Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Picks and Shovels of Biotech Investing

Companies / BioTech Feb 27, 2013 - 01:38 PM GMT

By: Investment_U

Companies

Marc Lichtenfeld writes: Yesterday marked the 184th birthday of an iconic American businessman – Levi Strauss

My wife worked for Levi Strauss & Co. many years ago. They were a terrific company, with a strong commitment to product quality, their employees and their community. I was so impressed that I remain loyal and almost exclusively buy Levi’s when I need a pair of jeans.


As you may be aware, Levi Strauss struck it rich in the California gold rush. But he wasn’t one of the poor saps wading through the river hoping to find a giant gold nugget. Rather, he sold durable pants to the poor saps.

When Levi Strauss died in 1902, his estate was worth approximately $6 million – roughly $160 million in today’s dollars – likely more than any gold prospector.

His family is now worth many billions of dollars.

Picks, Shovels… and Jeans
Few of the miners actually made any money. The big profits came from people like Strauss who sold the prospectors the tools they needed – the picks, shovels and jeans.

Biotech can be a similarly treacherous field. Great fortunes have been made by investors who metaphorically found gold in the river and picked the right biotech stock. Early shareholders of Amgen (Nasdaq: AMGN), Celgene (Nasdaq: CELG) and Biogen (Nasdaq: BIIB) have enjoyed huge profits as their investments have climbed from penny stock status to blue chips near or above $100 per share.

And there are plenty of exciting and promising small cap biotech stocks out there. Some have made incredible advances against difficult-to-treat diseases. Hopefully, in the near future, shareholders will be rewarded as patients’ lives are improved.

Though I recommend biotech stocks, an area that I really love is the companies that provide the “picks, shovels and Levi’s” to the drug and biotech companies. The companies that sell the tools necessary to conduct research make money regardless of whether the drug is successful.

A Few Examples
Most of these companies are profitable, with positive cash flow. That contrasts with some of the small cap biotech companies that don’t even have revenue yet. These “picks and shovels” companies are a way to play the biotech space while still investing in a real business.

For example, Qiagen (Nasdaq: QGEN) has over 500 products ranging from instrumentation kits to DNA cloning systems.

In 2012, it made $1.25 billion in profits or $1.08 per share. It generated $245 million in cash from operations.

Sigma-Aldrich (Nasdaq: SIAL) has 1.3 million customers around the world serving them with 187,000 products like organic chemicals, proteins and human cell lines.

Sigma-Aldrich generates over half a billion in cash flow and $2.6 billion in revenue.

Then there are the DNA sequencing companies like Illumina (Nasdaq: ILMN) and Life Technologies (Nasdaq: LIFE). The companies provide the machines that read DNA. Right now we’re only able to analyze a small fraction of the data that can be collected.

It is expected that within 10 years, every cancer patient will have the DNA from his or her tumor sequenced. Think about how much more knowledge we’ll have about cancer if we’re able to read and understand the DNA from every cancer tumor. Breakthroughs like that are what will likely lead to more effective medicines or perhaps someday even a cure.

Both companies are profitable.

Waters Corp. (NYSE: WAT) also has a wide range of products including peptide separation technologies, metabolite identification systems and even software for analyzing herbal medicines.

Waters generated $1.8 billion in sales in 2012 and nearly half a billion in profit.

There are many ways to strike it rich in the biotech sector. You can get lucky and invest in a small cap company that becomes the next Biogen, or you can act like Levi Strauss and make your money by supplying the speculators with the tools they need.

If you want to invest in a booming sector fueled by an aging population that will demand new therapies, yet be sure your money is going into a business and not a lottery ticket, look at the medical tools and services companies.

If Levi Strauss were alive today, I bet he’d be supplying the biotech sector with innovative gear like he did to the gold miners 150 years ago. Strauss not only made a successful product, he created a template for how to make a fortune off others’ speculation.

Good Investing,

Marc

Editor’s Note: Four years in the making, Marc is finally ready to pull the trigger on what he thinks could be one of his most profitable trades to date. We’re talking about one of, if not, the greatest advancement in medicine in the past 150 years. It will completely change the way new drugs are discovered and even created – along with the lives of early investors.

For the full story on this incredible breakthrough Marc calls “Cures on Demand,” click here.

Source : http://www.investmentu.com/2013/February/the-picks-and-shovels-and-levis-of-biotech.html

Editor’s Note: But what if you don’t have the time to put together a stock watchlist for yourself, or don’t even know where to look? That’s where The Oxford Club comes in. We’ll do the work for you, showing you what stocks to buy and when to buy them. Not only that, the Club offers something for every investor – from stock market newcomers to seasoned veterans – and provides ample opportunity to diversify through several model portfolios. Take a look at the full list of benefits that you’ll receive when you become a member of The Oxford Club.

Copyright © 1999 - 2013 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in