The U.S. government shuts down. The market goes up. Hmmm... Maybe we should have tried this before.
Actually, we have tried it before -- multiple times in every decade since 1970 except the last one. In the most recent government shutdown, the one beginning in December 1995, the S&P 500 increased a little, just as it seems to be doing this time around. But some stocks truly soared back then despite the political stalemate. Here are three of the big gainers from 18 years ago that could still be great stocks to buy whether the government stays shut down for a while or not.
1. Biogen Idec (NASDAQ: BIIB )
Back during the 1995/1996 shutdown, Biogen Idec's shares rocketed more than 36%. That's an average of around 6% for every week of the federal work stoppage.
Even after all these years, Biogen still looks to be a pretty good stock pick. The company's multiple sclerosis stable of drugs is still going strong, with Tecfidera set to become another blockbuster for the indication. Biogen continues to invest in multiple sclerosis, with a late-stage study under way for daclizumab and regulatory filings already submitted for Plegridy.
However, Biogen's pipeline holds promise in other areas as well. It awaits approval for drugs that treat hemophilia and chronic lymphocytic leukemia. Biogen also has a phase 3 study in progress for GA101 in treating non-Hodgkins lymphoma.
2. Celgene (NASDAQ: CELG )
Celgene didn't fare quite as well as Biogen during the Clinton era government shutdown, but it still outperformed the overall market considerably. Racking up a 24% gain during such a relatively short period would make any investor happy.
Today's Celgene is a lot stronger than the company from nearly two decades ago, but it's still growing at a solid pace. Blood cancer drug Revlimid powers the company, generating almost $3.8 billion in sales last year. This year, the drug appears to be on pace to beat that figure by close to 15%.
Other drugs seem destined to lessen Celgene's reliance on Revlimid, though. Abraxane is coming on strong, with regulatory approval for treating metastatic breast cancer, non-small-cell lung cancer, and pancreatic cancer. Pomalyst, which Celgene launched earlier this year, adds to the company's multiple myeloma lineup. Psoriasis drug apremilast seems likely to gain approval next year.
3. Gilead Sciences (NASDAQ: GILD )
Just behind Celgene, Gilead Sciences chalked up an increase of nearly 21% in the last government shutdown. That shutdown lasted 21 days, so Gilead shareholders averaged around 1% per day. Not too shabby.
Could Gilead perform well this time around? It's certainly possible. As in the 1990s, Gilead remains a leader in the HIV/AIDS drug market. Atripla and Truvada are juggernauts. Stribild, which gained U.S. approval in August 2012, should be Gilead's next HIV/AIDS blockbuster.
Much of Gilead's future growth, though, could stem from hepatitis C. The company is engaged in a race with AbbVie (NYSE: ABBV ) and others in getting to market first with an all-oral drug for the viral disease. While AbbVie maintains that it could win that race, many expect Gilead to take the prize. At stake is a market estimated to be around $20 billion.
Obviously, just because these three stocks went up during the last government shutdown doesn't mean that they'll go up with the current one. However, there are a few reasons why Biogen, Celgene, and Gilead could do well even in the midst of political turmoil.
You probably noticed that all three of these big winners from years ago were biotech stocks. The success of biotech companies, particularly those that focus largely on rare diseases, typically isn't as dependent on broader political or economic variables like many other companies are. Because of this, investors' interest in these stocks could rise in the face of questions about the national direction.
Not every biotech stock will succeed, of course. Some smaller companies sink or swim on clinical results for one key product. That's not the case for Biogen, Celgene, and Gilead, though. These three biotechs are large with multiple products on the market and more in their pipelines. I suspect that history just might repeat itself with 2013's government shutdown. If so, these could be among the best stocks to buy for uncertain times.
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