Why Biotech Is an Excellent Contrarian Play Today

Episode #353 | March 18, 2024

Episode #353 | March 18, 2024

Why Biotech Is an Excellent Contrarian Play Today

In This Episode

On this week's Stansberry Investor Hour, Dan and Corey are joined by Porter & Co. analyst Erez Kalir. Erez's impeccable pedigree and deep experience in biology, finance, and law make him an expert at finding the best businesses and investing opportunities out there. He joins the podcast to explore the current macroeconomic environment and all things biotech.

Dan and Corey kick off the show by discussing both bubbles and "anti-bubble" stocks. Dan mentions how the S&P 500 Index's cyclically adjusted price-to-earnings ratio, with data going back to 1871, is currently in the top 1%. He even believes this is the biggest mega-bubble in all of recorded history. As he says...

I think right now the world's pricing in a lot of growth that isn't going to happen.

Next, Erez joins the conversation and shares his financial philosophy. He talks about investing legends who have influenced his investing style, the importance of avoiding labels, and how successful investing is similar to using a Swiss Army knife. Plus, Erez explains the yin and yang of macroeconomics versus security-specific fundamentals and how there are extreme periods where one can entirely dominate the other. He emphasizes...

We are living through a deeply unusual economic period in the history of the world, especially the economic history of the United States... So I think it's very important to have a point of view about the big picture and how it frames the investing world.

After, Erez goes into detail about biotech – the sector's history in the stock market, how it's shaped by interest rates, and how you can find companies trading at an extreme discount with negative enterprise value. He argues that not being able to time the markets is merely a myth, and he shares the seven factors he uses to evaluate whether a biotech stock is worth buying. Speaking about the Federal Reserve's influence, Erez notes...

The biotech sector has never really had to live through the type of interest-rate-hike cycle that the [Jerome] Powell Fed just put the U.S. economy through.

Lastly, Erez explains why the conditions are right for biotech stocks today. He covers the sector being hated and how this gives savvy investors a chance to break away from the herd and profit.