The “Murderer’s Row” Of High-Tech ETFs

4 | By Michael A. Robinson

You don’t always have to buy a stock to double your money.

Sometimes, an exchange-traded fund (ETF) can pack just as big a wallop.

ETFs with that kind of horsepower don’t come along all that often, which is why you have to pick the right one … at the right time.

And that’s the tech-investing home run that I have for you today – an ETF with actual double-your-money profit potential.

In fact, you’ll be stunned at just how quickly every $1 you invest in this fund will turn into $2 in holdings.

It’s Like the ’27 Yankees …

Over the last couple of weeks here at Strategic Tech Investor, I’ve introduced you to several “double-your-money” stocks – tech plays that I believe can generate a return of 100% or better in just two, three or four years.

Finding stocks with that kind of upside is Rule No. 5 of my five-part strategy for achieving life-changing gains.

I look for stocks because they have a better chance of having the right “risk/reward” profile: The typical ETF, with its more-diversified makeup, is designed to be less-volatile and less-risky than its individual-stock counterpart – which is why many folks turn to them. They’re stable and have low fees, but they have a hard time beating the overall stock market – let alone doubling your money in a reasonable amount of time.

But there are exceptions, including the one I’m presenting to you here.

Not surprisingly, this ETF is focused on one of the hottest sectors in today’s stock market.

I’m talking, of course, about biotech.

As I’ve told you all many times, it can take 10 years and $1 billion or more to create a new blockbuster drug.

That’s why the companies that pull this off can double in price.

Now imagine an ETF that’s chock full of companies like that …

You end up with an array of stocks that’s every bit as potent as the “Murderer’s Row” hitting lineup of the 1927 New York Yankees.

The ETF in question is the iShares NASDAQ Biotechnology Index (NASDAQ: IBB). It invests nearly 58% of its funds in big-cap firms that have successful products on the market. It’s a terrific proxy for one of the hottest sectors in the U.S. stock market.

Fact is, in just the past six months alone the IBB has risen a scorching 29%.

That’s nearly double the 15.85% return of the U.S. Standard & Poor’s 500 Index over the same period. And it follows the 31% ride the IBB gave its shareholders last year – a return that was nearly triple the 11.68% gain of the overall U.S. stock market.

If this biotech ETF were even to rise at a more-conservative annual rate of 20%, you’d be on pace to double your money by the end of 2016 …

Then again, the iShares IBB is composed of proven winners. The fund’s chief holdings are a Who’s Who of the biotech sector’s best performers.

These firms have strong balance sheets, and have a solid track record of getting FDA approvals. I mean, just look at the Top Five holdings alone:

  • Gilead Sciences Inc. (NasdaqGS: GILD): The Foster City, CA-based Gilead has products that fight HIV/AIDS, and others that battle liver, heart and respiratory diseases. It also has products that fight parasitic infections and blindness. With a market cap of $80 billion, Gilead has a 29% profit margin, a 32% return on equity and free cash flow (FCF) of about $2.6 billion.
  • Regeneron Pharmaceuticals Inc. (NasdaqGS: REGN): An East Coaster, based in Tarrytown, NY, Regeneron is mainly known for EYLEA, a compound that combats age-related macular degeneration, a leading cause of blindness among older folks. It also has a drug used to treat advanced forms of colorectal cancer. With a $24.4 billion market cap, the firm has a 53% profit margin, an 87% return on equity and a recent quarterly earnings increase of 750%.
  • Amgen Inc. (NasdaqGS: AMGN): A biotech-sector pioneer, Amgen sells medicines to treat cancers, kidney disease, rheumatoid arthritis and bone disease. It also has products used to thwart anemia and inflammations. With a market cap of $74 billion, the firm has a profit margin of 26% and a return on equity (ROE) of 24%. It produces $3 billion in free cash flow.
  • Celgene Corp. (NasdaqGS: CELG): Although it’s one of the New Kids on the Biotech Block, the Summit, NJ-based Celgene has already demonstrated its muscle. Its core technology regulates cells, genes and proteins in order to treat cancers of the bone marrow, breast and lungs. It also has an agent that fights anemia. With a market cap of $49.6 billion, Celgene has a profit margin and return on equity of roughly 25% and free cash flow of $1.9 billion.
  • Alexion Pharmaceuticals Inc. (NasdaqGS: ALXN): The Chesire, CT-based Alexion specializes in rare and ultra-rare diseases, those that may affect only one in 20 million. And it has therapies for deadly blood and brain disorders. With a market cap of $18 billion, the company has a profit margin of 24%, an ROE of 17% and free cash flow of $255 million. Quarterly earnings recently rocketed 81%.

These Top Five holdings alone give us a broad reach into the next generation of biotech breakthroughs. These firms often collaborate with early-stage companies and university researchers. They also fund a wide range of new product clinical trials.

Amgen alone is involved in roughly 100 collaborations that could lead to breakthrough compounds or revolutionary manufacturing processes. For its part, Celgene says it is involved in roughly 300 clinical trials now under way.

In other words, several of the firms in this ETF are what I call “stealth small caps.” Despite their size, they offer the kind of growth rates you usually only see with small firms.

But don’t feel cheated. The IBB ETF also invests in quite an array of small caps, too. In fact, more than a dozen have market caps of $175 million or less.

I’m talking here about firms like Geron Corp. (NasdaqGS: GERN) and ArQule Inc. (NasdaqGM: ARQL), both of which are working on cancer treatments. Each company’s stock sells for less than $2.50 a share. The companies have promising therapies – but low sales and deep losses.

Add it all up and IBB removes much of the risk that average investors have in targeting the biotech sector, where many stocks offer a lot of upside but are highly volatile.

Of course, you pay a bit of a premium for this unique combination of both stability and rapid price appreciation. IBB trades at roughly $180 share.

But as I like to remind tech investors, you can’t just look at the price tag. You have to focus on the potential for profits.

And that’s really what it’s all about when it comes to investing in biotech – or any other promising slice of the high-tech market.

As this ETF demonstrates yet again, high tech has been – and will continue to be – the greatest wealth generator the world has ever known.

And the IBB is exactly the type of strategic play every tech investor should make. It’s both the easiest and lowest-risk way I know of to put a broad swath of market leaders and perennial winners in your hands … immediately.
It allows you to capitalize on a sector that’s been absolutely on fire – but doing so in a way that minimizes your risk.

And it establishes a terrific foundation for the more-risky profit plays that we’ll be examining in the weeks and months to come.

For all of this, we have but one goal – to help you avoid the “zero-net-worth” futures that so many Americans face …

But if we continue to work together as we have over these past few months, that’s a goal you can all achieve.

And we’ll be proud to have helped get you there …

See you later this week.

Editor’s Note: As my “Tech Stock Treasure Map” column from last week underscores, I welcome your comments, questions and suggestions. Post a comment below … or drop me a note at I look forward to hearing from you.

4 Responses to The “Murderer’s Row” Of High-Tech ETFs

  1. Tim Hitt says:

    I really enjoy reading your advice i like how you get all fired up! I am waiting to inherit some money and when i do i am going to take your advice and make some money.Thanks for the education. Tim Hitt

  2. Mildred Lyon says:

    Thank you so much. I have been spending many hours researching where to invest some money in a Roth IRA…I think this fund is perfect. Really, I am so thankful. I spend hours trying to learn and get info just to get to the bottom of an article and they want 399$ or some other outrageous price for some subscription. You make a difference in people’s lives, know that please. My sincere thanks for myself and my children. I make less than 26K a year and it is very hard to save anything yet we will all be old and I am trying to look out for myself and them.

  3. Bob says:

    Thanks, seems like sage advice. Currrently have CELEGENE & GILEAD, but others were financially ourt of reach. The “I shares” seems a way to get a bit & hold. These are not investments you want to buy, & then just sell in a year. You MUST have patience to hold for several years. & beyond.

    • Michael Robinson says:

      Hi Bob,

      Yes, patience can really pay off in investing. One thing about this ETF is the exposure to so many promising small caps that would be too volatile for most investors to buy and old.



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