Best Investments in Biotech in 2013
Of late, the industry has indeed enjoyed a healthy showing.
In Q1, the Nasdaq Biotech Index carried over its robust performance from late 2012, gaining 16.7%. Credit significant product approvals, positive clinical trials and sold business outlooks for the sustained momentum and outperformance versus the broader market.
The Index recently hit a record high, leaving many to wonder if the sector is poised for a pullback.
The consensus views are fundamentals remain favorable, the sector still exudes strength and the biotech rally has legs.
Sharing that sentiment is Evan McCulloch, co-manager of the Franklin Biotechnology Discovery Fund, one of the best performing health care funds tracked by Morningstar.
"Biotech, especially the big companies, are coming off some very low valuations. From 2009 through 2011, the sector underperformed the broader stock market. Wall Street, having once believed drug makers were unable to make research and development spending pay, now has come to realize that it pays for companies to invest in drug discovery and development," McCulloch told Barron's.
Thanks to a more receptive Food and Drug Administration (FDA), fresh drug pipelines and resurgence in M&A activity, the sector is in a sweet spot. Big players are flush with cash, and smaller troupes are ripe with promise--the perfect combination for fruitful research and development.
Best Investments 2013: How R&D is Paying Off for Biotech
Since the discovery of DNA in 1953, and the identification of DNA as the genetic material in all life, advances in the vast area of biotechnology have been astounding.
But because of the extremely high costs of R&D, coupled with scant revenue in the early years of development, funding is tight. Moreover, companies experimenting in R&D often see their valuation diminish since they provide little return for shareholders.
Lately, however, there's been a profitable development in the sector...
Now R&D spending is a sign of huge profit potential, not a drag on shareholder returns.
According to Barron's, Morgan Stanley (NYSE: MS) Chief U.S. Strategist Adam Parker found fewer than 20 globally companies with market caps of $30 billion or more that engage in healthcare research. That shines a spotlight on not only the big players, but also on the little guys with ample potential.
"Ten years ago, the human genome could barely be decoded. Ten years from now, one can guess that it will be done for pennies, nearly instantaneously," writes Parker for Barron's. "We could be witnessing a substantial re-rating where instead of a discount on R&D being embedded in health care stocks, a premium could ultimately be awarded for potential option value of curing a disease."
That's some exciting stuff, and particularly exciting for savvy investors.
That's why we asked our tech specialist Robinson to share some of the best biotech investments he sees now.
He said this is definitely one of the most promising sectors for profits.
But, in noting that "a lot of individual biotech stocks have actually doubled, tripled or more-the Holy Grail type of gains that high-tech investors crave," Robinson cautions "not all biotech stocks are created equal."
But he found one play that he thinks could double your money. Just go here to check out this "pick-and-shovel play" in biotech - and get all of Robinson's favorite tech profit plays - for free!
Robinson regularly details how to avoid pitfalls when investing in this volatile sector and highlights the stocks with the biggest potential in his Strategic Tech Investor reports - go here for all his latest info on the best investments in tech.
Related Articles and News:
- Money Morning:
Double Your Money in No Time Flat - Barron's:
Welcome to Drug R&D's Golden Age - Forbes:
The Best And Worst Performing Biotech Stocks, April 5 to April 12 - Barron's:
Biotech Fund: Many Healthy Returns
Diane Alter 24 May, 2013
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Source: http://feeds.moneymorning.com/~r/moneymorning/jOLe/~3/-E7sHPkUug8/
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