Back in October, I did something crazy.
That’s when I told the paid-up members of my Radical Technology Profits trading service to buy a small-cap biotech stock.
Here’s why that move was a bit nuts.
At the time, it looked like Hillary Clinton would soon enter in the White House and clamp down on drug prices – and so the biopharmaceutical sector was deeply out of favor.
Turns out, however, our crazy bet paid off.
Despite his campaign rhetoric, President Donald Trump has pulled back from his own fiery rhetoric about drug-price caps.
That helped pushed biotech and drug stocks into a big uptrend.
And my paid-up members made peak gains of 116% – in just over eight months.
Today, things have changed – and investing in biopharma stocks is generally seen as a smart move. However, that means a lot of these shares have been bid up, and your best move is to buy big winners at deep discounts.
But to do that, you have to know how to find those deals.
Today I’ll show you how you can, too.
And I’ll reveal the three best Biotech Bargains out there right now.
Not 1 but 2 D.C. Catalysts
I hate to look to Washington for help when it comes to finding tech stocks you can use to get on the Road to Wealth.
But I’ll take it when it comes our way.
Besides the seeming end of grousing about drug prices, biopharma stocks are gaining ground from another big catalyst out of Washington.
The White House is now talking about speeding up the U.S. Food and Drug Administration approval process.
That would be huge.
You see, hundreds of drugs are in FDA trials. It now takes an average 10 years and $1 billion to get a drug from discovery to market.
So, anything that gets the hundreds of drugs now in FDA trials out faster and cheaper is good news for biopharma investors – not to mention doctors and patients seeking new and effective treatments.
No wonder the sector is on fire once again.
The iShares Nasdaq Biotechnology ETF (NYSE: IBB) is up 11% since it hit a three-month low on May 30. Those gains are better than nine times greater than the S&P 500’s return of 1.2% over the period.
So, now that we have some proof for the sector’s rebound, it’s time to dig up those Biotech Bargains.
Remember that 116% gains-in-eight-months winner I told you about before?
I didn’t do so just to brag, but to demonstrate to you that I’ve got a knack – a system – for finding undervalued biotech shares. And I see a similar setup occurring right now with three great pharmaceutical leaders that are priced for a big move up.
Here’s how I know: Each is selling at a big discount from its peer group.
I base that on the fact that the tech-centric Nasdaq 100 is trading at about 21 times the forward price-to-earnings ratio (forward P/E), a key gauge of earnings growth roughly a year out. And based on their forward P/E’s, these three Biotech Bargains are trading at “fire sale” prices.
Take a look…
Biotech Bargain No. 1 – Gilead
Gilead Sciences Inc. (Nasdaq: GILD) had become a bit of a victim of its own success.
It was one of the better-performing biopharma stocks a few years ago based on its strength in the hepatitis market through its drugs Sovaldi and Harvoni, both of which rake in huge revenue. According to the advocacy group Hepatitis Foundation International, some 3.2 million Americans who suffer from a chronic version that can make them very sick. More than 150 million people globally are infected with the virus that causes the blood-borne disease.
However, the drugs’ cost – $1,000 a week… or even more – brought the company under the media’s and Washington’s scrutiny, and the targets of drug-price controls.
But now that the White House has waved the white flag on price caps, Gilead is back in Wall Street’s spotlight.
It just received a “Buy” rating from Deutsche Bank and a glowing review in Barron’s. Both noted that the stock appears to have bottomed out and entered a new uptrend.
Trading at $71.35, Gilead has a market cap of $93.5 billion. It trades at just 9.4 times next year’s earnings. That’s a 55% discount from the Nasdaq – and it doesn’t count Gilead’s 2.9% dividend.
Biotech Bargain No. 2 – Shire
If all you did was look at the headline for Shire PLC (Nasdaq: SHPG)’s first-quarter results, you might be tempted to shy away. After all, while sales were up sharply, earnings fell 11%.
But here’s the thing. Most of the decline came from onetime events and higher costs associated with Shire’s mid-2016 $32 billion merger with Baxalta Inc. If you strip out all those charges, you get a 14% increase in non-GAAP profits.
That Baxalta merger will end up being a boon for Shire. That move not only adds sales growth but also removes $700 million in costs by the end of 2019. That’s just going to add to Shire’s already impressive 75.5% gross margins.
And it has a great product pipeline. Shire has recently got FDA approval for five new drugs. It also has 18 compounds in Phase III trials. If only half got approved, that would mean a total of 14 new drugs on the market less than three years out.
Trading at about $172, Shire has a $52.3 billion market cap. It sells for 10.4 times forward earnings. That gives us a 50% discount from its Nasdaq peers.
Biotech Bargain No. 3 – Jazz Pharmaceuticals
For much of this year, shares of Jazz Pharmaceuticals PLC (Nasdaq: JAZZ) were on the rise. From Jan. 3 until the stock topped out April 27, they yielded peak gains of 45%.
While the stock headed down in advance of first-quarter earnings, they turned out to be very strong, with profits up 16.5% from the year-ago quarter.
Not only that, but Jazz Pharmaceuticals reported solid progress on three drugs now in pivotal Phase III trials. It now has six products on the U.S. market, so we’re looking at what could be a 50% increase in its sales.
Armed with the narcolepsy drug Xyrem, Jazz should post double-digit gains for both sales and earnings. Bear in mind that the analyst consensus is that Jazz will grow earnings by 16% a year over the next five years, meaning they – and the share price – should double over that stretch.
The stock trades at roughly $156, giving Jazz a market cap of $9.4 billion. It has a forward P/E of 12, meaning it trades at about a 43% discount from the Nasdaq.
Any or all of these stocks would make a great “Buy and Hold.” After you get beyond the politics of the moment, it should be clear that biotech will remain vital for years to come.
After all, you and me – all of us – want see better treatments or even cures for diseases like cancer and Alzheimer’s in our lifetime. And we won’t get that without the steady stream of breakthroughs that will come from biopharma firms.
So, with these stocks you’ll not only get on the Road to Wealth, but these companies will be using your investment dollars to cure the worst diseases on Earth and help us all live longer lives.
What could be better than that?
Of course, while I believe all three of these Biotech Bargains will deliver triple-digit gains over the medium haul, I can’t promise they’ll do so in less than a year, like that Radical Technology Profits “pick” did.
But if you do desire that kind of action – which I deliver like clockwork in “Rad Tech” – just click here.
Have a great weekend.
I’ll see you next week.