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Biotech is a fascinating sector. Unbridled promise and potential.
At the same time, volatility and value destruction lurks
like steep icy slopes on the way to the summit.

Growth, evolving science, and immense value creation potential make the biotech industry an exciting one, while uncertainty, complexity, and volatility make it an unnerving one.

Nonetheless, the potential of the biotech sector in delivering incredible investment returns is real and it remains one of the key sectors that powers the market performance. Since the markets recovered from the 2008 Great Recession, biotechs as a group have outpaced the general market convincingly. The risk (volatility) assumed in a biotech investment will always be higher compared to an S&P 500 investment, which is well-diversified across many industries and does not have to encounter the binary nature of success or failure inherent in biotechs.


Outperforming the Broader Market

The chart (click to enlarge) shows the undisputed status of the biotech industry delivering leading returns when compared to the broader market. In the last decade, from 2010 to 2019, biotechs cumulatively returned 350%, while the S&P 500 returned less than 250%. This additional gain of 100% was there even though the Nasdaq Biotechnology Index (IBB) peaked in mid-2015 and biotechs did not reach that level again during the decade. The volatility or standard deviation over the period was 6.1 for IBB and 3.6 for S&P 500. The Performance section lists out additional details.

Graycell Advisors - Nasdaq Biotechnology Index (IBB) Vs S&P 500

Performance 2010 - 2019 (smoothed chart - plotted values at the end of each period)

The Performance Demonstrates You Can't Ignore Biotechs!

The Prudent Biotech Newsletter

Using Quantitative Models for Systematic Biotech Investing


We decided to match the potential of the Biotech sector with a systematic, model-driven approach. The result was our BiotechQuant model. 

The BiotechQuant model goes through various stages, crunching the multiple quantitative parameters and rules, processing information on both the biotech sector listings in our database and the broader market variables. After various iterations, the eventual output is a list of the high potential stocks based on the parameters. The methodology is applied to select up to an 8-stock model portfolio, which we share in the monthly Prudent Biotech newsletter.

We know from the chart above, the extent of the Biotech outperformance over the broader market. Below, we have overlaid the same chart with the Prudent Biotech Portfolio.

Our BiotechQuant System Recommends a Model Portfolio
with a History of Returns Far Outpacing Benchmarks

We know from the chart above, the extent of the Biotech outperformance over the broader market. Below, we have overlaid the same chart with the Prudent Biotech Portfolio.

Prudent Biotech

A Decade Of Performance

The BiotechQuant model took a great performing sector, biotechs, and created a promising model portfolio that delivered compelling results each year to far outstrip benchmarks. The model portfolio outperformed significantly with a gain of 6,400% as shown in the chart (click to enlarge). The volatility of the Prudent Biotech portfolio was higher than the biotech index, but delivered a much superior risk-adjusted performance. The Sharpe ratio for the model portfolio was 1.3 compared to 0.8 for IBB, indicating the higher-risk was well-compensated for in terms of returns. Additional details are provided in the Performance section.

Prudent Biotech, Nasdaq Biotech Index and S&P 500 Returns - Graycell Advisors

Performance 2010 - 2019 (smoothed chart - plotted values at the end of each period)

A $10,000 portfolio growing to over $650,000 in a decade

That's right! A $10,000 investment in 2010 growing to $650,000 by 2019 end.

Now keep in mind that the newsletter was available for subscription from mid-2015, and the prior performance is a back-tested track record based on hypothetical trades. Generally speaking, biotech stocks have more variable returns and higher risk than the broader market indexes. Furthermore, historical results do not guarantee future performance.

Nonetheless, the performance gap is substantial, compelling & transformational.

A $10,000 investment in 2010 in the biotech index would have also grown,
but to just over $45,000.

The numbers get quite staggering if one calculates the model portfolio performance from 2003.

What is equally noteworthy is the consistency with which the Prudent Biotech portfolio has outperformed each year in the last decade.

During the brutal bear market of 2008-09, when the S&P 500 plunged 55% in a matter of months, the model portfolio did not suffer a material decline. The reason was straightforward. The models recognized the market risk to be abnormally elevated and found a scarcity of investing ideas with a higher probability of success. Consequently, the Prudent Biotech portfolio simply exited to the safety of cash. The ability to exit the market is relatively easier for individual investors, compared to institutional investors, and we should leverage that into an advantage during times of acute market stress or a downward trend.

Prudent Biotech focuses on Portfolio Returns and not on individual
position returns. Stocks can go up and down within a portfolio.
But it's the total portfolio return that should be the focus.

Even though volatile, Biotechs Can Fuel A Portfolio
Whatever your Investing System,
Biotechs Should Have A Role

What do I get?

What you get is the Prudent Biotech model portfolio with a systematic investing game plan behind it. 

The Prudent Biotech newsletter is a portfolio of up to 8-stocks, almost equally weighted, incorporating the investing rules and quantitative criteria we have developed. The objective is to position the model portfolio to potentially accrue strong returns over time. The systematic investing methodology for the model portfolio incorporates the time-tested investing virtues of patience, discipline, and compounding. Based on your determination of the relevance of this information to your unique situation, you would now have the ability to use a model-driven systematic investing approach to participate in one of the most exciting, promising and volatile sector of the market - the Biotechs.

  • Benefit 1 - A systematic investing approach to follow monthly
  • Benefit 2 - A game plan to follow a quantitative investment strategy
  • Benefit 3 - An emotionless investing system that minimizes the judgment risk
  • Benefit 4 - Exposure to the most promising names within the high potential Biotech sector
  • Benefit 5 - An in-sector diversified portfolio to manage a portion of the stock-specific risk
  • Benefit 6 - Limit risk from prolonged adverse market conditions by knowing when the portfolio is in Cash
  • Benefit 7 - Clear cut layout and updates, simple to understand and follow once a month
  • Benefit 8 - No daily decision-making or spending endless hours reading research and still remaining undecided
  • Benefit 9 - Once you determine the information is relevant to your situation, track the portfolio typically once-a-month
  • Benefit 10 - Instant access to a quantitative model portfolio for $29/month that is less than even a restaurant check.


Get Your Bonus Book As Well!

Quickly explains why
you should believe in Biotechs!
(comes free with your subscription, published 2016)

Since I'm quite active in the markets, I was sceptic about a hands-off approach. But I've turned around as I see the results from this discipline. Thanks for helping me out!

Marty H., Texas

This is awesome. It required patience at first but then it comes together. Up and away. I should become an affiliate for you 🙂

Richard E., Florida

The Best Time to Plant an Oak was 20 Years Ago.
The Next Best Time is Now...

How powerful is this old English proverb.

After all, you've to start somewhere, sometime.
There is no guarantee of future performance. Nonetheless, it should still be noted that various studies and scholars have provided empirical evidence that bolsters the thesis that systems outsmart experts consistently by a meaningful margin.

If you feel our system can help grow your portfolio over time, and build the wealth that you wish for, then don't wait!

The Decision is Yours Now!

We leave you with a quote from Warren Buffett,

Warren Buffett

While there is no one best system, there is one that works best for you. Once you choose a system, you need to stick with it.

Warren Buffett, Legendary Investor

Buffett made the above comment while referring to the card game of Bridge. But his words hold a vital truth for Investing as well.

Thanks for reading and Good Luck!

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      Graycell Advisors, and its affiliates, officers, employees, families, and all other related parties, collectively referred to as ‘Graycell’ and/or ‘we,’ is a publisher of financial information, such as the Smallcap, and Prudent Biotech newsletters. We are not a Registered Investment Advisor (RIA). Historical performance figures provided are hypothetical and unaudited, and based on our proprietary analysis and system performance, back-tested over a period of time. Hypothetical or simulated performance results have limitations, and unlike an actual performance record, simulated results do not represent actual trading and consequently do not involve financial risk of actual trading. The performance results obtained are intended for illustrative purposes only. No representation is being made that an account will or is likely to achieve profit or losses similar to those shown. Past performance is not indicative of future results, which may vary. All stock and related investments have a degree of risk, which can result in a significant or total loss. In addition, biotech sector and smallcaps are characterized by much higher risk and volatility than the general stock market. Information contained herein is general and does not constitute a personal recommendation or takes into account the particular investment objectives, financial situations, or needs of individual investors. If you decide to invest in any of the stocks of the companies mentioned in the newsletters, samples, alerts, etc., sent to you or available on our websites, you can and may lose some or all of your investment. You alone are responsible for your investment decisions. Use of the information herein is at one's own risk. We are simply sharing the results of our model. Nothing should be construed as a recommendation or an offer to buy or sell any securities, and we are not liable nor do we assume any liability or responsibility for losses incurred as a result of any information provided or not provided or not made available in a timely manner, herein or on our website or using any other medium.  We cannot guarantee the accuracy and completeness of any information furnished by us. We may or may not have existing positions in the stocks mentioned in our reports. Our models are proprietary and/or licensed, and can be changed or revised based on our discretion at any time without any notification. Subscribers and investors should always conduct their own due diligence with any potential investment, and consider obtaining professional advice before making an investment decision.

      © Graycell Advisors. All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the written permission of Graycell Advisors is strictly prohibited and shall be deemed to be copyright infringement.