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Your instant 6-share biotech portfolio

The pharmaceuticals, biotechnology and life sciences industry is strewn with so-called ‘penny stocks’.  Some of these stocks were once hyped and popular stocks who never managed to achieve their goals while many others are still busy trying to perfect their science and successfully take their product to market. Amongst this crowd there are but a handful of truly successful firms.

One word of warning – portfolio position sizing amongst small, risky biotechs is very important to consider. With that being said here are six stocks that could all be worth considering as part of a diversified portfolio.

Contrarian

Starpharma Holdings Limited (ASX: SPL) is currently trading near its 52-week low, which also happens to be a multi-year low for the stock. The company has a broad array of interesting therapies and products in development but appears to have fallen out-of-favour with investors despite primarily positive news flow from the company.

Growth

Mayne Pharma Group Ltd (ASX: MYX) has been a star performer in the past year with the stock up 139%. The company appears to have made a clever U.S. acquisition which has opened the firm up to significant growth opportunities.

Sirtex Medical Limited (ASX: SRX) recently hit a new all-time high of $15.04 after reporting impressive volume, sales and profit growth of its treatment for liver cancer. This growth looks set to continue with plenty more opportunity ahead of the firm.

Quality

CSL Limited (ASX: CSL) is without a doubt the elephant in the room of the local biotech industry with a market capitalisation of $34 billion. Its diversified product and customer base, growth prospects and rock solid balance sheet makes it a quality investment for long-term investors.

Speculative

Tissue Therapies Limited (ASX: TIS) has developed a treatment for wound healing and tissue regeneration. While the company is not yet marketing its product, the near-term potential is exciting.

Value

Acrux Limited (ASX: ACR) has now been profitable for four years and paid dividends for four years too. While future earnings are still somewhat unpredictable, with the share price at multi-year lows it’s possible that Acrux has entered value territory.

Foolish takeaway

Warren Buffett has always advised investors to stay within their ‘circle of competence’. The scientific and unpredictable nature of biotech can mean the industry falls outside of this circle for many investors. However if it happens to be within your circle then it can be an interesting and potentially profitable space to seek out investment options.

5 stocks under $5

We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.

And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

*Extreme Opportunities returns as of June 5th 2020

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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