Investing in Biotech and Healthcare is not easy! It is just as important to know what to avoid buying as it is to know what to buy.
The key to portfolio upside is allocating to compelling risk / reward opportunities across the sector. Here are 5 factors to consider:
Prioritize strong balance sheets (especially for development stage companies – avoiding punitive dilution is key) and fundamental-backed valuations
Avoid expensive “hype” stocks that offer poor risk / reward
Stay away from companies that are likely to release strongly negative clinical data and decline 75-90% in a single day
Own companies that may be targets of M&A
Find robust revenue growth and cash flow companies that are performing in the current environment.
It is possible to invest in biotech in every environment; including now! Do not be intimidated by recession talk or the complexity of the sector. Stick the basics.