In the same way that the biopharma sector led the overall market lower in early 2022, biotech is already emerging as one of the sectors that is likely to lead the market higher as 2023 gets underway, suggests Nate Pile, editor of Nate's Notes.
My more conservative Top Pick for 2023 is one that I have recommend in the past — Tekla Life Sciences (HQL). As its name suggests, this closed-end fund invests in a variety of publicly traded and private companies doing work in the life sciences sector (and biotechnology, in particular).
The fund's top five holdings (as of the end of September) are names that many investors are probably already familiar with Gilead Sciences (GILD), Amgen (AMGN), Vertex (VRTX), Regeneron (REGN), and one that is also a long-time holding in Nate's Notes, Illumina (ILMN).
Along with these industry leaders, the fund also holds positions in a number of smaller development-stage companies as well, including a number of private companies.
And while it is true that investors can probably get more bang for their buck by owning individual stocks in the sector, there is something to be said for being able to gain quite a bit of diversification in the sector with a single purchase, especially if one is more risk-averse and does not want to experience the high levels of volatility that are often associated with investing in biotech stocks.
Along with the instant diversification that comes with owning shares of the fund, Tekla Life Sciences also has a policy of paying out 2% of its net assets every quarter, so investors also "get paid to wait" — a rarity when it comes to investing in biotech.
Though the default is for the distribution to be paid in new shares (and we always take new shares rather than cash in the newsletter's portfolios), investors have the option of asking for cash instead — just contact your broker to change the default setting for your account. HQL is considered a strong buy under $14 and a buy under $18.