Best of the Week
Most Popular
1.U.S. Inner City Turmoil and Other Crises: Ron Pauls Predictions for 2015 - Dr_Ron_Paul
2. What’s In Store For Gold Price in 2015? - Ben Kramer-Miller
3.Crude Oil Price Ten Year Forecast to 2025: Importers Set to Receive a $600 Billion Refund - Andrew_Butter
4.Je ne suis pas Charlie - I am not Charlie - Nadeem_Walayat
5.The New Normal for Oil? - Marin_Katusa
6.Will Collapse in Oil Price Cause a Stock Market Crash? - OilPrice.com
7.UK CPI Inflation Smoke and Mirrors Deflation Warning, Inflation Mega-trend is Exponential - Nadeem_Walayat
8.Winter Storms Snow and Wind Tree Damage Dangers, DIY Pruning - Nadeem_Walayat
9.Oil Price Crash and SNP Independent Scotland Economic Collapse Bankruptcy - Nadeem_Walayat
10.U.S. Housing Market Bubble 2.0 Meet the Pin - James_Quinn
Last 5 days
U.S. Escalation in Ukraine Is Illegitimate and Will Make Matters Worse - 1st Feb 15
The German 10 Year Bund Effectively a Call Option at 30 Basis Points - 1st Feb 15
Australian Stock Market Index ASX200 Technical Analysis  - 1st Feb 15
Stock Market Major 4 or Primary IV Wave - 31st Jan 15
Gold And Silver Price Probability for A Lower Low Has Increased - 31st Jan 15
U.S. Bond Market Has Reached Tulip Bubble Proportions - 31st Jan 15
The 3 Big Reasons My Apple Stock Price Prediction Is Still Coming True - 31st Jan 15
199 Days of Hell - Unintended consequences: Oil and the Worst Battle in History - 31st Jan 15
Kaminak Yukon Gold - 30th Jan 15
U.S. Asset Price Deflation Coming Up? Food Prices Drop? CPI Negative? Credit Deflation? - 30th Jan 15
An Often Overlooked Predator: State Governments and Income Taxes - 30th Jan 15
Bullard Says Rates at Zero Interest Rates Not Right for U.S. Economy - 30th Jan 15
Why the European Central Bank's Massive Economic Experiment Will Fail - 30th Jan 15
Gold Price Short-Term Bottom Due, Higher into February - 30th Jan 15
Silver and Other Precious Metals To Manipulate - 30th Jan 15
Socialism Is Like a Nude Beach - Sounds Like a Great Idea Until You Get There - 30th Jan 15
To Create Unlimited Market Liquidity or Not; That Is the Question - 30th Jan 15
Seen the Energy Downturn Movie Before, and Not Worried - 30th Jan 15
It’s Not Time to Sell Everything – Yet - 30th Jan 15
13 Investment Themes for 2015 - 29th Jan 15
The Raging Currency Wars Across Europe - 29th Jan 15
The End of Currency 'Safe-Havens' - 29th Jan 15
Ron Paul on U.S. Fed, Central Bankers Monetary Psychopaths - 29th Jan 15
Why Microsoft Stock Will Provide Major Investing Returns - 29th Jan 15
Exploring the Clash Within Civilizations - Mind the Gap - 29th Jan 15
Saudi Arabia Changes Kings, But Not its Oil Policy - 29th Jan 15
Crude Oil Price Bulls vs. Resistance Zone - 28th Jan 15
Acceleration Of Events With Rising Chaos – US Dollar Death Foretold - 28th Jan 15
The Fed and ECB Take the West back to when the Rich Owned Everything - 28th Jan 15
Washington's War on Russia - 28th Jan 15
Cyber War Poses Risks To Banks and Deposits - 28th Jan 15
Lies And Deception In Ukraine's Energy Sector - 28th Jan 15
EUR, AUD, GBP USD – Invalidation of Breakdown - 28th Jan 15
“Backup-Camera Envy” Is Driving This Unstoppaple Investment Trend - 28th Jan 15
The Great "inflated" Expectations for Gold, Oil, Commodities -- and Now Stocks - 28th Jan 15
How to Find the Best Offshore Banks - 28th Jan 15
There’s More to the Gold Price Rally Than European Market Fears - 28th Jan 15
Bitcoin Price Tense Days Ahead - 27th Jan 15
The Most Overlooked “Buy” Signal in the Stock Market - 27th Jan 15
Gold's Time Has Come - 27th Jan 15
France America And Religious Terror War - 27th Jan 15
The New Drivers of Europe's Geopolitics - 27th Jan 15
Gold And Silver - Around The FX World In Charts - 27th Jan 15
It’s Not The Greeks Who Failed, It’s The EU - 27th Jan 15
Gold and Silver Stocks Investing Basics - 27th Jan 15
Stock Market Test of Strength - 26th Jan 15
Is the Gold Price Rally Over? - 26th Jan 15
ECB QE Action - Canary’s Alive & Well - 26th Jan 15
Possible Stock Market Pop-n-drop in Store For SPX - 26th Jan 15
Risk of New Debt Crisis After Syriza Victory In Greece - 26th Jan 15
How Eurozone QE Works: A Guide to Draghi's News - 26th Jan 15
Comprehensive Silver Price Chart Analysis - 26th Jan 15
Stock Market More Retracement Expected - 26th Jan 15
Decoding the Gold COTs: Myth vs Reality - 26th Jan 15
Greece Votes for Syriza Hyperinflation - Threatening Euro-zone Collapse or Perpetual Free Lunch - 26th Jan 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Learn to Trade

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

© 2005-2014 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

Free Report - Financial Markets 2014