Multi-asset investment company Saxo Bank is in the process of reviewing all of its current 21 theme baskets. There two baskets already that the bank has left unchanged and these are Women in Leadership and the Defence basket.
Following a review of its NextGen Medicine basket Saxo has chosen to update the basket by removing two stocks: Editas Medicine and MorphoSys. These two companies are the two smallest stocks in the basket on market capitalization and therefore the obvious rule based decision in order to make room for two new companies that Saxo believes provide a better geographical and product split.
The two new stocks entering the basket are Ionis Pharmaceuticals and 10X Genomics.
Ionis Pharmaceuticals is developing RNA-targeted therapeutics and 10X Genomics develops integrated solutions across instruments, consumables and software for analysing biological systems and their complexity.
Saxo’s NextGen Medicine basket is down 39% over the past year compared to the MSCI World Index that is down 5% in the same period. While this underperformance is big it also reflects the incredible outperformance in the previous years. This basket has a 60% revenue growth rate over the past year highlighting the enormous growth but with high expectations come high stock price sensitivity to changes in those expectations and NextGen Medicine stocks are typically high duration assets so they have naturally responded negatively to higher interest rates.
Analysts remain positive on the industry with a median price target being 66% above current market prices.