Small-cap biotechs tend to be walk hand in hand with a huge amount of risk, but that doesn't mean you should banish them from your portfolio altogether, as the rewards from choosing a winner can be extraordinary.
One tell-tale sign that I use to separate potential home-run stocks from the rest of the pack is to look for a small cap with a winning track record in the markets, as I'm a firm believer that winning stocks tend to keep on winning. One of those names for me is Halozyme Therapeutics (NASDAQ:HALO), a small-cap biotech with a focus on creating human enzymes. It's off to a great start since going public about a decade ago, as its returns far outpace the S&P 500.
So what's going right for this small cap, and can investors expect the outperformance to continue?
The Foolish bottom line
Halozyme offers investors a nice combination of revenue coming in the door and huge potential if PEGPH20 turns out to be a winner. I'd like to see a bit more clinical data come in before I could comfortably call the stock a buy today, but for more daring investors, Halozyme appears to be a better than average candidate for the speculative portion of your portfolio.