One very important sector to the economy and the equity market in general are biotech stocks. While it’s easy to lose your shirt speculating in this sector, no doubt a lot of money has been made with these companies.
They are typically hyped, overpriced, fast trading, and incredibly risky. But whether it’s with individual positions, funds or ETFs, institutional investors thrive on them.
Not only are biotech stocks a Wall Street favorite (for equity/debt finance, research coverage, sales, and trading), as a group, they are a good gauge on the degree of speculative fervor in equities.
Lately, biotechnology stocks have come under focus by politicians and news stories of outrageous profiteering over already-established pharmaceuticals.
It’s a tight rope to walk. But without question, this sector has to thrive if the rest of the stock market is going to do so.
The Few Remaining Biotech Stocks with Momentum in this Market
Individual stock selection and strong risk control matters in a bull market that’s come to maturity.
Because real economic growth is such a difficult thing to come by these days, institutional money will still chase these existing winners, but any uncertainty roils biotech price momentum.
There are several biotech stocks in the marketplace that remain top growth stories, but these stocks aren’t for the faint of heart. All biotechnology stocks, even an investment-grade company like Amgen Inc. (NASDAQ:AMGN) should be considered higher risk.
Some of these stocks include: Celgene Corporation (NASDAQ:CELG), Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) and Valeant Pharmaceuticals International, Inc. (NYSE:VRX).
There are plenty more, of course. Cambrex Corporation (NYSE:CBM) helps biotechnology companies develop their drugs. This is a momentum stock currently with lofty Wall Street growth expectations.
These stocks have been market leaders for several years. These existing winners are high-growth and high-valuation. And with them comes high investment risk.
Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN)
Alexion Pharmaceuticals is a very interesting play. The company is basically a one-drug phenomenon that helps treat a genetic blood disorder.
The stock is highly tradable and also appealing as a medium-term investment. But being a one-drug company, it comes with enormous investment risk. And that’s why it’s tough to bet the farm on these kinds of stories.
Alexion Pharmaceuticals has proven to be worth accumulating when it’s down or in consolidation. It hasn’t been down for very long historically.
The company’s Soliris drug is now approved in about 50 countries. 2015-second quarter sales topped $636 million for a gain of 24% over the second quarter of 2014.
This is a highly profitable enterprise with quarterly earnings coming in at $170 million.
Management recently increased its total 2015 sales guidance. And that’s on the back of an expected $160 million or six percent negative impact from foreign currency translation.
The NASDAQ Biotechnology Index has been due for a major price correction for a while. It’s been pushing strongly higher for five straight years.
But because existing winners within the index are “high maintenance” stocks, they need marketplace certainty or they get clipped quickly. In any case, it’s still a growth sector, which can’t be said for most others.