In terms of "gee whiz" discoveries, the biotechnology business is on fire... For example, using a technology called CRISPR, scientists can edit DNA – like editing a Word document.

Unpacking a 'Biotech Paradox' By Joe Austin, senior analyst, Chaikin Analytics In terms of "gee whiz" discoveries, the biotechnology business is on fire... For example, using a technology called CRISPR, scientists can edit DNA – like editing a Word document.  CRISPR cuts out faulty genes and pastes in corrected sequences. This means that, in cancer research, experiments that used to take years can get done in weeks or months. Then there are bioengineered organs and tissues. Those are grown in labs using a patient's own cells as a start. Since the starting cells originate from the patient, their body is less likely to reject the additions. Once a new organ is in, that can eliminate the need for lifelong immunosuppressant drug therapy. Organs grown on demand could also help solve the massive organ shortage. Every day in the U.S., about 17 people die waiting for an organ transplant. The waiting list for a liver transplant is now more than 10,000 people. Additionally, consider bacterial therapy... Scientists hack the E. coli bacteria living in your stomach and reprogram them to fight diseases. This has a wide range of applications – including cancer, inflammatory bowel disease, and Type 1 diabetes. Put simply, it turns your stomach into a personalized, living drug factory that can target diseases more accurately than traditional medications. The progress in biotech is incredible. And yet, broadly investing in biotech stocks has been a disaster in recent years... The SPDR S&P Biotech Fund (XBI) is down about 39% from its high in early 2021. And over the past five years, XBI's annualized return came in at negative 2.7% versus 17.5% for the tech-heavy Nasdaq 100 Index. That's massive underperformance. Earlier this year, investment bank Jefferies looked at more than 360 public small- and mid-cap biotech companies. It found that on average, they traded at a mere 20% premium to the cash on their balance sheets. Last year, that group traded at twice their levels of cash. And Jeffries also noted that over the past 23 years, the average was three to four times. That means the market is assigning close to zero value to those companies' drug pipelines or research. It's viewing them as piggy banks... not businesses with potential. The science marches ahead. But as a group, biotech stocks have struggled. So... what's an investor to do? Let's take a deeper look today... Recommended Links: 'Biggest Breakthrough in the History of Stock Trading' Goes Live Tomorrow at 10 a.m. Eastern Time A Maryland computer whiz recently created a new form of "Super AI" that can foresee the future prices of any of 2,334 stocks – to the day and even the penny – with 85% back-tested accuracy. It has led to a huge anomaly that turned every $100,000 into $702,190 in the last year alone in one study. Until tomorrow, claim free access here (no purchase required). Must See: America's $1 TRILLION GOLD Stash Gold has hit all-time highs, breaking $4,000 an ounce – but history shows it could be on the verge of its biggest bull run in more than half a century... triggered by a likely major event, eerily similar to what happened in the 1970s. (It's NOT inflation or anything you're likely expecting.) And Stansberry Research Senior Partner Dr. David Eifrig believes you MUST own shares of his No. 1 gold stock. He says it's likely better than any miner, explorer, or exchange-traded fund on Earth. It's the centerpiece of his full plan for this brutal market, with extraordinary upside potential. Click here for full details on this developing gold story. A Changing Landscape for Biotech The real problem biotech investors face is that identifying success is still closer to guesswork than real analysis. Only about 1 in 10 drugs that advance to clinical trials ends up getting approved. But approval alone isn't a guarantee that the drug will be a commercial success. Companies are also facing increased competition from China. Research and development (R&D) costs in China are roughly a third of those in the U.S.  In 2024, Chinese companies logged more than 7,100 clinical trials with the World Health Organization. Meanwhile, U.S. companies logged about 6,000. China has also shown that it can complete a clinical trial in 12 to 20 months. That compares with the global average of 24 to 36 months. And by 2040, expectations are that China will account for 35% of approvals by the U.S. Food and Drug Administration. That's up from 5% today. This is a fundamental shift in where drug innovation happens. But competition aside, a strong supply-and-demand dynamic in biotech stocks is working in investors' favor... There are fewer companies to buy at a time when Big Pharma has more money than ever to spend. On the supply side, the initial public offering ("IPO") market for biotech has been near-dead for years. Only 18 companies went public last year. That's down from a pandemic-era peak of 150 companies in 2020 and 2021. And this year hasn't been any better. Through mid-August, only 16 biotech companies went public. Yet on the demand side, there's a ton of capacity with which to make acquisitions. Big pharma companies have an estimated more than $1.5 trillion in dry powder. And they're faced with a "patent cliff" of about $400 billion between this year and 2033. To put that in perspective, the last big patent cliff for big pharma was around $250 billion in 2011. So the question then becomes what to buy. Let's turn to the Power Gauge to help with the answer... Separating the Potential Winners From the Losers The first option would be to buy XBI. As an exchange-traded fund ("ETF"), it holds a basket of biotech stocks. As I said earlier, the fund is down heavily from its 2021 highs. But take a look at it over the past 12 months... As you can see, XBI had still been sinking lower earlier this year. But since April, it has been moving higher. In fact, for the first time in the past year, the Power Gauge turned "bullish" on XBI last month. And since then, our system has flashed three "buy" signals for the fund. Another way to invest would be to buy an actively managed biotech ETF or mutual fund. That way (at least theoretically), you'll have an expert making educated guesses about what companies are worth owning. There aren't a lot of these around. But as an example, the biggest one – the ARK Genomic Revolution Fund (ARKG) – currently earns a "bullish" rating from the Power Gauge as well. Of course, you could also roll the dice and buy individual companies... Right now, that doesn't look like a bad idea. The Power Gauge says the Biotechnology industry is "strong" right now. And it currently gives 205 stocks in the industry "bullish" or better ratings. And within that, there are two ways to pick individual companies... The first is to form your own opinion about a particular company's science and pick them based on that. But by doing so, you'll likely get drowned in a sea of knowledge pretty fast. However, a second way is to look for companies selling at a discount or a slight premium to their cash. In fact, this is something that big institutions do on a regular basis. To do this, you need to find companies selling at a marginally positive or outright negative enterprise value ("EV"). To compute a company's enterprise value, add up its market cap and debt and then subtract cash and any short-term investments. If a company has a negative EV, that means it's selling at a discount to its cash. And it means you're getting the company's science for free. I recently dug into a list of U.S.-listed companies in the biotech sector. I calculated each company's EV... and found 83 companies selling for $0 or negative EV. The Power Gauge doesn't publish a rating on all those companies. But of the ones with ratings, 33 were "bullish" or "better... 29 were in "neutral" territory... and only five were "bearish" or worse. Now, it's important to note that the Power Gauge doesn't monitor what's going on with these companies from a science standpoint. But it does look at relative strength and institutional money flow. As regular readers know, both these metrics are great indicators of what the "smart money" on Wall Street sees in these stocks. So it could be useful in finding companies selling at deep discounts, too. In the end, there's no requirement that an investor must have exposure to any one sector. That's true for biotech... just like everything else. But at the same time, biotech is an industry that's hard to ignore. It's central to our future health and the economic competitiveness of our country. The real challenge is investing in its potential without accepting those casino-like odds. Good investing, Joe Austin Market View Major Indexes and Notable Sectors     # Hld:     Bullish     Neutral     Bearish Dow 30 +1.28% 6 14 10 S&P 500 +1.53% 96 264 143 Nasdaq +2.12% 26 54 20 Small Caps +2.78% 371 1161 382 Bonds -0.06% Information Technology +2.44% 27 42 0 — According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks have turned somewhat Bearish. Major indexes are mixed. *  *  *  * Sector Tracker Sector movement over the last 5 days Utilities +1.25% Consumer Staples +0.49% Information Technology -0.84% Health Care -1.51% Materials -1.73% Real Estate -1.8% Financial -1.94% Communication -2.29% Industrials -2.37% Consumer Discretionary -2.52% Energy -3.32% *  *  *  * Industry Focus Mining Services 19 14 0 Over the past 6 months, the Mining subsector (XME) has matched S&P 500 performance. Its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #1 of 21 subsectors. Top Stocks AA Alcoa Corporation CMC Commercial Metals Co CDE Coeur Mining, Inc. *  *  *  * Top Movers Gainers BBY +9.97% AVGO +9.88% ON +9.55% MPWR +8.54% GEV +7.23% Losers FAST -7.54% LVS -6.33% WYNN -6.15% ANET -4.32% MNST -3.55% *  *  *  * Earnings Report Earnings Surprises FAST Fastenal Company Q3 $0.29 Missed by $-0.01 *  *  *  * You have received this e-mail as part of your subscription to PowerFeed. If you no longer want to receive e-mails from PowerFeed, click here. You're receiving this e-mail at STEVENMAGALLANES520.NIMS@BLOGGER.COM. For questions about your account or to speak with customer service, call +1 (877) 697-6783 (U.S.), 9 a.m. - 5 p.m. Eastern time or e-mail info@chaikinanalytics.com. Please note: The law prohibits us from giving personalized financial advice. © 2025 Chaikin Analytics, LLC. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Chaikin Analytics, LLC. 201 King Of Prussia Rd., Suite 650, Radnor, PA 19087. www.chaikinanalytics.com. Any brokers mentioned constitute a partial list of available brokers and is for your information only. Chaikin Analytics, LLC, does not recommend or endorse any brokers, dealers, or investment advisors. Chaikin Analytics forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees of Chaikin Analytics, LLC (and affiliated companies) must wait 24 hours after an investment recommendation is published online – or 72 hours after a direct mail publication is sent – before acting on that recommendation. This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.