The double-digit run for biotech stocks off a June bottom is great — until you realize you could've netted a 160% gain by investing in the highfliers.
Two of the top 10 biotech stocks by Relative Strength Rating started the year off as dollar stocks. One has only five months of trading under its belt following an initial public offering in April. But that hasn't stopped them from leading the group. In terms of 12-month performance, these biotech stocks rank in the top 1% of all issues, according to IBD Digital.
According to an analysis from Investor's Business Daily, if you'd bought 100 shares of each at the end of 2021, you'd be more than $12,000 richer today — $12,489, to be exact. The group of 10 has jumped 65%, collectively, this year.
There's a lot to like about biotech stocks right now, experts say.
Early this year, investors gravitated to a "risk on" mindset amid rising interest rates and continued inflation. Now, a bevy of new catalysts and more visibility into 2023 are driving investors back to biotech stocks.
"To me, a lot of the rebound has been a recovery, recognizing the durable embedded value in this portfolio of companies," Terray Therapeutics Chief Financial Officer Eli Berlin told Investor's Business Daily. Terray is a privately held company using data science to develop drugs.
Biotech Stocks: Check Out These Highfliers
IBD tracks 807 biotech stocks. Collectively, the group has surged more than 28% from a bottom on June 16. Meanwhile, the SPDR S&P Biotech exchange traded fund — a key biotech barometer — has jumped 32%. The top 10 biotech stocks by RS Rating? They put together a 160% run as of Monday's close.
Catalyst Pharmaceuticals leads the group. It started the year off trading under 7 a share. Similarly, Aerie Pharmaceuticals began the year as a dollar stock. As of Monday's close, these three biotech stocks have soared 92% and 116%, respectively, this year.
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Here's how it works: For $1,379, you could have bought 100 shares each of Catalyst and Aerie at the end of 2021. Today, those shares would be worth $2,812 — an increase of 104%. If you'd bought 100 shares of the top 10 high-performing biotech stocks, it would have cost you $19,237. But today, those holdings would be worth $31,726, a gain of $12,489.
In comparison, you could have bought 100 shares of the SPDR Biotech ETF for nearly $11,200. Today, that holding would be worth around $8,200 — a loss of about $3,000. Though the ETF has ramped higher amid the biotech recovery, shares are still down 27% this year.
So, there's a benefit to seeking out the best-performing stocks.
Some Caveats To The Group's Performance
Hindsight is 20/20, however, and there are some caveats to the group of 10.
Aerie, ChemoCentryx, Global Blood Therapeutics and Forma Therapeutics benefited from their looming acquisitions.
Alcon is buying the former for roughly $770 million. Amgen is taking on ChemoCentryx for $3.7 billion. Pfizer will buy GBT for $5.4 billion. Forma forged a deal with Novo Nordisk for $1.1 billion. Aerie makes glaucoma treatments and ChemoCentryx is testing treatments for rare diseases. GBT and Forma both make sickle cell drugs.
The strongest gain among the group comes from Belite Bio. The biotech stock has rocketed 243% off its IPO in April. Belite is working on eye-disease drugs.
Catalyst, which leads the group and has nearly perfect ratings from IBD Digital, sells just one drug, a treatment for a rare neuromuscular disease. But the company is hoping to acquire another.
The Top Biotech Stocks By RS Ratings
| Company | Ticker | YTD performance |
|---|---|---|
| Catalyst Pharmaceuticals | CPRX | +92% |
| Aerie Pharmaceuticals | AERI | +116% |
| Belite Bio | BLTE | +243% |
| ChemoCentryx | CCXI | +42% |
| Ventyx Biosciences | VTYX | +85% |
| Akero Therapeutics | AKRO | +27% |
| Global Blood Therapeutics | GBT | +132% |
| G1 Therapeutics | GTHX | +37% |
| Verve Therapeutics | VERV | -3% |
| Forma Therapeutics | FMTX | +40% |
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
