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Optimism for the future of biotech

Biotech
Adam Gault | Getty Images

Fidelity Select Biotech, a portfolio focusing on biotech services and products, has been down 4.47 about percent compared with its closing price Monday at $263.27, leaving Wall Street to wonder how strong the biotech industry is now.

Yet, the portfolio's stock price has been up about 40 percent over one year.

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The portfolio manager of Fidelity Select Biotech Rajiv Kaul is confident that the biotech industry will do well in the long run, given that the industry has been doing "numerous amazing things" when it comes to rolling out new therapies that save patients.

"I think this is going to be an extremely rewarding period for our shareholders and most importantly for the patients who can really benefit in this great time in innovation and medicine," said Kaul on Tuesday during CNBC's "Power Lunch."

Investors tend to be short term-oriented and it would be good to focus on the fundamentals of the sector to really understand the current great period of innovation, according to Kaul.

"The stock market does what it does on the short term," Kaul said.

Kaul added that the focus should be on buying the best companies with the best drugs that have the highest probabilities of success, the best management teams and, importantly, take a long-term view.

"If you just look at the largest biotech companies, look at their compounded earnings growth in the last four-five years, it's 30 to 40 percent," Kaul said.