The Covid-19 pandemic put a spotlight on an industry whose purpose is to safeguard life. The biotechnology sector develops applications to promote health through medicine, environmental sustainability, agriculture, and industrial processes.
Some biotech stocks shone brightly during the pandemic downturn, and some of them continue to have a good outlook and positive potential for investment gains.
In this guide, we list the top ten best biotech shares and talk about how to trade them.
Where Can I Trade Biotech Stocks?
The best brokers for trading stocks online have a robust trading platform with high-quality trading tools, excellent customer service, no hidden account charges, and reasonable investment minimums.
Check out our list of the best brokers for trading biotech stocks, which we have compiled based on criteria such as fees, unique features, and regulatory status.
What Are Biotech Shares?
When coronavirus hit, the world needed a vaccine, and it was up to biotech companies like BioNtech (NASDAQ: BNTX) and Moderna, Inc. (NASDAQ: MRNA) to develop one.
Coronavirus is just an example of how biotech companies research and create breakthroughs to address the many issues in our world today. Through intricate, often expensive processes, biotech companies develop therapies for chronic and infectious ailments and solve other global issues like clean energy and food security.
Besides researching and developing their innovations, biotech firms have to find ways to commercialise their creations. They also have to attract money from the public markets by creating propositions that can capture the investors' trust.
For biotech companies, stock valuation goes beyond merely analysing financial goals and performance. Evaluating biotech stocks is a more qualitative endeavour that considers many other factors.
How to Trade and Invest in Biotech Shares?
Open a Trading Account
In your search for a broker, take time to compare costs and incentives, services and conveniences, as well as the educational resources offered by different brokers. Then open an account online in minutes by entering your name, email address, and postal address. You may also have to provide proof of ID.
Once you’ve funded your account, select a biotech share by comparing it to its peers and considering the kind of industry, the customers it caters to, and its future prospects. Conduct a thorough fundamental analysis of things like company earnings to assess the company’s true value.
Place Your Trade
It’s worth checking out the technical picture (price chart) to determine the best time to press the “buy” button, e.g. when the price dips. Applying a stop order to your trade will automatically close the position for a small loss (before it becomes a big loss) if the price starts to go against you. Beware not to set your stop-loss too tight, though, as you could be sold out for no good reason on the most minor of price corrections.
Top 10 Biotech Shares to Trade
Biotechnology is a broad, innovative category. Companies here are constantly inventing therapies, procedures, and technologies to fix our problems while cashing in on their successes along the way. Here is our list of the best biotech stocks to trade this year:
- Sarepta Therapeutics
- Zai Lab
- Alnylam Pharmaceuticals
- Alexandria Real Estate Equities
- Horizon Therapeutics
- Gilead Sciences
- Regeneron Pharmaceuticals
- Fate Therapeutics
1. Sarepta Therapeutics
Sarepta Therapeutics is a biotech company that develops treatments for rare diseases through gene editing and RNA-targeted therapeutics.
The company has recorded significant underperformance compared to the S&P in the recent past, mainly due to negative clinical trial outcomes for some of its drugs. Nevertheless, the stock seems to be recovering. With some recent executive management changes coupled with growing analysts' optimism, Sarepta Therapeutics is now becoming an attractive stock to trade.
2. Merck (NYSE: MRK)
Merck had a disappointing fourth quarter, with the ongoing coronavirus pandemic having a $2.5 billion impact on last year's revenue. At the beginning of 2021, the firm sold its Moderna (NASDAQ: MRNA) equity stake and started focusing on COVID-19 treatments.
In February, the company's long-serving CEO announced that he would be stepping down to retire at the end of June. Nevertheless, Merck is a big company whose stock could enjoy big gains if the right drug breakthrough comes along.
3. BeiGene (NASDAQ: BGNE)
This commercial-stage biotech company develops molecularly targeted cancer therapies in China and the United States of America. Some of its notable creations include the breast cancer-curing Abraxane, Tocilizumab for Hodgkin's lymphoma, and Brukinsa for mantle cell lymphoma.
BeiGene has recorded significant successes in the recent past, including one of its drugs receiving approval from the China National Medical Products Administration. This stock has been in an uptrend since the March 2020 low point.
4. Zai Lab (NASDAQ: ZLAB)
This Shanghai, China-based biopharmaceutical firm mainly works to discover, develop, license, and commercialise proprietary therapeutics for infectious, oncologic, and autoimmune diseases.
Its big pipeline of drugs includes Niraparib: an oral medication for treating cancer, including ovarian, lung, and multiple solid tumours.
The company has been on a profitability path, with its average annual growth estimated to be around 60%. Although its share price has become volatile in 2021, the uptrend that started in October 2018 continues.
5. Alnylam Pharmaceuticals (NASDAQ: ALNY)
This biopharmaceutical company engages in the discovery, creation, and commercialisation of RNA-modifying therapeutics. Some of its noteworthy remedies are used to treat genetic disorders as well as diseases of the central nervous system, cardio-metabolic diseases, and hepatic infections.
Even though the company incurred losses in its fourth quarter of 2020, it still is among worthy biotech stocks to buy this year. Price volatility could be unnerving for some, and an opportunity to make money for others.
Expert Tip on Investing in Biotech Shares“ Aim to diversify your portfolio. Even as you focus on trading biotech stocks, consider investing in other sectors to limit your exposure to a single sector and open up the possibility of making money elsewhere. ”- Jim Mwangi
Why Invest in Biotech Shares?
Investing in biotech stocks for the very first time can be intimidating but it could help you create a solid portfolio with good returns and minimal losses. The coronavirus pandemic of 2020 triggered a flood of new money into research, which benefited many biotech companies. There has also been a rise in clinical data sharing.
Biotech stocks will be in huge demand for the foreseeable future and could therefore be a good investment.
Frequently Asked Questions
Biotech investments could be suitable for beginners who take care to diversify their portfolios so that they’re not dependent on a single stock or sector doing well.
Yes. Most countries consider profits from trading as a taxable event. Check your local tax regulations before trading.
Trading stocks 24/7 is, by and large, impossible. However, some brokers allow pre-market and post-market sessions where you can place a trade.
An exchange-traded fund (ETF) is a fund composed of a basket of biotech stocks, whereas biotech stocks are individual equities. The biggest difference between the two is that individual stocks will carry higher risk as opposed to investing in a diversified fund.
Diversification (i.e., not putting all your investment eggs into one basket) is the beginner’s best bet for reducing risk. You might also consider applying a stop order to each of your investments, which will sell you out for a small loss before it becomes a big loss if the share price goes against you.
Yes. Most regulated platforms will insist on “know your customer” (KYC) checks before allowing you to trade. This is to provide a safe and secure environment for the users.