Biotech stocks are tricky but worth investing
The biotech companies have strong earnings growth
The Nasdaq Biotech Index (NBI) has slightly outpaced the S&P 500 over the past 12 months.
Biotech stocks are the most impressive, exciting and, at the same time, one of the trickiest assets of the stock market. Biotech firms use technological methods based on science to produce products. The majority of biotech companies are focused on clinical research and the development of new medicines.
But the whole industry has a lot of different purposes, the drugs are just a part of that. You can find biotech stocks on genetic experimentation, food modifications, health care, almost everywhere. One thing is common for every single producer: they have to go through a harsh, expensive and intensive experimental process before getting approval for the market.
The biotech companies have strong earnings growth
Discovering the best biotech firms to invest in can be difficult. Laboratory ideas don’t always come to success and frequently biotech stocks are subject to strict regulations and rules.
What you have to keep in mind is earnings growth. Biotech stocks are giving exactly that. If you are looking for great rewards, the biotech stocks are for you. One thing is important to be noticed here: these stocks carry a big risk too.
Biotech stocks have great potential
Well, there is an explanation of why that is. Every company needs time to develop its business, operations, presence in the market. Biotech companies frequently depend on the success of several trials of their products. During that phase, its stock isn’t expensive. Contrary, it can be very cheap. When the company gets approval for a drug or some positive news about testing comes, the stock price can skyrocket. Refusals or bans, though, can cause a disaster. So, for normal investors, it can be difficult to gauge how the testing of some drugs or anything from the field of the biotech industry will end. Well, here is one suggestion. Stay tuned on what the analysts who are well informed in the biotech industry are saying. If you see a stock that is frequently surrounded by bulls, it is a sign that something worth is nearby.
Recognize your biotech stock better than anyone
We will show one example of how to do so.
Axsome Therapeutics is developing new drugs for the treatment of CNS disorders. Yes, it is clinical-testing stage and biotech stocks can be uncertain for investors. But this stock is remarkably fit for any investor with an aggressive approach to investment.
AXSM stock has increased over 1.200% in this year. The investors are excited about the upcoming clinical study results. Axsome Therapeutics is in a late-stage study for its AXS-05. It is innovative and important in treating a depressive disorder, so-called MDD. The company is expecting results from another study, a drug for treating treatment-resistant depression, by the end of the first quarter in 2020. Also, the company expects positive results from a study of AXS-05 for Alzheimer’s disease in the first six months of 2020. And stock market analysts are predicting a huge revenue for the company and the shareholders. So, the hint that some biotech stock is a good investment is coming from the news.
How to pick the best biotech stocks
Over the past year, the Nasdaq Biotech Index (NBI) has kept up with the market.
This year has been a hard ride for everyone. But the biotech sector, with its large firms, is definitely catching its pace. The index is rising. We were witnesses of interesting mergers during the past several years that starting to be profitable. Some new technologies are starting to gain excellent results which boosts hope for many patients. The cost of their tests is enormous, it is around $2 billion approximately. Also, it takes almost 10 years until some drug gets permission for distribution and human usage.
It sounds like a lot of responsibility. Moreover, producers need to form a strong base for future growth.
If you are focused on biotech stocks you should find biotech companies that are driving cutting-edge therapies. The brands that are well-positioned provide big premiums.
Traders-Paradise recently wrote about one of them, but stay tuned, there will be more.
