Biotech: Anatomy Of An Investing Mania?
By Atlas Capital
From time to time, humankind has had periods of arrogance where society as a whole believes that many (if not all) of life's mysteries have been solved.
Such was a time in the 1800s when most believed they had advanced as far as possible…just before the Industrial Revolution.
The same kind of faulty thinking occurs in capital markets where the enduring truths of finance and economics are discarded. Someone inevitably states: "It's different this time."
Think of the tulip mania, railroad bonds in the early 1900s, Nasdaq during 1999-2000, and the credit bubble of 2004-2007. All are examples of market environments that ran off the rails.
Credit Suisse recently put out a research piece about the biotech industry with some interesting points and graphics.
The investment bank believes the biotech space isn't in a bubble.
The graphic from Credit Suisse below is telling, not because it shows how impressively the biotech sector has performed, but for the unprecedented nature of continuous relative outperformance.
'Not In A Bubble'
Credit Suisse posits that the sector is "not in a bubble" and supports the notion with eloquent points.
Of course, there's no way to actually know if the sector is in a bubble, but worth noting is that markets have a tendency to stay irrational longer than most investors can stay liquid.
What the past has shown is when the market psychology changes (perhaps because of some random, unexpected failure), the correction can be swift.
Below are a few biotech movers from Tuesday:
- BIND Therapeutics Inc (NASDAQ: BIND)
- Ocular Therapeutix Inc (NASDAQ: OCUL)
- Hospira, Inc. (NYSE: HSP)
- Organovo Holdings Inc (NYSE: ONVO)
- United Therapeutics Corporation (NASDAQ: UTHR)
- Arena Pharmaceuticals, Inc. (NASDAQ: ARNA)
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.