Year In Review In 7 Charts: Biotech Boom 2.0

Happy New Year!

And welcome to the final installment of our Year in Review in 7 Charts.

As you’ll see in a moment, we’re ending on a familiar and profitable note: biotech.

Longtime readers know I predicted the sector would be the top performer in 2020. Before Covid-19 even hit. And that prediction proved to be right. In spades.

For proof, look at the performance of the SPDR S&P Biotech ETF (XBI) versus the rest of the market.

Coming off the March lows, it surged more than 125%, almost tripling the rally of the S&P 500 Index.

My Biggest Personal Investment for 2021

Of course, I’m not writing to say I told you so.

Instead, I’m writing to tell you again: biotech is going to be the top performer in 2021.

Why? Because as I’ve shared before, the pandemic brought about a permanent shift in investor sentiment for the sector. It’s now become vital to survival. Literally.

And that’s not going to change anytime soon.

On a more strategic level, I’ve shared with you the first requirement to be a successful trend trader:

You need to follow the “smart money” to identify a burgeoning trend before it’s obvious to the rest of Wall Street and Main Street.

Well, we did that with biotech in late 2019.

And that brings us to the second requirement: riding the momentum of a trend for as long as it lasts.

And when it comes to biotech, there’s no signs of it letting up:

The major sector indexes are breaking out to new all-time highs, and big pharma is paying higher and higher triple-digit premiums to acquire upstart biotechs.

Bottom line: I already told you to overweight small- and micro caps going into this year.

But if you want to super-charge your profit potential in 2021, you should overweight small biotech stocks.

I’m convinced they’re going to repeat their chart-topping performance from 2020. So much so, I’m allocating the largest percentage of my personal portfolio to the sector.

Ahead of the tape,

Lou Basenese