Why you should Invest in Health and Biotech Small Cap Stocks on the ASX

Richard Hemming

Under the Radar Report’s average return on the 16 Small Cap Stocks we cover in the health and medical technology has been 115%.

Small Cap Stocks in the Health and Biotech sector on the ASX can produce a big bang for your investment buck, albeit at a greater risk.

Small Cap takeovers in the ASX Health and Biotech sector continue apace across the globe, but the key thing to remember for Under the Radar’s Small Cap Report subscribers is that while there is a great deal of hype regarding the science in the sector, it always pays to look at the fundamentals. Follow the money!


 

Look at the Science in all Small Cap Stocks in Health and Biotech

When you look across the medical technology sector in both small cap stocks (and blue chip stocks too) it’s important to recognise what is science and what is commercialisation, or profitable opportunity for the investor.

For all the hype there are always disappointments in a sector that relies greatly on scientific research. For example, this week a small cap stock we haven’t covered, the Alzheimer’s treatment specialist Actinogen Medical (ACW) fell 68% because its phase 2 clinical trial failed to meet a primary endpoint. The company has close to $11m in cash so it will live to fight another day.

Small Cap Stocks must have commercialised before you invest

The point is that some of these Small Cap Stocks (and Blue Chip Stocks) in the biotech sector that have a great deal of potential remain science based until they commercialise. Even though the primary endpoint wasn’t meet, the small cap company added value to its asset, generating a better understanding of the drug’s safety and the effect that it has on the brain from what they call “pharmaco dynamic data”.

In science you do experiments. The challenge for biotechs is to marry those experiments with the investors’ urge to generate profits asap. It’s no accident that Under the Radar Report has shied away from the higher risk biotechs.

How has Under the Radar Report been so successful?

Under the Radar Report’s success in generating strong returns in small cap stocks has been principally because we’ve focused on the small cap companies that have (in the main) not required capital injections because they’ve either been profitable or have had enough cash to sustain themselves until they were profitable. Some of our past Small Cap Stock favourites: Sirtex Medical (SRX), Medical Developments (MVP) and Clover Corp (CLV) have been paying dividends for a long time.

In our latest Small Cap Stock Report we update one of the few small cap research and development specialists in biotech that we like, Pharmaxis (PXS). This small cap stock does burn cash, but what it also has is a track record of doing deals with big pharma, good biological prospects and future milestones which should deliver further cash windfalls.

Also, just check out how fast the returns on another small cap stock Clover Corp (CLV) have been since we stepped back into it. Our small cap analysts also run through our strong track record on small cap stock Mayne Pharma and why we think it’s well priced at current levels.

What's coming up in our Small Cap Stock report?

This week we cover off on four small cap stocks in the medical sector that are all profitable. Next week we cover even more small cap stocks in the health and biotech sector that are listed on the ASX.

About the Author

Richard Hemming

Richard Hemming (r.hemming@undertheradarreport.com.au) is an independent analyst who edits www.undertheradarreport.com.au, which provides investment opportunities in Small Caps that you won’t get anywhere else.

Under the Radar Report is licensed to give general financial advice only (AFSL: 409518). The author does not own shares in any of the stocks mentioned.

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