By Matt McCallMar 06, 2020
Little did I know when I woke up on October 14, 1980 how important that day would become in my life.
I was just a wide-eyed four-year-old, and as my family and I prepared for game one of the World Series between my beloved Philadelphia Phillies and the Kansas City Royals (spoiler: the Phillies won their first World Series), an even more historic event was about to take place.
About 100 miles north of us in New York City, Genentech was becoming the first biotechnology company to trade on a public stock exchange. Shares, which traded under the symbol “GENE,” opened at $35 and quickly shot up to $88 before closing the wild first session at $71.25.
It was such a historic and crazy day that the Los Angeles Times referred to it as “a frenzy the likes of which hasn’t been seen on Wall Street since the go-go days of the 1960s.”
The Wall Street Journal referred to Genentech’s IPO as “one of the most spectacular market debuts in recent history.” If you invested in the stock on its opening day and held until the company was sold in 2009, you earned 157X your money.
That IPO was the first in what was to become one of the most profitable IPO sectors in the history of the stock market – biotech stocks. Amgen went public three years later on June 17, 1983. An initial $1,000 investment would be worth about $748,000 today (including splits and dividends). A $10,000 investment would have turned into $7.48 million – a gain of 748X!!
I’ve been enjoying my Phillies again this week as I took a little trip to Clearwater, Florida to watch a few spring training games. And I’ve been watching biotech stocks as well. They may hold the answer to the coronavirus selling…
I think 2020 will be the Year of Biotech.
The future of healthcare will really start to take shape this year, and I believe the next decade will bring advancements that we can only imagine in our wildest dreams… from a possible cure for cancer to artificial intelligence drug discovery to devices that will track our vitals 24/7.
We can now add a coronavirus vaccine to that list.
A small biotechnology company named Moderna (MRNA) is developing a possible coronavirus vaccine, and human trials are expected to begin very soon – in less than two weeks, according to the latest estimate. That is amazingly fast development, considering the first cases appeared a little over two months ago. It shows how far biotechnology has come.
Moderna shares have jumped 61% in the last two weeks.
Other companies are also hard at work on a vaccine, from big pharmaceuticals like Johnson & Johnson (JNJ) and Sanofi (SNY) to smaller biotechs like Vir Biotech (VIR), AIM Immunotech (AIM), Inovio Pharmaceuticals (INO), and Novovax (NVAX).
All those stocks have jumped in the last couple of weeks, especially Inovio. It gained 45% just today and 235% in the last week after saying it would speed up development of its potential vaccine.
Let me be clear that I’m not saying you should run out and buy these stocks. They’re still quite risky with trials yet to begin. But I’m hopeful that one or more of the vaccines will come to fruition quickly and bring the coronavirus and related fears under control. (I’ll have a special podcast and MoneyWire for you on Monday talking about the fears and the market.)
What I am saying is that technology and science have converged to the point where unimagined breakthroughs are not only possible but starting to happen… be it a vaccine for a possible pandemic developed in record time or being able to “edit” a certain disease out of our genes.
History shows how you can make big money investing in biotech companies discovering world-changing drugs in a country that embraces medical breakthroughs. The biggest winner of this transformative mega-trend will be biotech stocks – especially small biotech stocks set to grow large.
I look for biotech stocks as a group to gain more than 20% this year… with the best, most innovative firms more than doubling.
Big money is already on the move. Mergers and acquisitions (M&A) activity hit record highs last year. And just this week, Forty Seven (FTSV), a small biotech company working on fighting cancer by activating a patient’s immune system, was bought by one of the big biotechs, Gilead Sciences (GILD), for $95.50 a share. That was a 65% premium over the previous close (last Friday) and nearly 140% above where FTSV started the year.
Larger firms paying up for smaller companies is always a positive sign – and as we just saw, owners of those smaller companies stand to make a lot of money.
And then there’s the IPO market. A bunch of biotech/healthcare-related IPOs over the last year have done extremely well. My team and I also looked at the best-performing IPOs of late, and nearly every one in the top 20 is a biotech or healthcare company.
Investors had the opportunity for life-changing gains during the last biotech boom (2008-2015). Exact Sciences (EXAS) soared 54X… Regeneron Pharmaceuticals (REGN) ran 34X… and Incyte (INCY) gained 31X.
I believe select biotech stocks are poised to give investors another opportunity for similarly huge – or even bigger – gains as we head into the Roaring 2020s.
If you want exposure to biotech as a whole, you can buy an exchange-traded fund (ETF) like the iShares Nasdaq Biotechnology ETF (IBB). If the sector does as well as I expect, it should also do very well. It’s down about 3.5% here in 2020, so it has held up much better than the overall market’s 10.7% drop.
But… you can do even better by owning smaller companies that bring a breakthrough product to market, develop a new technology, or get bought out.
It’s interesting. I’ve done a ton of research into smaller stocks recently, and of the 10 I recently recommended, four were biotech/healthcare related.
One is a very small healthcare IT company. If it captures just 0.5% of its market, it would increase nearly 5X in size. One uses artificial intelligence (AI) to detect cancer early, and the other uses AI to create next-generation drugs. The fourth helps other biotech companies bring their products to market.
Whatever your choice, consider having biotech stocks as part of your portfolio. The breakthrough treatments set to come our way have me more excited about the opportunity in biotech than I have been in many years.
P.S. The AI drug discovery stock I mentioned got some attention recently and soared more than 100% in just nine days.
It’s a great example of how the right small stocks can explode higher. It’s much harder for Apple (AAPL) to go up 10X when it’s valued at $1.2 trillion than it is for a small cap to go from $1 billion to $10 billion.
My system is designed to identify small stocks with the best chances to grow large… and I recently recommended 10 to my readers. One soared 54.6% in one day just two weeks after I recommended.
Four of the remaining nine stocks are in healthcare, but I also include my #1 5G microcap stock right now.
The number of 5G connected devices will grow from 2 million to 1.5 billion in just five years… a 750X growth rate. This tiny microcap company is developing the key components the big boys need to take this technology mainstream.
Click here to listen to Matt McCall’s MoneyLine podcast! This week, Matt discusses the recent market volatility. Stocks endured one of their worst weeks since the 1930s as a result of fear surrounding the coronavirus. But this isn’t the first correction the market has experienced – and it certainly won’t be the last. In this podcast, Matt dives into the history of stock market corrections. What it tells us can help us create a strategy. The current weakness is providing buying opportunities, and Matt names a few stocks with potential. Plus, he interviews famous value investor Dan Ferris of Stansberry research.
You can subscribe to this podcast on iTunes, Stitcher, Spotify, or wherever you listen to podcasts.
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