How to Make Money in Biotech Stocks

“This is an all-or-nothing trade,” Paul told me.

“If things go their way, it could return 1,000% gains overnight.

“But it’s a 50/50 shot.”

Paul Mampilly is our investment director at Agora Financial.

In his 30 years of investing, he’s seen some incredible biotech gains.

He’s personally seen biotech returns as high as 2,540%.

So when he talks, smart investors listen.

It was Monday, Nov. 11, at 2:48 p.m.

And the questions on my mind were:

Did I want to take a 50/50 chance on a big winner?

Is the reward worth the risk?

I think the answers will surprise you.

The way Paul sees it, right now, we’re in the midst of the greatest biotech boom in history.

It’s one of the reasons he’s been able to generate cumulative returns of 535% in his personal accounts over the past five years.

Biotech gains are incredible.

Catch just one biotech bull market in your lifetime and you may never have to work again.

For example, Paul caught Ariad Pharmaceuticals on Sept. 22, 2008, at $2.76 per share…and sold for $22.05 per share on Dec. 4, 2012. A 698% return.

And he caught AVI BioPharma on April 3, 2012, at $1.12 per share and sold shares on Dec. 4 for an incredible return of 2,540%.

But are Paul’s results just a fluke?

Is investing in biotech worth the risk?

I think it is. Let me explain…

Biotech stocks can swing widely — anywhere from 25-75% overnight.

You take some big gambles.

But when you know what to look for, the gambles are not as big as most people think.

That’s because the average investor has no idea what to look for when it comes to pricing a biotech stock.

As Thompson Clark, editor of Agora Financial’s Microcap Millionaires research advisory, tells us:

“The further along a drug is in getting FDA approval, the more it should be worth. There are four phases in approval, and a Phase 3 or 4 drug should be worth a lot of money. That’s because once a drug reaches Phase 3 status, approval is almost guaranteed. But every now and then, we see Phase 2 and 3 drugs at Phase 1 prices.”

And most investors miss out on these gains…

They wait to invest until after Phase 3 approval has been awarded.

Situations like this can hand us enormous profits — safely.

Let me give you an example…

On Jan. 8, tiny Intercept Pharmaceuticals (NASDAQ: ICPT) traded around $72 per share. But just 24 hours later, it had jumped nearly 323%. By the end of the week, ICPT had gained a staggering 530%.

What happened?

The biotech company made a positive announcement on their Phase 2 performance results.

Another example…

Alan Auerbach, the CEO of Puma Biotechnology (NYSE: PBYI), personally made over $700 million after the biotech company suddenly soared 295%.

What happened?

PBYI surprised investors when they reported positive results for their Phase 3 cancer drug neratinib.

295% overnight, 530% in a week…The gains in biotech are like those in no other industry.

But only if you catch a mispricing.

And there’s a simple way to do it.

Paul uses a system he calls his “Magic Calendar” to know when a mispriced biotech stock is about to soar. Right now, he’s watching for news that one of our FDA Trader positions will jump. Watch for the signal on Dec. 5, this Friday.

Is biotech worth the risk?

The potential gains without the leverage are extraordinary. Biotech stocks gained over 600% in their three-year bull run ending in 2000.

And right now, we’re in the midst of a bull market that could be even greater.

Time will tell.

If you follow Paul’s advice…and the advice of other great traders before him…you too could see gains of 600% in biotech.

Enjoy the market,

Diana Gordon
for The Daily Reckoning

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