There are always surprises in the market … at least on the surface.
Here’s one: China’s stock market is one of the best performers in the world this year.
It’s a bit surprising because the coronavirus was first discovered in China. The first cases of COVID-19 were diagnosed there. And parts of that nation were the first in the world to be shut down to try to contain the virus.
On the other hand, China represents several massive opportunities. Some people are uncomfortable with that, but it’s absolutely true.
One of those may be another surprise. Even though there is no treatment or vaccine for COVID-19 yet, China’s healthcare and biotech stocks have been standouts in the recent global bear market.
The government is devoting massive resources to growing China’s biotech industry, and big winners are already emerging …
If you’re a regular MoneyWire reader, you know how bullish I am on U.S. biotech stocks … going back to last year when I declared 2020 the Year of Biotech.
We’re on the right track. The Nasdaq Biotech Index broke out to new five-year highs this week, and the VanEck Vectors Biotech ETF (NASDAQ:BBH) touched a new historic high just Monday.
I continue to believe the opportunity in U.S. biotech stocks is one of a kind. But … so is the opportunity in biotech and healthcare stocks in China. It would be crazy to look past it.
At the moment, this is an opportunity with short-term relative strength — which is great in a down market — and huge long-term potential.
The chart below shows the year-to-date performance of two China biotech stocks that trade in the U.S., two healthcare-related China ETFs, and the S&P 500. Of the five, the only loser is the S&P 500 (-11%).
Both ETFs are up on the year, and the two stocks — Zai Lab (NASDAQ:ZLAB) and WuXi Biologics (2269.HK) — are crushing the market.
Last year, I put together a comprehensive report for my Early Stage Investor subscribers on the ridiculously big upside potential for the Chinese biotech stocks in the next decade. The spread of the pandemic has only strengthened my case for the sector.
Here’s the big story in a nutshell: The Chinese government stated it wanted that nation’s biotech sector to make up 4% of the total economy by 2020. Based on the numbers at the time, that meant an explosion from a $5.4 billion industry to a $627 billion industry — or 116X growth — in just two years.
I said at the time that it may not happen that quickly, and I doubt it will. But I also said … who cares? If you could get 116X growth over five years, you’d want in on that, wouldn’t you?
The big money certainly wants in.
Amgen (NASDAQ:AMGN), the biggest biotech of all, announced a major partnership last fall with BeiGene (NASDAQ:BGNE) to sell drugs in China and co-develop 20 new cancer drugs. Big pharma companies like Pfizer (NYSE:PFE), Novartis (NYSE:NVS), and Merck (NYSE:MRK) — all with market caps over $200 billion — have partnerships in China, plans to expand there, or both.
I recommended Zai Lab to my Early Stage Investor readers last April because of its focus on cancer — China has more cancer patients than any other country in the world — and its impressive pipeline of potential new drugs. The stock has surged more than 50% here in 2020, which says a lot given the broader market conditions, and it’s now 120% above where I recommended it. It’s a poster stock for this massive trend.
I realize some investors will never buy Chinese stocks, especially biotechs. I understand. They are two categories that have been volatile in the past, and I am not here to judge anyone’s view or comfort level. But I am here to point investors to what I feel are the best investment opportunities for your money. And biotech and healthcare stocks in China have to be at or near the top of the list.
My good pal Steve Sjuggerud also wrote about this opportunity in a daily email this week and one of his current newsletters. Steve is one of the smartest guys I know when it comes to investing in China — he’s been there many times — and knowing he’s on board makes me even more confident in the money to be made here.
A key in this case — and in fact to all successful investing — is timing. We are still early in the hypergrowth China biotech trend, and that makes the upside potential even more massive for those who invest now.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.