Choosing Between Biotech and Miners
The resources sector globally is in the trough of a prolonged depression while the biotechnology sector is setting new price records. The NASDAQ biotech index has risen 21% since the start of 2015 within a 420% rise since the beginning of 2009. It would be easy enough to conclude that biotech investments are generally preferable to mining investments but this is not necessarily the case in Australia where the resources and biotech return profiles are remarkably similar. The chart, based on the entire population of the stocks in the two sectors listed on ASX, shows the distribution of returns so far during 2015. The resource sector offers the more extreme returns but a statistically insignificant number of resource stocks (2.3% of the total) exceeded the highest returns in the biotech sector. The similarity in returns prompts very different inferences about sector performance than would be drawn from observing the US market. The make-up of Australian biotech companies tends to resemble, in their stage of development and commercial progress, the resources part of the market more than their peers overseas.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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