We are currently experiencing the classic post-ASCO sell-off.
So, conventional wisdom holds that the summer is a seasonally slow time for biotech investing, and that investors can avoid losses by rotating out of the industry and returning in the fall. While it is true that the summer months do not feature as many medical conferences as the spring or fall, there is little historical evidence that stock performance is that predictable or poor in the June-August time frame.
There is summer doldrums, but it is not necessarily a bad time for biotech shopping. Full pipelines, good earnings visibility, and continued pricing power make biotechnology stocks attractive for investors with a 6 to 12 month view. The industry’s fundamentals remain strong, reasonable valuations and the majority of profitable biotechnology companies have better-than-average earnings growth and visibility, making it a good time to buy biotech.
Biotech valuations and fundamentals are as strong overall as they have ever been and there is plenty of money to be made by the astute investor who picks stocks selectively. Opportunities exist for robust growth in several strong large cap names and very strong growth among certain small cap biotech companies with impending Phase III data announcements.
Biotech sector remains a lucrative area for investment if one picks names cautiously and ensures that each company has its fundamentals intact. With that proviso, read our latest issue on small biotechs that have interesting and promising drugs in the pipeline to treat cancer or cancer-related conditions.
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