As The Oxford Club's resident biotech expert, I'm often asked what I look for when choosing biotech stocks. Here are five specific things I want to see... No. 1: Game-changing technology. I'm not interested in a company that has a cancer drug that adds two months of life over the existing standard of care. I want to see entirely new approaches to treating disease - something we've never seen before. No. 2: Safety. A drug is unlikely to get approved if it is unsafe, no matter how effective it is. I pay particularly close attention to Phase 2 trial results because they're usually the first real indication of whether a drug is safe enough to try in a larger population. No. 3: Upcoming catalysts. Biotech stocks can move quickly on news. I don't want to be sitting with a stock for a year and a half waiting for clinical trial results. I typically want to see important trial data within six months. No. 4: Cash on the books. Most small cap biotech companies are unprofitable and burn cash. I'd rather not be holding the stock when management sells shares to raise capital. This dilutes existing shareholders and causes the stock to drop. If the company has a lot of cash already, it reduces the chance of seeing a stock offering. No. 5: Smart money. I like to see investors who I respect own large holdings in the stock. When I see investors like Felix and Julian Baker or others, I know some major league brainpower has reviewed the company's science and investment opportunity ahead of me and has decided to move forward. My confidence is also boosted when insiders own a lot of shares. From there, I'll dig into the clinical trials, investigate management to see whether there are any red flags and conduct other due diligence. There are a lot of factors that go into deciding to pull the trigger on a biotech stock, but the above list is a good start. Remember, no other sector sees stocks move 50% or even more than 100% in a day on a takeover announcement. Here's just one example: Five Prime Therapeutics jumped 78% in one day (March 4) on an acquisition announcement - and that was after it jumped 349% in one day in November 2020 after reporting positive data. I would argue that biotech is the most important sector in the market and will be for the next decade and beyond. Your portfolio should have some exposure to biotech stocks in order to take advantage of the enormous potential. Good investing, Marc P.S. I'm hosting a free special event at 1 p.m. ET today where I'll be revealing the ticker symbol of a biotech stock that delivered 1,400% growth in net income year over year. Compare that with Amazon's 84% growth... and you can see how valuable this recommendation is. Just click here to register, and be sure to join me this afternoon. | 
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