The 3 Biggest Mistakes Biotech Investors Make

By Lou Basenese, on Thursday, November 5, 2020

We’re still waiting for a Presidential winner to be declared…

And yet biotech stocks keep marching higher.

You see, as I explained earlier in the week, the next President is largely irrelevant to this red-hot investing trend.

This year alone, this trend has delivered profits to my readers of 105%, 118%, 243%, 641%, and 949%.

And now I want to make sure you don’t miss out on the next biotech profit opportunity.

So today, I’ll address the three biggest obstacles that might be holding you back.

Up, Up, and Away

The biotech sector was one of the first to snap back from the Coronavirus sell-off in March.

And it’s done nothing but charge higher ever since. Why? Because the pandemic has led to a permanent shift in investor sentiment and behavior.

As I’ve explained in earlier columns, prior to the pandemic, biotech stocks were considered a potential source of considerable profits, but were also considered risky.

But now they’re considered to be very profitable — and absolutely vital to human survival.

That’s why capital is pouring into the sector by the billions. It’s helping to help fund Covid-19 therapies, as well as every manner of life-saving drug and treatment imaginable.

And yet many investors are still sitting on the sidelines. Why?

I believe three obstacles are holding them back.

Biotech Obstacle #1: Too Many Choices

For starters, with over 500 publicly-traded biotech companies, investors simply don’t know how to sort through and identify the highest-quality opportunities.

I’ll admit, it’s a daunting task. But that’s no excuse.

We’re literally in the “the golden age of biotechnology.”

This represents one of the biggest and most enduring investment trends of today — and therefore, biotech stocks should be in every investor’s portfolio. Even if it’s just a small exposure.

Unfortunately, most investors get exposure by investing in a biotech ETF like the iShares Nasdaq Biotechnology ETF (IBB) or the SPDR S&P Biotech ETF (XBI).

While this is better than doing nothing, it’s never going to deliver gains of 243%, 641%, or 949% (or more) that are possible by investing in individual biotech stocks.

Biotech Obstacle #2: Buying Low

As you might know, I’m a fundamental analyst by trade. But biotech stocks don’t trade on typical fundamentals like cash-flow, price-to-sales ratios, or EBITDA margins.

That makes it hard for most investors to know if they’re buying a biotech at an objectively good price. So most investors jump in blindly, buy at any price, and then hope the stock goes higher.

But hope isn’t an investment strategy.

Perhaps surprisingly, it is possible to analyze biotech stocks based on fundamentals, and then determine whether they’re cheap or expensive. You just need to know how. (More on that in a moment).

Biotech Obstacle #3: Selling Too Soon

Since most investors are afraid of the risks involved with biotech stocks, when they happen to invest in a winner, they tend to bail prematurely.

It’s like they’re surprised they made money and believe it’s too good to be true. So they rush to put their profits in the bank.

Big mistake. Not having confidence in what you own could mean leaving profits on the table that add up to literally hundreds of percent.

Take Novavax, Inc. (NVAX), example.

I recommended it on March 27 of this year when it was trading for about $12.65 per share.

Within two months, the stock more than tripled.

Now, with gains like that, it’s smart to take some money off the table. And I recommended doing so.

But I know from reader emails that many folks sold out of their position entirely. And now they regret it big time — because shares kept surging all the way to $189.40.

Talking about leaving profits on the table… that’s a total return potential of roughly 1,400%!

Overcoming Obstacles

But now for some good news…

All the obstacles you learned about today can quickly be overcome.

And next week, I’m going to prove it by sharing my secret for identifying the best biotech stocks…

At the lowest prices…

With the greatest potential for lightning-fast gains of 1,000% or more.

So stay tuned!

Ahead of the tape,
Lou Basenese
Lou Basenese

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