Biotech stocks’ performance blew the doors off the market over the past year as promising treatments advanced and trial results inspired new confidence.
Indeed, for growth-focused investors looking for “the next big thing,” you want to invest in biotech stocks developing drugs and treatments from living organisms like viruses, bacteria, DNA or other molecules. Treatments for things such as cancer, multiple sclerosis, diabetes, hepatitis and HIV are a launching pad for enormous revenues for years on end.
Still, risk and reward go hand in hand — only 40% of drugs that reach even the final stage of FDA testing actually get approval, and the odds are far worse for those in earlier stages. That means every little headline has a big impact, and so biotech stocks tend to be more volatile than the broader market. Plus, when you factor in hefty up-front development costs, most biotech companies take a long time to turn a profit — but if/when they do, it can pay off handsomely.
Given the sheer profit potential of this sector, all investors should have some exposure to biotech stocks, but your investment horizon and risk tolerance is almost certainly going to differ from the next guy. So, if you’re looking for ideas of biotech stocks to buy, here are a few suggestions — some for conservative investors, and some for the truly adventurous: