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For investors new to the healthcare field, finding the top biotech stocks to buy among the hundreds of pharmaceutical, healthcare, and drug companies on the market can seem overwhelming.
But the process can actually be quite simple when broken down into a three-step approach.
Money Morning's BioScience Investment Specialist Ernie Tremblay has more than 20 years of experience studying and analyzing the biotech market, and when he's picking biotech stocks to buy, he looks for the same three signs every time. His step-by-step process filters out the riskier bets and focuses on the sector's most promising plays - like the one that soared 75% in just seven days in April.
Step One to Picking Biotech Stocks to Buy: Find Strong Drug Pipelines
The first thing Tremblay stresses is the importance of a company's pipeline. Having many promising drugs in trials means that if one drug doesn't reach FDA approval the entire company isn't at risk.
"Having a deep pipeline is like having depth on a football team - if your first-string player doesn't work out, you've always got a few backups to take his place," Tremblay said. "Likewise, if one drug doesn't make it to market, it's great to have another one right behind it to pick up the slack."
But a strong drug pipeline isn't the only thing to consider when buying biotech stocks. There are two more criteria a top biotech stock must meet. And according to Tremblay, this second one is the most important factor of the three...