Biotech stocks have long-been one of the hot topics of the market. These companies are well-known for high-risk, high-reward for investors. Via multiple phase trials and billions of dollars in capital, some biotechnology stocks can fly high. In 2020 alone, countless biotech stocks soared to never-before-seen heights thanks to the race for coronavirus vaccines. In fact, biotech stocks have been one of the most promising classes for trading penny stocks too. Again, COVID-19 resulted in hundreds of companies working toward the same goal. Many of them were public and had stocks under $5.
Finding the best biotech stocks to trade or even just to watch isn’t difficult. But you should understand what you’re looking for in the best biotech stocks. Consider the risks as well. Unlike some sectors, biotechnology stocks can involve a number of early-stage, pre-clinical, and clinical-stage companies.
Why Biotech Stocks?
Each stage and interim progress along the way can become a catalyst for biotech stocks. A positive outcome or update can lead to a boost in shares. But a negative outcome or update can crush biotech stocks. In light of this, there are also situations where there may be good results but biotech stocks may fall and vice versa. That can result from a number of things including trials for multiple endpoints.
However, just like mining stocks, tech stocks, and other sector stocks, biotech stocks can benefit even from the early stages. A healthy market for mergers and acquisitions can lead to even the smallest biotech stocks getting bought out for billions of dollars. It’s important to keep in mind that this isn’t always the case. However, investors look to the biotechnology sector as one that can offer more – albeit higher risk – opportunities than things like consumer stocks or financials.