No one can deny the performance of biotech and biopharma stocks over the last six months as they have outperformed the entire market. The sector has done so well that it has brought back that dreaded word that everyone has feared in this sector since 2000: “bubble.”
However, it’s shortsighted to look at what these sectors have done since last October. Credit Suisse stated in a note that the NYSE Biotech Index has surged 204% since 2011, while the S&P 500 is up only 64% in that time. If you take it back to the great dotcom bubble of 2000, the index has increased nearly 400%.
The note goes on to say that it doesn’t believe the sector is facing imminent doom due to the financial makeup of its large caps. But what about small cap stocks in the space?
It’s here where we see the potential for major home runs or disastrous busts.
Usually you want to look for a company with a healthy pipeline of drugs to be approved or have attained a strong competitive advantage. Here are three small caps that fit into this category.