Is This the Most Lucrative Way to Play AI?

Biotech is all over the 52-week high leaderboard … why we’re poised for even larger gains … the confluence of AI and healthcare … the age of precision medicine

“Big picture cautious, small picture opportunistic.”

That’s how we described our current investment environment at the end of yesterday’s Digest.As to “opportunistic,” we wrote that in today’s Digest, we would profile an investment opportunity that’s been seeing a host of triple digit winners over the last year.To begin unpacking this, last week, InvestorPlace’s CEO, Brian Hunt, sent an email to a handful of InvestorPlace department heads with an eye-catching title…

Look at all the drug stocks on the 52-week leaderboard

Brian then included a chart of the top 52-week stock performers, highlighting all the biotechs.The yellow highlight was everywhere. Here are a handful of the top biotech one-year performers he flagged:


  • Cabaletta Bio (CABA) – 419.64%
  • Ardelyx Inc (ARDX) – 335.13%
  • Verona Pharma Plc ADR (VRNA) – 312.81%
  • Meihua International Medical Technologies L (MHUA) – 308.78%
  • 89Bio Inc (ETNB) – 259.50%

How are these gains accumulating in spite of last year’s bear market and our current, tenuous macroeconomic climate?Today, let’s take a break from the chaos in the banking sector, inflation reports, and Fed watching to dive into the answer. We’ll do this with Brian’s help.In addition to his email, Brian wrote up a detailed analysis of developments in the sector, highlighting an enormous investment opportunity that’s emerging thanks to one of the most exciting technological advancements in history – artificial intelligence (AI).So, tomorrow we’ll pick back up with this action-packed news cycle. But today, let’s look at a sector that’s creating explosive wealth regardless of what’s in the headlines.And from the looks of it, the gains are only going to accelerate from here.

A profit-generating opportunity with “rocket boosters” bolted to it

Regular Digest readers know that beyond helming InvestorPlace, Brian is an accomplished investor and trader.He’s also a gifted teacher, sharing his accumulated investment wisdom in a series of essays you can read for free in InvestorPlace’s Education Center. They read like a master’s course in investing. I expect today’s analysis will eventually find a home there.Due to limited space here in the Digest, I’ll have to condense Brian’s research so we can cover more ground. Let’s begin with him explaining the broad set-up:

Check the stock market’s leaderboard any day of the year and you’ll see how – as much as any other industry – drug discovery is a constant generator of big stock winners that generate great wealth for their shareholders.Almost every week of your life, a drug discovery stock sets up for a big run that will see its market value double, triple, even quadruple in price over the course of 6 – 18 months.Given this, it’s not like skilled drug stock investors need any more advantages that help them make even more money. But thanks to a giant new technological revolution, they are getting a huge one.As you read this, the drug industry is getting profit-generating rocket boosters bolted onto it.These boosters will launch drug discovery into a whole new era that will be loaded with big opportunity.

The power of software meets biotech

Brian then points toward ChatGPT, the revolutionary AI program that debuted late last year.As you’re likely aware, it’s a hyperintelligent computer program that can write novels, screenplays, PhD dissertations, and research papers… all in a way that is indistinguishable from humans.  Brian points out how, at its core, AI is just incredibly powerful software running on incredibly powerful computers. And if you’ve been lucky enough to be an investor in top-tier software companies over the last decade, you know how explosive the related investment wealth has been.Back to Brian:

Think of all the software-based products and services that bring us joy or save us time, money, and frustration: Google… Microsoft Word… Uber… Facebook… restaurant reservation aps… Expedia… the iPhone operating system… Excel… Waymo… PayPal… Docusign… airline booking software… online bill paying… online brokerages… etc…Because software programs do such a wonderful job of allowing us to collect, store, display, analyze, protect, and transfer information, they free us up to spend money on things we truly enjoy… they free us up to spend more time with family and friends.  And that is why we are so willing to buy computer programs and pay for the value they create.  It’s why we assign so much value to those businesses in the stock market.  It’s why the owners of those businesses grow very rich in very short amounts of time and become the world’s most powerful people.I’ve taken the time to show you the mind-blowing power of software because it’s at the center of a huge revolution in drug discovery. This new era will see the rise of a whole new group of trillion-dollar information powerhouses. The coming revolution is all thanks to one of the most important, most transformational technologies in human history: Gene sequencing. 

How far we’ve come in understanding DNA, and how the pace of breakthroughs is about to explode

At this point in his analysis, Brian summarizes the scientific gains we’ve made in mapping the genome, and the resulting impact on personalized health care.In short, we have information inside our bodies that determines how tall we are, our hair color, our body type, our eye color, and hundreds of other things that make us individuals.  This information is called deoxyribonucleic acid, or DNA. Put simply, DNA is the instruction manual for your body… and every other living thing on Earth.  It’s the “code” that forms your operating system.In the 1990s, scientists undertook a giant and costly international research effort, called the Human Genome Project. The purpose was to “map” the human genome and find out exactly how much information is in this code, how it is ordered, and exactly what it says.Back to Brian:

Thanks to bleeding-edge analytical tools and incredible advances in computing power, we now have the ability to read DNA and create medical treatments based on [new advancements in DNA sequencing].  Very soon, getting your genome sequenced will cost less than a nice pair of shoes.  In the future, insurance and healthcare companies will require customers to get their genome sequenced.  Massive industries based on all that information will spring forth. Software is the greatest wealth-creation force of the past 30 years because of all the time, money, and frustration it has saved us.  DNA analysis promises to create another set of transformational changes. 

The confluence of artificial intelligence, software, and genomic sequencing will put an end to “one size fits all” healthcare

As Brian points out, our current healthcare system is based on a crude, blunt “one size fits” all strategy in which people receive the exact same treatment, no matter what is in their DNA. But today, we’re on the cusp of this changing forever – which will transform personal healthcare while directing the flows of trillions of dollars of capital over the coming decades.Back to Brian:

Determining how our genes interact and which parts of our DNA affect certain diseases and conditions means doctors have much greater understanding of how these conditions work and how to treat them.  After adding that to the precise knowledge of an individual’s genes and their mutations, you get the dawn of a new era of personalized medicine. Thanks to gene sequencing, doctors can fashion a patient’s medical treatment to be an exact fit, the way a tailor adjusts a dress or a suit for an individual…Soon, we’ll move from a “one drug fits all” style of treatment to a much more effective, much more targeted and highly personalized approach.  

This transition toward personalized healthcare is about to hit turbo speed thanks to AI

Brian explains how, historically, the process of drug discovery has been massively time-consuming.The process of creating a new drug that’s safe and effective can take years or decades. But let’s assume we have one such potential new medical treatment – the drug developer must test it in all sorts of different hypotheticals. And remember, “effective” is one thing, but “effective and safe” is another.So, how does the drug affect women? Children? Men with a specific health condition? Women with XYZ health condition who are taking ABC medications?As Brian points out, the list of potential use cases and their effects is mindboggling. But this is where AI comes in.Back to his analysis:

…Artificial intelligence will make it so our development and testing cycles speed up by a factor of at least 20X.This is because computer programs powered by AI will be able create a digital twin of any kind of drug or treatment you can think of… and then perform billions of tests on billions of different versions of said innovation. And it can do that in less than the time it takes for me to say this sentence. 

In short, a digital twin is simply a digital version of a physical thing. It enables scientists to run billions of tests on billions of different versions of a drug or therapeutic concept.Brian tells us that this technological advancement is at the core of the mind-blowing change AI will have on drug discovery and many other industries.

So, what’s the investment action step today?

Well, first, you can look into the biotechs referenced at the top of today’s Digest, researching each for their exposure to genomic sequencing and precision medicine.Second, there’s also the ETF route. For example, there are a handful of ETFs that seek to target genomic biotechs. As one example, though not an official recommendation, there’s the iShares Genomics Immunology and Healthcare ETF (IDNA).Now, though the ETFs at the top of today’s Digest are seeing explosive growth, many broad biotech ETFs like IDNA have been languishing. It’s a good reminder that biotech is a boom/bust sector. And when fear-based risk-off sentiment dominates the market, biotech, as a whole, often suffers – though clearly, individual biotechs can buck the trend and explode higher.On that note, you could identify the various genome-based ETFs, then look at their top holdings for specific stock ideas that you find more attractive.In the coming months, we’ll bring you some of these top-tier biotechs for your consideration.Bottom line: This is something that needs to be on your investment radar beginning today.We’ll give Brian the final word:

I believe gene sequencing and artificial intelligence will converge to accelerate the pace of drug development… thus increasing the amount of big stock market winners the industry generates. This is why the drug discovery industry is about to enter a while new era filled with huge opportunities. And it’s why trading drug discovery stocks could be the most lucrative way to play AI over the next decade. 

Have a good evening,

Jeff Remsburg

Article printed from InvestorPlace Media,

©2023 InvestorPlace Media, LLC