BPIQ Portfolio & Back-Testing Update

As we have discussed in prior posts, we transitioned our BPIQ model portfolios to strategies that utilized top holdings of bio/pharma-focused funds. This post updates the performance of those model portfolios in their first full year. Furthermore, this post presents results of more back-testing we performed as we tested similar and further refined sub-strategies based on hedge-fund favorite holdings. Four conclusions can be drawn from this work:

1) All 5 of our Our BPIQ model portfolios out-performed XBI in 2024, their first full calendar year;

2) The HF-favorite strategies that we identified and used to devise our model portfolios, performed well through 2024;

3) We continue to identify sub-strategies based on the particular HF favorite strategies that we identified, that yield improved back-testing results;

4) We plan to continue to refine our model portfolio strategies based on our back-testing and actual results.

Figure 1 shows the actual performance of our 5 model portfolios for 2024. These portfolios are actual real-money brokerage accounts. All 5 of our BPIQ model portfolios out-performed XBI in their first full year. However, based on our updated back-testing of refinements (see below) and our relatively poor performance of our prior Top 10 portfolio strategy vs. our back-testing, we have/are implementing some updates to those strategies. Elite subscribers have access to our portfolio holdings table for these portfolios that provides the tickers and percent targets.

FIG. 1. Actual performance of BPIQ portfolios in 2024 vs. XBI (small-cap bio/pharma ETF) FN^1

Figure 2 shows the 1, 3, 5, and 10 year hypothetical pre-tax returns of new back-testing through the end of 2024 that we performed not only on the strategies that are similar to those we currently use as a basis for our current BPIQ model portfolios, but on numerous variations of these strategies as well. The results show that these basic strategies performed well through the end of 2024. The second test for each strategy (10, 15, 20, and 50) shows performance of the best sub-strategy we identified in this round of back-testing. As we have seen and reported on in the past, these strategies typically beat XBI in their performance, and usually by wide margins when looking over 3, 5, and 10 years. Most of the strategies showed over 50% return in 5 years and over 100% returns in 10 years, versus XBI which was virtually flat over 5 years and up about 25% over 10 years. The best performing portfolio was our Test 2 Top 10 portfolio that showed over 300% return in 5 years and 600% return in 10 years.

FIG. 2. Performance of back-tested sub-strategies related to current BPIQ portfolio strategies vs. XBI (small-cap bio/pharma ETF) FN^2. The numbers provided are percentages.

Figure 3 provides hypothetical pre-tax back-testing annual returns over the past 10 years for these same strategies. On an annual basis, these strategies beat XBI the vast majority of the time as observed with all the green vs. orange in Figure 3. At the beginning of 2025, many of these strategies have not performed well. However, this is likely because we are only 2 months into the year and these strategies are based on a small number of biopharma stocks, which can be quite volatile.

The back-testing results we provide in this and prior posts, show that biopharma investing over the past 10 years has been more a stock-picker market, since XBI overall has not performed exceptionally well. Many individual strategies based on 10 to 50 stocks can perform very well. We identified strategies based on combined top holdings of biopharma-focused funds that can consistently beat XBI, as shown in the results provided in this post. With the 50 company strategies, it is more difficult to differentiate from XBI, but strategies that outperform XBI were identified. In fact, as shown in FIG. 1, our Top 50 portfolio was our best-performing model portfolio in 2024. In summary, most of our back-tested hypothetical strategies, beat XBI in at least 8 of the 10 years from 2015 to 2024 (FIG. 3).

FIG. 3. 10 yr annual performance of back-tested sub-strategies related to current BPIQ portfolio strategies vs. XBI. FN^2,

Based on the results of our latest back-testing, we plan to continue our Biopharma-focused HF favorites strategies with our BPIQ model portfolios for another year. Furthermore, we plan to continue to refine our strategies based on our ongoing back-testing of further refined strategies.

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Footnotes

FN^1. Past performance of our BPIQ portfolios is not a guarantee of future performance.

FN^2. Past performance of these hypothetical strategies is no guarantee of future performance.

Key for figures:

1. Green numbers are positive returns and red numbers are negative returns.

2. Green shading means that the performance is higher than XBI for that strategy in that year; orange means lower, and white means +/- 3%.

3/4/25 Article posted (EJV & AV)

This article is not investment, legal or tax advice. Past stock performance does not guarantee future performance. This post is not investment advice. Please do your own diligence and consult a financial professional before making any stock investment decisions.