- • You wouldn’t venture into a Komodo dragon’s lair without a guide, would you? Investing in speculative small cap biotech stocks is similar.
- • Today, Marc Lichtenfeld shares the three characteristics you should look for first.
Editor’s Note: Today’s article comes to you from The Oxford Club’s Chief Income Strategist Marc Lichtenfeld. Marc has decided to share his biotech investing expertise with us by divulging the three characteristics he looks for in a biotech stock.
Coming soon, Marc will also present The 2019 American Health & Wealth Summit. He has teamed up with former Speaker of the House Newt Gingrich to discuss the best new opportunities in the healthcare sector.
Don’t miss your chance to join them on Thursday, July 18, at 1:00 p.m. ET. Click here to sign up for this FREE online event and learn how you can profit from today’s best medical innovations.
– Christina Grieves, Senior Managing Editor
Several years ago, I was on The Oxford Club’s Chairman’s Circle cruise to Australia and Indonesia.
During the trip, we saw the famed Komodo dragons, which are some of the most lethal animals in the world. When they bite, they release bacteria that stop the blood-clotting process, leaving their prey (including humans) to bleed out.
The dragons roam free on Komodo Island, so I’m sure glad that I had a guide to make certain we didn’t become dragon food.
If you were to take a trip to an exotic location that had hidden dangers like man-eating Komodo dragons, crocodiles or dangerous plants, surely you’d bring a guide.
Yet many investors try their hand at speculating on small cap biotech without consulting an expert. And it’s not that these investors can’t figure out a good stock from a bad one. But in small cap biotech particularly, the waters are rife with danger if you don’t know what you’re doing or don’t follow someone who does.
There are lots of great stories in biotech – amazing new drugs with the potential to cure horrible diseases. And let’s face it, investing in these companies is uplifting. You’re investing in life. Who wouldn’t want to be part of something that saves or drastically improves the lives of people who are suffering?
But it’s important to slow down and understand the forces that move these stocks.
In my advisory service Lightning Trend Trader, I’ve boiled my stock-selection process down to three characteristics that make for a good biotech trade:
- Binary events. You want a company that has a significant upcoming catalyst. These catalysts can be clinical trial data, FDA committee meetings or approval, an earnings release, partnership announcements, etc. Biotech stocks tend to respond strongly to both good and bad news, so if you want to see quick results, buy the stock ahead of an upcoming catalyst.
- Unloved or undercover. My training as an analyst was with an ultra-contrarian Wall Street research firm. We didn’t issue recommendations unless they went against the consensus. So when I pick a biotech stock, I prefer it not be the darling of Wall Street – yet. When an analyst comes around to our side, it’s an important event. It can – and often does – act as a catalyst, pushing the stock higher.
- Flat price action. I prefer a stock that isn’t doing a whole heck of a lot in terms of price movement. That way it has a better chance of being off people’s radar. Even if it’s a popular or well-known stock, if the trading activity has been flat, it allows the stock to build up steam for the next move higher. The stock is unlikely to catch the eye of momentum traders if it’s flat, so the stock should be in strong hands. Once it gets moving higher, you shouldn’t see a lot of sellers.
This is the strategy that helped my subscribers earn a gain of 318% on Neurocrine Biosciences (Nasdaq: NBIX) and a staggering 2,381% on AbbVie (NYSE: ABBV). One of my readers made more than $1 million just on the AbbVie trade.
Clearly there’s something to these three characteristics…
That’s why I’m applying them to the companies that I discuss during The 2019 American Health & Wealth Summit with former Speaker of the House Newt Gingrich.
All five companies are on the verge of massive medical breakthroughs and check the boxes on what I look for in a great biotech trade. Listen in as Newt and I discuss the companies that are helping to solve America’s broken healthcare system and will make investors a boatload of money.
And it couldn’t be easier to attend The 2019 American Health & Wealth Summit…
Simply click here now to reserve your seat for the free online event. Not only will you avoid becoming dragon food, but you may become the next millionaire.