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Pinpointing the next major move in the market is nearly impossible, but for investors with a longer-term horizon, biotechs are still early on in a multi-year bull run.
What has been the biggest bull market of the last five years? The answer may surprise you.
It wasn’t the rebound of the housing market, the recovery of the financial sector, or the social media bubble. Instead, it was biotech stocks that led the markets higher.
Just look at the iShares NASDAQ Biotechnology ETF (NASDAQ:IBB). The return of this biotech ETF is nearly double the S&P 500 over the last 12 months. And over the last five years, the iShares biotech ETF return is close to triple what you would have gotten from the S&P 500.
Have you missed out on the biotech rally? If so, don’t worry. There remains one unique opportunity to invest in the biggest biotech innovation of our time. It’s called the “Smart Pill,” and it could hand early investors huge profits in the coming years. To get the details on this rapidly unfolding opportunity, just click here now.
But can this rally really continue? The short answer is a simple yes. The long answer lies in industry tailwinds. Let me explain…
The Big Trends Propelling Biotech
One of the big tailwinds for biotech stocks going forward will be positive demographic trends. First, there’s the rise of the middle class in emerging and developing countries, which means they’ll have more money to spend on modern day medicines.
Then there’s the aging population in the U.S. and across the globe. Older individuals tend to have more health issues—thus, they need more drugs.
The beauty of the biotech market is that people will continue to age, regardless of whether Greece exits the eurozone, whether oil falls to $40 a barrel, or whether the economy falls back into recession.
And with a steady flow of aging individuals, the demand for new drugs will keep biotech companies incentivized to develop new products.
Overall, investing in biotech isn’t as scary as it used to be. Some biotech stocks are even offering dividends and the extraordinary biotech rally has led to the rise of large-cap biotechs.
Biogen Idec (NASDAQ: BIIB) is one of the leading biotech companies in the world. It’s the largest holding of the iShares biotech ETF, making up 9.7% of the ETF’s portfolio, and it has a $90 billion market cap, a size unheard of for a market cap until a few years ago.
And shares of Biogen are up 236% over the last three years, having added $65 billion to its market cap over that time.
Its secret? Focusing on an underserved market, which allowed it to become the market leader for treating multiple sclerosis.
Other major holdings of the biotech ETFs includes Gilead Sciences (NASDAQ: GILD) and Amgen (NASDAQ: AMGN). My colleague, Tyler Laundon, foresees a slowdown of Gilead’s great growth. This comes after a 140% surge in its stock price for the last two years,
Amgen, on the other hand, might have more room to run. Shares are up 75% over the last two years. And with a $114 billion market cap and paying a dividend that yields 2.1%, it’s not your typical biotech. Its primary focus is on products for cancer care and inflammation.
Innovation is Front and Center
Driving the growth in biotechs during 2015 and beyond will be about the demographic trends, but innovation will also continue to be a key for the industry going forward.
Possibilities are becoming endless.
Companies that are treating rare diseases are no longer quite as risky. By targeting a previously underserved market, biotech stocks can charge high prices and enjoy the benefits of little to no competition.
Recall that we covered Juno Therapeutics (NASDAQ: JUNO) on the day of its IPO. Despite having $0 in revenues, shares soared as the biotech company is gaining traction in the cancer market; specifically, it’s working on using a patient’s own immune systems to battle cancer, versus using radiation or chemotherapy.
Yet, there are still stocks with huge opportunities that are underappreciated by the market.
My colleague – Ian Wyatt – believes he has found a company generating the next-gen smart pill. Now that term — smart pill —sounds like hyperbole, but consider the fact that Novartis (NYSE: NVS) saw its stock rise over 75% after investing in the first generation smart pill.
Novartis soared but because it was developing the next great biotech invention: the first-generation smart pill. Now another company is working on a second-generation smart pill. The approval of this new device could create a massive profit windfall for early investors. Click here to get all the details on this timely opportunity right now.
My advice is simple: be alert to biotech stocks and to demographic tailwinds that will drive them to continue to develop cutting-edge drugs and devices. Despite the strong biotech performance over the last five years or so, there’s no reason to believe we’re not set up for a longer-term bull run in biotech stocks.