The biotechnology stock sector is breaking out. After 20 months of consolidation “everyone” forgot about biotechnology stocks, the former leading stock market sector. As it always goes the bull breaks out once all interest is gone. That is when there are no sellers left.
This breakout, however, did not pass unnoticed. CNBC wrote that biotech stocks are on fire. It looked into Obamacare as a potential explanation, but readers know meantime that explanations for a move do not make sense in markets: if the time is there a trend will start.
Talking about reasons, MarketWatch was also there to provide “reasons for this biotechnology breakout“. It is so easy to tell a story and attribute reasons to a move … just look around and five some factors that make sense.
From our perspective, it is very simple: the consolidation period discouraged all bears. As said, when sellers leave the arena there are only buyers left. As soon as a critical group of smart investors start buying it is like they lit a fire. The rest happens automatically.
This article features 3 biotechnology stocks investors should consider to buy
Amgen is a large cap with a $120B market cap. We covered its as a biotechnology breakout stock in March. However, at that time, it was a false breakout as indicated on below chart. Right now, Amgen is getting the full support of its peers so this breakout attempt is very likely to succeed!
Repligen (REGN) is a $1.3B valued stock (mid-cap). It has very healthy financials: rising revenue (both monthly and quarterly), rising earnings, relatively low short float ratio. The P/E ratio is definitely at the high side, but given the rising earnings per share this is acceptable.
This is the type of biotech stock that outperforms its peers in terms of quality (financials, chart setup, etc). That is always a safer bet on a breakout.
Last but not least, Grifols is a large cap with a $15B market cap. It is a biotech company based in Spain. It has solid financials, an ultra-low short float ratio, and a beauty of a chart setup.