Expert Explains Why Investors Might Want To Stay Away From The IBB ETF

Paul La Monica is a CNN Money Digital Correspondent. On Friday's PreMarketPrep show, he discussed a few stocks and industries. Talking about the biotech market and the recent pullbacks, he says that, rather than a bubble, he sees many stocks with valuations that "don't seem to really be in line with reality (…) particularly the smaller ones (…) [which] are very volatile, and can move extremely dramatically, based on what's happening with clinical trials results." La Monica continues to say that he thinks that "there is a little bit more rational behavior going on with some of the biotech giants (…) Maybe the pullback we are seeing with a company like Amgen, Inc.

or Gilead Sciences, Inc.

, where the valuations aren't insane… those might be companies that look a little safer because they are really more like big pharma these days, they just have higher growth levels than big pharma. So, it's like the best of both worlds. You've got a little bit of safety, but some growth as well." The analysts points out that he would probably be scared of the iShares NASDAQ Biotechnology Index (ETF)

, because there are so many smaller companies in it that have high valuations. However, he thinks that there are "some individual companies that probably still look pretty promising and maybe have been oversold."