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Top Stocks: Biotech sector14.04.2014

Under the Radar Report shows you that ASX listed biotechnology companies give small cap investors strong growth and are the new Top Stocks to invest in. Biotechs are replacing miners as far as speculative bang for your small cap buck is concerned.

Biotechs are the new Top Stocks to buy

Sirtex Medical (SRX) has almost tripled subscribers money since we first tipped it, and it is certainly evidence of the growth opportunities in biotech stocks.

Dr Simon Marais

We recently interviewed Dr Simon Marais, chief executive of Allan Gray, which manages $4 billion in Australian equities. He also believes that biotechs are replacing mining stocks as the new growth stocks. He makes the valid point that if you are fearful that the market could sell off, developing a portfolio of biotechs might be the way to go:

“Biotechnology is high risk and high return, sure. But the risks are largely focused on the company, rather than the market, which means you can hedge that risk away by owning a number of the stocks.”

Top Stocks Generating Top Returns

Marais also likes the fact that these biotech companies can generate returns like no others in his portfolio.

“We’ve been buying energy stocks like Woodside, Origin because we like the LNG (liquefied natural gas) theme, but these stocks are never going to go up five times. We might have 0.5 per cent of the fund in (the biotech) Starpharma, but this could easily do that.”

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Starpharma (SPL)

This month Starpharma had a win with the Japanese approval of its anti-bacterial condom. Marais expects this company to be profitable within 18 months

Why Biotechs are Top Stocks

He says that there is a big difference between investing in the high risk mining stocks of this world and the biotechs: “Mining is much more capital intensive, whereas if a biotech proves itself, you can easily see it growing its business for a long, long time.”

Top Stocks: Biotech success stories

Success stories include specialty pharmaceutical CSL, which started out as a government body, Commonwealth Serum Laboratories in 1916 to service Australia’s health needs, isolated as it was by war. Arguably the company’s most recent innovation is arguably it’s vaccine against cervival cancer,  Guardasil, which it released in 2006, originally developed out of the University of Queensland.

CSL was listed in 1994 generating just under $300 million for the Commonwealth Government. It now has a market capitalisation of $33.7 billion. 

Which are the ASX listed Stocks that have had Big Success?

CSL is by no means the only big success story on the ASX. The sleep apnoea developer ResMed has a market capitalisation close to $7 billion and hearing treatment specialist Cochlear’s is $3.2 billion. Meanwhile the rising star and Under the Radar Report’s pick Sirtex, whose cancer fighting radiation therapy is producing big sales growth has increased its market cap from $347 million in June 2012 when we started covering it, to its current level of $894 million.

Which ASX Stocks does Allan Gray own?

The ones Allan Gray owns includes: diagnostics device developer ImpediMed and cancer therapy producer and developer Alchemia which also has a drug on the market.

Biotech stocks strong analysis

In a final dig at the mining explorers of this world, Marais says, “Unlike miners, which don’t have a massive mining boom helping them any longer, you can do a lot of verification of the fundamentals underlying these biotechs, like their performance in clinical trials and their regulatory approvals.”

About the Author

Richard Hemming

Investment analyst and Editor of Under the Radar Report

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