Even after the first correction in four years, biotech stocks are absolutely crushing the S&P 500 over the trailing-five-year period. In fact, the SPDR S&P Biotech ETF has more than quadrupled the performance of the broader-based S&P 500 over that time span (297% versus 72%).
There are a couple of reasons investors favor biotech stocks in a rising or recovering market. Primarily, it’s because biotech stocks, more than any other sector of the market, are valued based less on fundamentals and more on their long-term sales potential and investors’ emotions. Nearly nine out of 10 biotech companies are losing money, therefore traditional fundamental valuation metrics wouldn’t do investors much good when it comes to valuing these companies. So when investors are willing to take on higher levels of risk in a rising market, biotech stocks tend to shine brighter than most other sectors.
Hey, check out all the research scientist jobs. Post your resume today!
