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The Right Way to Invest in Biotech
From Baltimore – The race for a COVID-19 vaccine is juicing the biotech sector this year.
Since early spring, investors have pumped billions of dollars into biotech companies in hopes of holding the right stock when the music stops and the race is won.
While major market indexes like the Dow Jones and the S&P 500 are down for the year, the Nasdaq Biotechnology Index is up 16%. That’s quite a contrast.
Investing in biotech may be in vogue at the moment due to the pandemic, but it’s old hat to Chief Income Strategist Marc Lichtenfeld. And it’s the topic Marc and Associate Franchise Publisher and host Rachel Gearhart discuss on today’s Market Wake-Up Call.
The chart below shows just what the race for a vaccine has done to biotech this year. Take a look…
But chasing a vaccine stock is not the smart way to invest in this dynamic sector, Marc explains.
“If you want to buy a lottery ticket and chase the COVID cures, you’re welcome to,” says Marc. But it’s highly speculative, he adds, “especially if you’re looking at the smaller companies.”
That’s because developing an effective vaccine typically takes years and is fraught with problems and unpredictability. Even in this urgent atmosphere, we likely won’t see a COVID-19 vaccine until 2021.
“There are better opportunities in pretty much any other area in biotech,” Marc says.
So a far wiser strategy is to spread your biotech investments among bigger names in the industry, like GlaxoSmithKline (NYSE: GSK) and Pfizer (NYSE: PFE), as well as smaller firms, especially those doing work in gene therapy and rare diseases (one of which Marc reveals in today’s video).
Diversification in this unique sector can really pay off. You can see in the chart below that the entire sector has outperformed the market. And not just this year, but for several years now.
“Have some of the large pharmas, but also have some of the smaller biotechs that really have the potential to jump,” Marc adds.
The drug approval process, a tortuous journey from drug concept to mass-market use, renders diversification even more critical in the biotech sector. One Food and Drug Administration (FDA) announcement about a drug trial can send a stock soaring… or crashing back to earth.
So a significant part of picking the big winners in biotech is about watching the FDA approval process. Marc has done intense research on that process and, in particular, on the optimal times to invest within it.
Marc’s biggest wins in biotech include Novocure (Nasdaq: NVCR) for a 228% return, Celldex Therapeutics (Nasdaq: CLDX) for 419%, NPS Pharmaceuticals (since acquired) for 775% and, of course, AbbVie (NYSE: ABBV), which, with a return of 2,381%, made Marc a bit of a biotech investing legend at the Club.
In today’s video, Marc reveals his favorite biotech stock right now, and it’s not likely one you’ve heard of. This company has seen some important FDA decisions in the past month, so you’re definitely going to want to learn about it.
I can tell you that this stock is front and center on my investing radar right now. It should be on yours too.
And if you’re interested in other unique opportunities in biotech, you’ll want to hear about what Marc recently identified as “Wall Street’s No. 1 secret catalyst.”
It’s a little-tracked but federally mandated special event that can send a share price soaring and can provide the chance to double your money every month for a year.
Enjoy your Sunday,
Matt