This year was a wild ride for the biotech space, as stocks first roared higher and then quickly plunged when the group came under political fire over rising drug prices. But Jim Cramer saw some incredible leaps forward and thinks it is worth noting that the Nasdaq biotech index has still dramatically outperformed the averages.
As investors head into the end of the year, Cramer put a list together of the biotech stocks to load up on for 2016.
Cramer has been a long-time fan of the group of stocks that he refers to as the four horsemen of big pharma. This group represents Biogen, Celgene, Gilead and Regeneron.
"While there are hundreds of smaller companies working on revolutionary things, these four players often have a hand in them and they are likely to command the most attention from the stock market next year," the "Mad Money" host said.
Biogen is down 15 percent for the year on concerns of growth over one of its multiple sclerosis drugs and a significant guidance cut in the middle of the year. But the company seems to be addressing these issues, and Cramer thinks there are a lot of potential catalysts to send the stock higher in 2016.
Celgene roared 10 percent on Wednesday after basically being flat for the year. The stock is now on fire because the company just settled a patent dispute over its blockbuster blood cancer drug, Revlimid. In a growth starved environment, Cramer expects that institutional money managers will salivate over this stock.
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Gilead also shot up this year thanks to its drugs that cure Hepatitis C. Many worry about competition in the Hep C space from Merck, but Cramer still thinks Gilead has become a tremendous value play. It has low expectations next year for its pipeline, but the stock only sells for 8.5 times next year's earnings estimates.
Last up is Regeneron, the high flyer and fastest grower of the group. The stock rallied 35 percent year-to-date. The stock is a lot more expensive than its peers, but Cramer thinks the growth potential for this stock is fantastic, and he likes that the stock is more than 70 points off its highs.
Outside of the four horsemen, Cramer also liked Amgen and Radius Health. Radius' lead drug candidate is a treatment for osteoporosis and is currently being reviewed by the FDA with a decision expected in the first quarter. If all goes well, the drug could represent $1 billion in peak sales.
"Going into 2016, this market is going to be starved for growth, and with so many sectors slowing, biotech is the natural place to look," Cramer said.
That is why he is willing to bet on the four horsemen. And for those investors looking for a bit more speculation, along with Amgen and Radius Health is the way to go.
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