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.
Brian Feroldi has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.