Biotech Bubble Bust: 2 Ways to Win

Are biotech stocks in a bubble? Is that bubble collapsing?

These are the two questions at the forefront of investors' minds. Given the tremendous run of biotech stocks, the iShares NASDAQ Biotechnology Index is up 80% over the last 2 years, it's easy to see why the bubble talk started. Mix in a tsunami of IPOs as new biotechs, some highly questionable, capitalize on easy money, and combine it with the relative ease of picking a multi-bagger stock -- it quickly adds up to irrational investor exuberance. 

Exuberance that can be fleeting. That same biotech index is down 15% in the last month, with some individual stocks getting hit considerably worse. However, whenever there is a sector wide sell-off, good stocks get indiscriminately dumped alongside the bad. This is when contrarian investors live the famous Warren Buffett saying of being "greedy when others are fearful," and find quality businesses with strong revenue and growth potential. 

On this edition of Market Checkup, Motley Fool health care analysts David Williamson and Michael Douglass discuss the fallout of the biotech collapse. They put on their best catcher's mitts and look to grab a few falling babies that have been thrown out with the biotech bathwater. Watch and find out at what two stocks they think are interesting at these new bargain prices.

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  • Report this Comment On April 16, 2014, at 8:55 PM, classic216 wrote:

    Prosnesa's drug Drisapersen shouldn't be compared with Sarepta's drug Eteplirsen ---- two different compounds, two different dosing amounts, two different studies, two different results............maybe in the same category but I don't think it's fair at all to say Prosnesa's drug failure should cause concern for Sarepta's drug.

  • Report this Comment On April 17, 2014, at 8:01 AM, cmalek wrote:

    Is every time an industry or a sector has better temporary results than the rest of the market, going to be hailed as the next "bubble" by the pundits?! This is getting as bad as the media calling every scandal some kind of a "-gate"

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