Biotech Is Where the Bucks Are

TheStreet.com

NEW YORK (TheStreet) -- Successful investors use the same strategy as successful fishermen: You put your line in the water; if you catch something, you stick around. If you don't, you go fish somewhere else.

Fisherman love gadgets and tools to help them find the fish. Sometimes fish show up where they are supposed to, sometimes not.

Fishing is not about following the gadgets, however; it's about following the fish.

It is the same with stocks. Right now, the biotech sector, for the umpteenth week in a row, continues to be the leading sector in my Best Stocks Now app.

Data from Best Stocks Now App

There are a million reasons why. But the most important reasons come not from the pundits or even the CEO. They come from the stocks themselves.

Let's look at three biotech stocks that should be in your portfolio now.


When I write about biotech companies, or talk about them in the news, I hear from investors about why this company or that stock should be doing better.

This company just received a $50 million line of credit. Or that company just hired a new technology officer. But the stock does not listen.

It goes where it wants to go.

So I follow the stocks. Two weeks ago, my Best Stocks Now app declared Regeneron to be my top stock, not just in biotech, but among the entire 3,300-plus stocks that I follow.

I wrote an articleabout my No. 1 stock pick at that time.

Data from Best Stocks Now App

Regeneron makes drugs for cancer and arthritis and macular degeneration. It also makes big profits for investors.

When my Best Stocks Now app made it the top pick two weeks ago, Regeneron had returned 71%, 104%, 59%, respectively, to investors over the last one, three and five years. Those are annual rates of return. Not total return!

Here is what the total returns look like now.

Data from Best Stocks Now App

This has been one of the premier growth stocks of the last 10 years. A week after I made the call, Regeneron jumped up and became the biggest-gaining stock in the market that day. And I still like it.

Data from Best Stocks Now App

Let's look at two other high-rated biotech investments from the Best Stocks Now app.

Though not quite as dramatic as Regeneron in its performance, Gilead Sciences has been making investors healthy for 10 years.

Data from Best Stocks Now App

The returns over the last one, five and 10 years are 113%, 40%, 15% and 25% per year.

Gilead is an international leader in drugs to treat viral, fungal, respiratory and cardiovascular diseases.


With a forward price-to-earnings ratio of 18.4 and an expected growth rate of 25.1% over the next five years, the price-to-earnings-to-growth ratio is still a very favorable 0.73.

Furthermore, when I carry out earnings estimates over the next five years at a 25% growth rate and apply an appropriate multiple, I compute a five-year target price of $106.

Data from Best Stocks Now App

Gilead Sciences is still one of my top-ranked stocks.

Data from Best Stocks Now App

Aegerion Pharmaceuticals is a different kind of investment. It is also a new top pick of the Best Stocks Now app.

Data from Best Stocks Now App

Aegerion makes drugs for rare diseases we hear about only on television medical shows. One of the diseases is called HoFH. Unless you are a doctor, you won't be able to pronounce what it really is.

But investors know this: Insurance companies are paying $250,000 to $300,000 per year per patient for this treatment.

This is a small-cap stock without the five- to 10- year records of returns I normally like to see.

Data from Best Stocks Now App

So this is for aggressive investors only. That means people who not only aggressively buy, but also aggressively keep an eye on their stocks.

Is it high risk? Absolutely. That's why I keep an eye on it every day. But as long as it keeps returning profits to investors, I will continue to gratefully accept them.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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