Investing in genetic sequencing stocks
Mapping the human genome once took 13 years and $2.7 billion. Today, next-generation sequencing (NGS) can decode a full genome in a day for under $600. That rapid drop in cost and time has opened the door to wider research, clinical, and commercial use -- and to new investing opportunities.
Sequencing companies use different technologies to read DNA. Short-read sequencing is fast and cost-efficient, while long-read sequencing captures larger DNA segments that help analyze complex genetic regions. Ongoing improvements in chemistry, throughput, and cost are driving hybrid systems that combine both approaches.
Most sequencing companies operate on a “razor-and-blade” model:
- Instruments (the razors) help lock in customers
- Consumables (the blades), such as reagents, kits, and flow cells, often make up 50%+ of revenue
- Services (data analysis, workflow support) add recurring value and typically contribute 10%+ of revenue
As with many technology companies, investors can directly measure and monitor the progress of sequencing companies against specific levers of performance. Examples include:
- Number and type of instruments being placed or under development
- Growth in customers and partners using the instruments and consumables
- Level of penetration into research and clinical markets
- Efforts to lower price points to open new uses and markets
- Product development and mergers and acquisitions (M&A) to expand testing approaches
How to choose the right genetic sequencing stocks
When choosing genetic sequencing stocks, the same fundamentals that matter in other industries still apply. Investors should look at market share trends, revenue growth, profitability, and cash flow. A strong patent portfolio can provide a meaningful competitive moat in this space. Valuation also matters, and some investors use the PEG ratio to judge whether a stock’s price is justified by its growth prospects.
How to invest in genetic sequencing stocks
- Open your brokerage app: Log in to your brokerage account where you handle your investments.
- Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
- Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
- Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
- Submit your order: Confirm the details and submit your buy order.
- Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.
