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April 1, 2015, 6:01 a.m. EDT

Soaring biotech stocks are looking a bit sickly

Stick with big, proven companies in a hot sector

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By Jeff Reeves, MarketWatch


Bloomberg Enlarge Image

As the quarter ends, it’s time for those tired old “listicles” about the best performing stocks and worst performing stocks of the last three months.

And as a card-carrying member of the financial media, I am required to write at least one of these stories lest my license to willfully manipulate gold prices be revoked.

But while doing my dutiful end-of-quarter screening, I noticed a trend that is hard to ignore — the bubble-like ascent of biotech stocks in the last few months.

Take a look at some of the top performers since Jan. 1, all of which are in the biotechnology or drug development business:

Eagle Pharmaceuticals (EGRX) /zigman2/quotes/200611523/composite EGRX +2.07%  , up 156%

Ziopharm Oncology /zigman2/quotes/200291745/composite ZIOP +1.40%  , up 126%

Esperion Therapeutics /zigman2/quotes/207049816/composite ESPR +1.14%  , up 124%

Foundation Medicine  , up 116%

Pharmacyclics  , up 110%

These are not tiny OTC companies that I have cherry-picked, by the way. The smallest has a market cap of $600 million and trades about 500,000 shares daily.

In fact, by many measures, biotech has been the best performing sector of the stock market for five years running — a feat that hasn’t been matched in the modern investing era.

Whenever investors see returns like this, they naturally start using the “B” word.

But is biotech actually in a bubble?

Chasing the narrative

The narrative behind these stocks is one of the biggest selling points. Take Biogen /zigman2/quotes/201531540/composite BIIB +0.13%  , a $100 billion biotech stock that is up “only” 25% year-to-date or so compared with just 1% for the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.00%  thanks in large part to encouraging data regarding its potential Alzheimer’s treatment.

How can you not like a company that is on the cutting edge of medicine, attempting to cure previously uncorrectable conditions?

Click to Play

Where next for the euro?

It has been a wild ride, but the euro could now be in for a long period of going nowhere, BNY Mellon’s Simon Derrick tells Katie Martin. But watch out for the yen, he warns.

/zigman2/quotes/200611523/composite
US : U.S.: Nasdaq
$ 61.99
+1.26 +2.07%
Volume: 144,840
Oct. 15, 2019 4:00p
P/E Ratio
21.66
Dividend Yield
N/A
Market Cap
$902.57 million
Rev. per Employee
$2.22M
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/zigman2/quotes/200291745/composite
US : U.S.: Nasdaq
$ 4.35
+0.06 +1.40%
Volume: 1.48M
Oct. 15, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$697.35 million
Rev. per Employee
$3,042
loading...
/zigman2/quotes/207049816/composite
US : U.S.: Nasdaq
$ 38.97
+0.44 +1.14%
Volume: 363,001
Oct. 15, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.05 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/201531540/composite
US : U.S.: Nasdaq
$ 226.06
+0.30 +0.13%
Volume: 1.98M
Oct. 15, 2019 4:00p
P/E Ratio
8.41
Dividend Yield
N/A
Market Cap
$41.64 billion
Rev. per Employee
$1.55M
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
2,995.68
+29.53 +1.00%
Volume: 1.68B
Oct. 15, 2019 5:00p
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