The way to invest in Biotech in the cold winter

In 2021, pharmaceutical investors have been on an exciting roller coaster ride
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Starting from the low point of bulk purchases in 2018, the pharmaceutical sector has gone through a three-year bull market, during which the epidemic has further strengthened the sentiment of the pharmaceutical sector.
After reaching the top, I entered a long refractory period.
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Frankly speaking, in the face of such a trend, the blood pressure is difficult to suppress.
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Every time, when the optimism is deduced to the extreme, it is a tragic valuation bubble repair, and various reasons can be found for after-the-fact attribution, but these are all after-the-fact attributions, and the essence is still a valuation bubble
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Valuation problems can be fixed with time.
Medicine is an innovation-driven industry.
In the long run, there will always be innovations that will drive the industry to form new growth points.
In the long run, the future of a specific company is uncertain.
, but the people's desire for a better life must be optimistic, which is the source of human progress
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In Hong Kong stocks, the Hang Seng Biotechnology Index has undoubtedly beaten the old comrade Hang Seng Index
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If you look at the U.
S.
market where the real innovation comes from, the most representative one is the S&P Biotechnology Selected Industry Index, and the tracking ETF is XBI.
Because it is a broad-based and equal-weighted index, it is generally believed to represent a typical small- and medium-cap biotechnology.
The performance of technology stocks, since its release in 2016, has not bullied the old comrade S&P.
Even if it is compared with the Nasdaq, the index that can beat the most, XBI has far outperformed the Nasdaq for a long time
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As long as the time is extended, innovation as a whole has a high probability of bringing long-term excess returns
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Whether looking at the Hang Seng Biotechnology Index, which represents China's pharmaceutical innovation, or the XBI, which represents global pharmaceutical innovation, in addition to long-term relative high returns, the indices show extremely high volatility far higher than the broader market
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Investing in Biotech must be accompanied by high volatility
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Back to investment strategy, any investment decision can be broken down into: probability * odds

There are many investment schools in the secondary market, such as the school of core assets, that is, certainty first (high certainty), and excess compound interest is obtained through long-term holding.
Due to a high degree of consistent expectations, the overall odds are not so high; some strategies It is to give priority to odds, and to compensate for the unpredictableness of certainty through high odds.
Like Feng Liu's weaker system is a system that prioritizes odds
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If you want to find high certainty in the field of Biotech, you are asking for fish.
If you want high certainty, why not go out and turn left to embrace the noble Maotai? Maotai Technology is also a core technology
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Decentralized allocation of Biotech with high odds is the only way to deal with high volatility biotech investments
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Risks rise and opportunities fall.
When the pharmaceutical sector, which is more sensitive to liquidity factors, continues to fall sharply, it should actually be optimistic.
First, based on the MMT theory, the trend of currency "paper money" is irreversible, and the overall liquidity There is no solution to the flood, only innovation, which can be infinitely priced, can absorb a huge amount of funds; secondly, the internal development momentum of pharmaceutical innovation still exists for a long time, and the industrial cycle, policy cycle, and capital cycle cannot change this inherent inevitability
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Therefore, be strategically optimistic and tactically cautious
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As a whole, the odds of Biotech are actually starting to become friendly.
Just like the bottom after purchasing with volume, how many pharmaceutical stocks are willing to watch? Furthermore, when the tide recedes, it is easier to see the trump cards of each company.
When it falls, all kinds of negatives are fully exposed, and the differences between different targets are more clearly highlighted
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At this moment, how to tell the odds of Biotech?

As investors, in fact, we allocate capital to more professional teams to try innovation.
Therefore, before analyzing scientific problems, we should start with simple problems and build a framework based on our understanding of the business of innovation.
Biotech
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Someone, look for founders with ability and vision
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With money, innovation costs money
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There is quantity, whoever wins will help whoever
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Find founders who have the ability and vision, and look at their financing cash.
Get a lot of money, in fact, the real game begins, and this is also the stage where secondary investors can really participate
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The secondary market is a more realistic market.
Funds will only set prices for more promising companies.
After the short-lived market popularity of IPOs, the average daily turnover of most companies tends to fall back to a normal state.
This is to observe the company market.
The key indicator of attention.
After listing, the value of the company needs to be priced by the market, and the market is highly efficient.
Relatively excellent companies must have more funds to participate in pricing.
Once there are marginal changes, it is easier to form a consensus, no one Companies involved in pricing may be at odds in one way or another
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Therefore, a simple logic, the high probability of higher liquidity in companies of similar size is more worthy of attention, especially after this round of biotech's sharp decline, market sentiment has reached a relatively low range, at this time The funds that are still pouring into Biotech are likely to be the most determined and professional group of pharmaceutical investors.
What companies they pay attention to and why they are willing to set prices is a key effective market information
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Summarize this screening logic: 1) The company has the ability to have a founder with a vision; 2) It has strong financing capabilities and cash reserves; 3) There is good liquidity in the same market value group in the secondary market; In fact, the scope of optional Biotech has been greatly reduced.
Based on this screening logic, we will focus on whether the company's pipeline is differentiated and whether it is in line with the technical development direction.
Consult and verify with experts in related fields, so that the research efficiency can be greatly improved.

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It is equivalent to first screening through simple logic, and then confirming complex logic; conversely, it is to look at the pipeline first, and then to make subsequent judgments, that is, to answer the complex logic first, and then solve the following problems, I believe from the difference in research efficiency Second-tier investors should be able to understand
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In scientific issues, most investors cannot be more professional than industry experts.
From an investment perspective, we do not need to be stronger than the strongest brains in the industry, and this is an almost unattainable achievement.
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But Starting from the investment logic, it is enough to find a group of wealthy teams led by excellent founders who have a consensus in the market, and spread their bets on more promising tracks to form a combination with a higher probability
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All kinds of the strongest brains in the industry will find a way.
When the logic of industrial contradictions has become so prominent that investors in the secondary market are familiar with it, new breakthroughs are actually being conceived, and the development of things must be fluctuating forward.
Just a beautiful but unrealistic expectation
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Biotech investment, remember to be upright, believe in the inevitability of innovation as a whole, and spread bets; be cautious and surprising, individual black swans are a matter of probability, and be cautious about heavy positions
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To be long in Biotech is essentially the desire to be long in human beings.
In the long run, it must be optimistic.
When the odds of the sector become more friendly, we should be more optimistic
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Biotech in the first echelon has big enough odds not to be sexy, but in the second echelon, it can provide bigger odds expectations, such as Betta and Ashong in A shares; Rongchang and Kangfang in Hong Kong stocks; Zai Ding in US stocks , Tianjing, etc.
These still have Biotech with strong men in power.
After resisting this wave of cold winter, there will still be a second spring
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Finally, let’s appreciate the historical trend of XBI and feel its violent fluctuations.
Investing in Biotech is a choice for higher yield expectations.
The source of income comes from both internal innovation and external fluctuations
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