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Diversification is Key to Biotech Investing

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Approach:

-Exclusive attention to development-stage biotech companies, which we define as those companies whose market cap is primarily attributable to a drug not yet approved by the FDA.
-BSR delves deeply into the scientific basis for drugs under development at the companies it covers. BSR does the same for the diseases targeted by these drugs and we then share the results of our research in plain English with our subscribers. BSR's co-primary goals are to make investors money and educate them about the biotech sector.
-A more recent, but increasingly important, focus has been on how changing market dynamics (record short interest, increasing use of derivative instruments, the rise of the zero volatility fund strategy) affect the biotech sector.

Key themes:

-Upcoming revenue deficits at big pharmaceutical companies will drive them to use cash to purchase companies and partner products at small biotech.
-Strong upward moves in the market will be accelerated by nearly two years of sequential record-high short interest.
-Diversification is key to biotech investing.
-Understanding the science, statistics, regulatory environment, and the macro market environment are all equally important to profit in the sector.

Outlook for the financial markets:

-Significant gains for the biotech sector over the next 12-18 months as big pharma, big biotech, and private VC firms vie to throw ever-larger sums of money at promising products owned by dev-stage biotechnology companies.

Thoughts on controlling risk and staying in the game:

-Diversification
-Decide why you will sell before you ever buy. Write it down and stick to it. Constantly re-evaluate it.
-Really understand how different investing in dev-stage biotech is from investing in the rest of the market.
-Never defer to the bear's ability to influence price, but spend considerable time understanding those arguments anyway.

If I could give one piece of advice to attendees...

The market is too hard, particularly in the biotech sector, to allow you to succeed on your own for any significant period. Find help you can trust, which means closely analyzing all conflicts of interest. Read every statement about the market or a trading vehicle so that your first thought is, "what is this person's motive for saying that?" Once that is ascertained, you can make a rational decision whether to integrate their commentary into your market views.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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