The emergence of COVID-19 has put a spotlight on the $258 billion biotechnology industry.

Across the globe, companies large and small are racing to develop a vaccine.

After all, an effective vaccine is the only surefire path back to “normal.”

And, of course, that means big profits for the first to market.

That’s why the minute a headline comes out about a new development, stock prices surge higher. Take Moderna Inc. (Nasdaq: MRNA), for example. Following a report on Monday of positive results in a test on just eight individuals, MRNA stock jumped 20%. That brings the total gains for the stock to over 150% in just two months!

You can see why biotech stocks get a bad reputation as purely speculative plays. Company profits and the fate of stock gains rest solely on the outcome of clinical trials.

But if you dig deeper, you can find companies with broad product portfolios that generate billions in sales and profits.

And the truth is that the biotech industry offers an incredible value opportunity at the moment … and that’s why you should act now.

The Right Industry at the Right Time

Ever since peaking in mid-2015, the Nasdaq Biotechnology Index (NBI) has traded in a range that previously never surpassed its prior high.

But industry profits continued to grow over that time. And the result is that valuations have become cheap … especially compared to the broader stock market.

Right now, the price-to-earnings (P/E) ratio on the biotech index is 16.5. That’s below its 10-year average of 16.9.

At the same time, the P/E ratio on the S&P 500 Index is 20.9, which is well above its own 10-year average of 15.9.

That means biotech stocks are trading at a 21% discount to the stock market when, historically, they’ve traded at a premium.

And now that this sector is garnering tons of attention, investors are realizing this as well. In fact, the group is being pushed above key price levels.

Check out the chart below to see the price action I’m talking about:

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This chart shows the price of iShares Trust Nasdaq Biotechnology ETF (NYSE: IBB) over the past 10 years. IBB is an exchange-traded fund (ETF) that tracks the biotech sector. And as shown by the trend line, stocks in this sector are just now staging a key breakout to new highs.

What makes this breakout even more significant is the price consolidation of the past five years. That means a powerful move higher is in the works.

Cheap valuations coupled with surging momentum make biotech stocks an excellent pick in this frothy stock market.

So act quickly and pick up shares in IBB to profit from biotech’s breakout!

Best regards,

Ted Bauman Signature

Clint Lee

Research Analyst, The Bauman Letter