The Best Stocks in a Weak Stock Market

The Best Stocks in a Weak Stock Market The stock market may seem trendless but corporate earnings are holding up okay. It’s very early days in this earnings season, but the financial sector’s performance was impressive. However, the stock market yawned at the news, with institutional investors more worried about the U.S. and Chinese economies and what kind of monetary stimulus might come next. The kind of trading action we have today will likely last going into next year—this is a market that’s so unsure of itself. (See “Blue-Chips: Watch & Wait for the Best Ones to Correct Further.”)

In this lackluster environment, some of the best stocks for risk-capital speculators are in the biotechnology sector. No matter what happens in the rest of the economy, the demand for pharmaceutical cures and therapies remains unabated. Some of the best stocks I’ve comes across lately have been related to the biotech or medical sectors in some form, and these shares can always move briskly if the news is right. Biotechnology as a stock market sector has much less correlation to the broader market and this can be advantageous when there’s no particular trend (like now).

Naturally, the best stocks are always the ones that go up right after you take on a position. But making money from the stock market in a no-trend environment is extremely difficult. Even a fast-growing business can have a tough time getting its share price up if the rest of the stock market is stuck in the doldrums.

The best stocks in any given sector tend to be in and out of favor quickly, so as a speculator, you have to be nimble. One of the best stocks in biotechnology has been Alexion Pharmaceuticals, Inc. (NASDAQ/ALXN). Pull up a three-year stock market chart on this winner, and you’ll see the wealth creation. Usually trading right around its all-time high on the stock market, Alexion has only one approved drug called “Soliris.” This drug is the only one specifically indicated for the treatment of patients with paroxysmal nocturnal hemoglobinuria (PNH), which is a rare, debilitating and life-threatening blood disease. Any stock market speculators taking on a position in Alexion over the last two years have basically done so at the stock’s high, because the company’s financial growth has been so strong. From my perspective, this company has been one of the best stocks recently for capital gains in a stock market environment that’s pretty lousy.

The best stocks in any given stock market environment are not hard to find. All you have to do is run a screen of stocks making new record highs. Determining, however, which of the best stocks have further legs in a weak market is a whole other ballgame, and that’s why I think some of the best stocks at this time are in biotechnology. A company like Alexion doesn’t really care if the rest of the world is coming apart. It has the drug and the demand from the global marketplace. Biotechnology is a high-risk stock market sector, but when it pays, it can do so handsomely.