'Fast Money' traders talk how to play biopharma space

Core Viewpoint - The biotech sector is showing strong momentum, with significant potential for continued growth, particularly in the context of upcoming mergers and acquisitions (M&A) in 2026 [3][11]. Group 1: Sector Performance - The biotech sector is performing comparably to major tech stocks, indicating a competitive landscape [1]. - Companies like Gilead and Merck are reaching all-time highs, while Bristol Myers is also recovering [2]. - Historical valuations for biotech and healthcare are at historic lows compared to the past five years, suggesting a value opportunity [3]. Group 2: Valuation Insights - The forward price-to-earnings (PE) ratio for the healthcare sector is currently around 18, below the historical average of over 20 [5]. - There is a significant valuation gap, with some companies trading at single-digit or low double-digit multiples, indicating potential undervaluation [6][10]. - The healthcare sector typically represents 10-15% of a traditional portfolio allocation, but many investors are currently underweight in this area [6]. Group 3: Market Dynamics - The recent rotation in the market has favored healthcare, with notable inflows observed in October, marking one of the largest rotation days in years [9]. - The Trump administration's stance appears to have eased pressures on companies like United Healthcare, contributing to a more favorable investment environment [9]. - The potential for M&A activity in the biotech space is high, with companies positioned for strategic acquisitions [11].