In this terrible stock market, Dr. George Huang's subscribers just pocketed a 70% gain in six months.
My friend George's picks are on fire... What's he doing right?
George writes the S&A FDA Report. He finds biotech stocks inches away from FDA approval or rejection and tells his readers the best way to trade them.
Last year, biotech was one of the market's top-performers (it fell, too, but not nearly as far as most stocks). Now, the industry is lighting up. Already in 2009, we've seen four takeover deals hand shareholders an average 85% gain.
George is ecstatic. "Even crappy drugs are fetching enormous premiums in this market," George told his subscribers last week.
Biotechs in general are only up about 20% from their lows. Meanwhile, the average gain on a biotech stock index during a biotech bull market is 566%. So don't worry you've missed it already.
Actually, as I'll show you, I think now is a perfect time to buy...
Earlier this month, the Wall Street Journal reported, "An atypically large number of [biotech] companies are down to their last few months of cash."
Biotech firms rely on investors to finance their futures. But investors have been clinging to their cash. So right now, a full 180 of the 370 publicly traded biotech companies in the U.S. are operating with less than a year of cash, according to BIO, an industry trade group. More than 100 have less than six month's cash on hand.
That sounds like terrible news for biotech investors. But it's exactly what we want to see.
The Wall Street Journal article coincided with the JPMorgan biotech conference. The first JPMorgan biotech conference was held in 1991. "The mood of that conference was that there will never, ever be another biotech IPO again in the history of the world," an attendee recalled. At that time, the Datastream Biotech Index was in the midst of a four-year bull market. The entire index soared over 1,000%.
This time around, many biotech stocks won't survive. They'll simply run out of cash. But others – like George's pick, Indevus – will be bought out for huge premiums. Indevus shareholders collected a 45% premium to the market price. (George set up a trade that allowed he readers to grab a 70% gain.)
Biotech is way overdue for a massive boom. And with over half of the biotech companies on the stock market in danger of running out of cash, we have to be near the bottom.
Honestly, I've been too early on biotech so far... I've jumped in twice, only to be stopped out. But it's worth it. As I've said many times, if you catch just one biotech bull market in your lifetime, you may never have to work again. Since 1983, biotech stocks have exploded higher in four separate triple-digit rallies. And in the early 1990s, biotech stocks as a group had an extraordinary run – good for 1,347% profits.
The coming bull market could match that boom... These stocks are THAT cheap today. The Nasdaq Biotech Index is down more than 50% from its 2000 highs.
Innovation hasn't stopped in those nine years. The companies continue to make new discoveries. Yet the stock prices are half what they were nine years ago.
Now we're finally seeing an inkling of an uptrend – biotech stocks held up well last year, and they're moving up off their recent lows. Biotech stocks are ignored – they've been off of everyone's radar for years. And the value is there... In many cases, you can buy them for less than the cash they have in the bank.
Buy biotech now, the one sector that's held up in the last few weeks as just about everything else has fallen. Remember, with an average gain of 566% per bull market, if you catch just one biotech bull market in your lifetime, you may never have to work again...
Good investing,
Steve
P.S. You can buy a biotech index fund like the SPDR S&P Biotech Fund (XBI) and do well. But you could do much better with a guide like George Huang. He has an exceptional track record of picking the companies that are getting taken over for rich premiums.
Click here to learn about George's strategy and how to maximize your gains.
NEW HIGHS OF NOTE LAST WEEK
StemCells (STEM)... biotech
Anadys Pharma (ANDS)... biotech
Life Technologies (LIFE)... biotech
ITT (ESI)... secondary education
DeVry (DV)... secondary education
Apollo Group (APOL)... secondary education
Cocoa, Japanese yen
NEW LOWS OF NOTE LAST WEEK
Nokia (NOK)... cell phones
Saks (SKS)... luxury retail
MBIA (MBI)... bond insurer
J.B. Hunt (JBHT)... trucking
Seagate (STX)... disc drives
Pep Boys (PBY)... auto parts
Luxottica (LUX)... eyeglasses
Hanesbrands (HBI)... apparel
Scholastic (SCHL)... publishing
CSX (CSX)... railroad
Union Pacific (UNP)... railroad
Norfolk Southern (NSC)... railroad
Schlumberger (SLB)... oil services
Citigroup (C)... bank
Wells Fargo (WFC)... bank
Bank of America (BAC)... bank
SPDR Regional Banking (KRE)... ETF
HSBC (HBC)... British bank
Barclays (BCS)... British bank
Lloyds TSB Group (LYG)... British bank
Royal Bank of Scotland (RBS)... British bank
iShares United Kingdom (EWU)... ETF
General Electric (GE)... conglomerate
Visa (V)... credit cards
Capital One (COF)... credit cards
American Express (AXP)... credit cards
Portfolio Recovery (PRAA)... debt recovery
Microsoft (MSFT)... world's largest software company
Crude oil, Natural gas, British pound
