Investing in biotech stocks can be risky, particularly in the clinical stage, since their success often hinges on the results of trial data and regulatory developments. Additionally, it can take years for pre-revenue companies to bring a potential blockbuster drug from the pipeline stage to the point where it generates meaningful profits. So, while biotech companies carry the potential for significant returns for patient investors, there's also the potential for significant volatility and risk when investing in this corner of the market.
One way to find higher-conviction picks is by tracking insider buying activity, which refers to purchases of company stock made by executives, board members, and major shareholders. When these investors buy stock with their own money, it's typically viewed as a bullish signal by the market.
