5 Strong Reasons To Overweight Big Biotech

If you have little to no exposure to the biotech sector right now, you are making a big mistake. With some of the best valuations and growth prospects in the entire stock market, your portfolio will perform much better with exposure to any one of the four stocks Bret Jensen is recommending today.  

“People who make no mistakes lack boldness and the spirit of adventure. They are the brakes on the wheels of progress.” – Dale Turner

The markets had a nice little rally on Friday, but January is still heading towards being the worst performing month for investors since February 2009; the tail end of the financial crisis. We are starting to get into the meat of fourth-quarter earnings season. Expect a lot of commentary around a weak global economy and the impact of the strong dollar during earnings results and guidance issued during the conference calls that follow.

Right now, estimates generally range from approximately $117.00 to $130.00 for earnings from the S&P 500 in 2016. With the S&P 500 trading right near 1,900 that gives us a forward multiple range of approximately 14.6 to 16.2 times projected earnings this year. Consensus earnings estimates always start out high to begin a year and generally drift lower the further we get into the year. Given the anemic world economy and deep problems in energy, commodities, and emerging markets, a more conservative and likely range is probably $110.00 to $115.00 in earnings from the S&P 500 this year. This provides a forward price to earnings range of 16.5 to 17.3 times this year’s S&P 500 profits.

This is not cheap by historical standards nor is it tremendously expensive. However, given the challenging global backdrop, one should be cautious here. An investor cannot count on profit growth or even earnings from either the energy or commodity sectors this year. Manufacturers, Industrials, and American Multinationals will be challenged to show profit growth given tepid overseas demand and a dollar that continues to grow stronger against major currencies.