In recent weeks, the Street has become much more enamored with pharma stocks than it was previously. The iShares Biotechnology ETF (NASDAQ:IBB) climbed 6% so far this year. As a result, those who invest in pharma stocks now will benefit from the sector’s current positive momentum.
But from my perspective, that’s just icing on the proverbial cake. The main reason to buy the shares of some pharma stocks is that the drugs that these firms have developed could eventually become huge blockbusters. And the stocks of the companies that accomplish that goal will produce huge returns.
I like to recommend and buy pharma stocks whose products have not yet become blockbusters but have excellent chances because their risk-reward ratios are excellent.
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