Biotech stocks are climbing high, but Reuters' Deena Beasley writes that a nearly 50 percent increase in the last year has stoked worries about a bubble. She notes that the Nasdaq Biotech Index is up 45 percent as compared to last year and the Pharmaceutical Index is similarly up 32 percent, while during the same timeframe, the S&P 500 Index gained 25 percent.
"Genetic information is providing a big opportunity for new drug development," Rajiv Kaul, portfolio manager of Fidelity Investments Select Biotechnology Portfolio, tells her. "There are exciting new opportunities, but you also need to be careful because most drugs fail."
David Heupel from Thrivent Investment Management adds that the space "has some room to grow, but it is not going to be as easy as it has been."
Consensus estimates, though, say that the annual average combined earnings growth for biotechs for the next three years will be 21 percent, as compared to 9 percent for S&P 500 companies, Beasley writes.