The most important innovation of the 1990s was the internet — today, it would be a vaccine for COVID-19. If these times have anything to say about it, the next Microsoft is coming from the biotech sector. Investors are moving in looking for profits, even putting companies without products on the map.
Companies like Novavax (NASDAQ: NVAX), Co-Diagnostics (NASDAQ: CODX) and Inovio (NASDAQ: INO) have capitalized on media attention surrounding their clinical trials and PR statements about a coronavirus vaccine. Does all of the new research and development (R&D) money mean new investment opportunities, or are we in the middle of a vaccine bubble?
Now that you have a real-time update, let’s give some context to the industry that should help to inform your investment process.
Overview: Biotech Penny Stocks
Modern biotechnology began in 1973 when scientists used recombination to genetically engineer an antibiotic-resistant strain of Escherichia coli bacteria. This began a revolution in molecule production that culminated in the founding of Genentech, the first publicly-owned biotech company, in 1976. Like many biotech startups today, Genentech started as a research initiative without any marketable products. However, it was able to produce a human-based form of insulin that dramatically increased the effectiveness of the drug in treatments.
The founders of Genentech started with an investment of $1,729. In 1980, they went public, raising $35 million. In 2009, Roche bought Genentech for $46.3 billion.
Investors have seriously recognized biotechnology as a distinct market sector since 1993. The Biotechnology Innovation Organization (BIO) was formed that year and now stands as the largest biotech trade organization in the world. BIO has spent millions lobbying the U.S. for small business inclusivity and intellectual property rights. Many of the issues they address directly affect small-cap and penny stocks, allowing more room for startups to perform speculative R&D and retain the fruits of their study.
The history of biotech is based around building something from nothing and giving the little guy a chance to change the world. This is the perfect space for speculative investors who want to hit stock trading home runs.
Penny stocks are notoriously volatile, and so is the biotech industry. Put the two together and you have a recipe for headlines. But if you’re looking for an industry of possibilities, this is the one to be in.
Best Online Brokers for Biotech Penny Stock
You will need a trading platform with lightning-fast execution, real-time news feeds and other features to compete in the biotech penny stock market. Compare the feature sets of the online brokers below to get an idea of the best choice for you.
Intermediate Traders and Investors
Finding the Next Microsoft
As you wade through biotech penny stocks, you are sure to find rampant speculation over COVID-19 treatments. Companies know they can quickly boost stock prices with little more than a press release. If you’re fast on the draw and your account is big enough, you might be able to scalp a few day trading profits from these gimmicks.
If you want to find the next Microsoft, you have to do a bit more digging. Not every company is a winner — in fact, the vast majority of them are not. But our understanding of biology and technology is moving forward in leaps and bounds. It’s definitely an exciting time for an industry that combines these 2 things. Look past the coronavirus headlines into a company’s management team and research process for the best results.
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