Biotech companies continued their rally today, with the biotech index up more than 35 percent in the last three months.
Eric Schmidt, biotech analyst at Cowen, and Joel Sendek, managing director and biotech analyst at Lazard Capital Markets, explained the force behind the comeback and the best stock plays for investors right now.
(See their picks and pans, below.)
“We found that the best time to invest was during the 'HillaryCare'" debate in the early 1990s, Sendek told CNBC. "And valuations haven’t gotten to the point since then until this year.”
“So we think it’s reasonable to invest across the board. Within the types of companies, I would argue for the smaller ones because I think there’s more upside.”
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Sendek added that the smaller biotech firms are less likely to be affected by Washington’s health care reform discussions.
“When people don’t know anything other than there’s going to be reform, they sell first and ask questions later,” he said. “As we get details, it’s getting clearer that biotechs won’t be impacted as much.”
Schmidt said investors should look for good fundamental values, take into account the company’s future cash flows and buy those that are trading at discount to the market.
“Health care reform has kept a lot of investors at bay,” he said. “Whether health care reform happens or not, there’ll be money that comes back into biotech once it’s all decided.”
No immediate information was available for Schmidt or Sendek.