John Lennon once sang a song titled "Nobody Loves You (When You're Down and Out)." That sentiment seems to be especially relevant today with the major Wall Street indexes in bear market territory.

Many investors have turned their backs on once high-flying stocks and exchange-traded funds (ETFs). But some of these down-and-out securities deserve a little love, and there's at least one ETF that's still a screaming bear-market buy.

Biotech blues

The SPDR S&P Biotech ETF (XBI 0.43%) ranks as the second-largest ETF focusing on biotech stocks based on assets under management. It's designed to track the performance of the S&P Biotechnology Select Industry Index. This index uses a modified equal weighting of around 150 biotech stocks.

In 2020, XBI soared 48%. However, the good times didn't keep rolling far into 2021. The ETF peaked that February, then began a steady and extended downturn. While it bottomed out in June 2022, it's still down by more than 25% year to date and is roughly 50% below its high.

Obviously, XBI's price has declined because many of the stocks that it holds have plunged. But consider what's behind the biotech blues.

It's not that there's been an extraordinary number of clinical setbacks, nor has there been a raft of failed commercial launches of drugs. The headwind here has been that investors began to sour on growth stocks in early 2021. The negativity intensified this year due to worries about inflation and the economic outlook.

Why it's a good pick

The SPDR S&P Biotech ETF is a good pick right now in part because it has been beaten down so much. The fund first began trading in 2006. Since then, every time it has fallen by more than 25%, a strong rebound occurred relatively soon afterward. 

Perhaps the best parallel to its latest decline came in 2015 and 2016. XBI plunged nearly 50% from its February 2016 peak. It then took off, more than doubling by early 2018.

The fortunes of some of the stocks in XBI's portfolio are also clearly improving. Biogen (BIIB 0.37%), for example, currently ranks as the largest of the nearly equal-weighted positions in the ETF. The company and its partner Eisai recently reported successful results for their experimental Alzheimer's disease drug, lecanemab. If lecanemab wins regulatory approvals (as many expect it will), Biogen stock could soar even more.

Some of the top XBI holdings continue to defy the bear market. Vertex Pharmaceuticals (VRTX 1.18%) has been the biggest winner, with its shares jumping nearly 40% year to date. The big biotech could have more good news on the way soon with anticipated regulatory filings for gene-editing therapy exa-cel, which could provide a functional cure for sickle cell disease and beta-thalassemia.

Perhaps the strongest argument for buying the SPDR S&P Biotech ETF, though, is that the future should be bright overall for the biotech industry. Every company in which the fund owns a stake is working hard to bring innovative new therapies to market. Not all of these efforts will succeed -- but many will. And some of those biotech stocks could deliver explosive returns that push XBI higher.

Another approach

There is another approach for investors hoping to profit from a big biotech bounce. Instead of buying the XBI, you could buy individual stocks in the industry.

One advantage of going this route is that you can avoid the riskiest stocks in XBI's portfolio while betting on biotechs that are more likely to be successful. Another plus is that you won't have to pay the 0.35% expense fee of the ETF. 

But investing in the XBI offers some benefits, too. Accurately choosing which biotech stocks will perform the best is easier said than done. The ETF provides a simple way to buy a basket of these stocks and spares investors the effort of researching each biotech individually. Also, XBI's expense ratio is relatively low. If your brokerage charges for buying and selling stocks, it's possible that your overall trading costs could be higher if you invest in individual stocks than if you buy the ETF.

Biotech stocks won't stay down and out forever. Neither will the SPDR S&P Biotech ETF. Now is a great time to buy into it at a bargain price.