This article is part of our Best ETFs for 2012 series, in which we're seeking out the top-performing ETFs for the coming year.
The New Year looms, and many of us are wondering where we might most effectively park our investment dollars. One very promising field is biotechnology, which is likely to prosper over time as our population grows, ages, and develops medical conditions requiring treatment.
Below, I'll reveal my pick for the top ETF for 2012, which capitalizes on this opportunity. But first, I want to talk about some of the companies with enormous potential in the industry.
Consider the following companies, for example:
But hold on -- as promising as those companies may be, they're not without some serious risks. Momenta faces the risk of additional generic-drug makers eventually offering versions of Lovenox. Generic-drug makers have had some trouble recently manufacturing leucovorin, which competes with Spectrum's Fusilev, and the resulting shortages have benefited Spectrum. But if or when they manage to boost production, Spectrum's revenues may take a hit.
Troubles in biotechland are not remote possibilities. Look at Dendreon
Or consider Ariad Pharmaceuticals
Buy them all
Clearly, you can get stung by biotechs. But while some such companies do take hits, others can prosper wildly on successful blockbuster drugs. Since it's hard for us to know which companies will do best, it makes sense to consider investing in a big bunch of biotechs at once. (That's true for many sectors, but especially biotechnology, since it's a field that most of us non-scientists don't understand very well.)
The SPDR S&P Biotech ETF
If you want to participate in medical breakthroughs without being much of a medical expert, consider adding this ETF to your portfolio. I'm bullish enough on it to make a CAPScall on it, giving it a green thumb on my CAPS page.
Stay tuned throughout our series on the Best ETFs for 2012 to find out about all of the picks our Foolish contributors have made. Click back to the series intro for links to the entire series.