Some major news – and almost completely ignored – from Washington, D.C., is on the cusp of upending the biotech world, turning America into the “pharmacy of the world” in no time – and giving us a solid 6.8% dividend-buying opportunity. For just 91 cents on the dollar.
That might sound hard to believe for woebegone biotech companies, which have fallen more than the S&P 500 index this year, according to benchmark performance. iShares Biotechnology ETF (IBB
The problem is that despite these tailwinds, biotech is burdened with the same problems that affect the rest of the economy: declining R&D funding as interest rates rise, and supply chain issues hurting productivity.
But this sector is so important to America’s future that the government won’t let it pass. So President Biden stepped in. What his administration is doing will more than offset those negatives – and set the sector on an upward trajectory for years to come.
Let’s Click “Biden Biotech Boost” for 6.8% Dividend and Rise
Before we go any further, I’d like to say that we don’t have any political agenda here at Contrarian Outlook. We simply extract profit (and growth) opportunities that have been overlooked in front of us. And Biden’s plan is one, because it prepares the 6.8% closed-end fund (CEF) that we will discuss shortly for solid gains.
The plan is a multi-billion dollar project called the National Biotechnology and Biomanufacturing Initiative. Among other things, it is designed to bring the production of more biotherapies to the United States—an echo of the “localization” and “deglobalization” trends we’ve been covering here in another overview recently. At the same time, US pharmaceutical companies can use this money to enter new markets and grow their existing ones.
The plans are ambitious and broad: There is hope to develop new treatments with antibodies, alternatives to meat, biodegradable plastics, and age-reversing technology.
It all boils down to the fact that the government is turning on me Money flowing into biotech at a time when the Federal Reserve is Reducing The flow of money to the economy as a whole. This will format the sector to regain its advantage. But not all biotech companies will benefit equally, which is why we are playing the “Biden biotech boom” through an actively managed CEF.
This 6.8% fund holds all of the Biden Biotech Boom winners.
The best biotech CEFs are managed not only by financial professionals but also by Ivy League trained doctors and researchers who can take a critical look at the research conducted by different pharmaceutical companies.
This is why CEFs are files ideal Tools for investing in biotechnology. Algorithmic-managed ETFs and individuals picking stocks for their own simply cannot compete with the financial and medical experts who know the sector inside and out.
Pros at 6.8% - yield Takla Healthcare Opportunities Fund (THQ) She is an excellent example. This fund, like all Tekla-managed funds, is managed by a mix of financial and medical professionals with decades of experience. The proof lies in their performance: THQ has outperformed a biotech index fund since THQ launched nearly a decade ago, with nearly double IBB's returns at the time.
THQ's portfolio is strong, featuring a mix of excellent companies with good cash flows, such as Johnson & Johnson
Finally, let's talk about valuation: THQ offers an 8.6% discount on net asset value (NAV, or the value of the shares you hold), so we're basically buying for 91 cents on the dollar here. this discount we will Less than the 4.4% discount the fund averaged over the past year and far from 4% excellent which topped it at the time. I would expect the THQ discount to flip into the premium and reclaim that level on the strength of the Biden pharma bundle, taking the price of the box with it.
Michael Foster is Principal Research Analyst at dissenting look. For more great income ideas, click here for our latest report »Indestructible Income: 5 deal funds with a safe profit of 8.4%."