By Dr. Steve Sjuggerud

In this terrible stock market, Dr. George Huang's subscribers just pocketed a 70% gain in six months.

My friend George's picks are on fire... What's he doing right?

George writes the S and A FDA Report. He finds biotech stocks inches away from FDA approval or rejection and tells his readers the best way to trade them.

Last year, biotech was one of the market's top-performers (it fell, too, but not nearly as far as most stocks). Now, the industry is lighting up. Already in 2009, we've seen four takeover deals hand shareholders an average 85% gain.

George is ecstatic. "Even crappy drugs are fetching enormous premiums in this market," George told his subscribers last week.

Biotechs in general are only up about 20% from their lows. Meanwhile, the average gain on a biotech stock index during a biotech bull market is 566%. So don't worry you've missed it already.

Actually, as I'll show you, I think now is a perfect time to buy...

Earlier this month, the Wall Street Journal reported, "An atypically large number of [biotech] companies are down to their last few months of cash."

Biotech firms rely on investors to finance their futures. But investors have been clinging to their cash. So right now, a full 180 of the 370 publicly traded biotech companies in the U.S. are operating with less than a year of cash, according to BIO, an industry trade group. More than 100 have less than six month's cash on hand.

That sounds like terrible news for biotech investors. But it's exactly what we want to see.

The Wall Street Journal article coincided with the JPMorgan biotech conference. The first JPMorgan biotech conference was held in 1991. "The mood of that conference was that there will never, ever be another biotech IPO again in the history of the world," an attendee recalled. At that time, the Datastream Biotech Index was in the midst of a four-year bull market. The entire index soared over 1,000%.

This time around, many biotech stocks won't survive. They'll simply run out of cash. But others – like George's pick, Indevus – will be bought out for huge premiums. Indevus shareholders collected a 45% premium to the market price. (George set up a trade that allowed he readers to grab a 70% gain.)

Biotech is way overdue for a massive boom. And with over half of the biotech companies on the stock market in danger of running out of cash, we have to be near the bottom.

Honestly, I've been too early on biotech so far... I've jumped in twice, only to be stopped out. But it's worth it. As I've said many times, if you catch just one biotech bull market in your lifetime, you may never have to work again. Since 1983, biotech stocks have exploded higher in four separate triple-digit rallies. And in the early 1990s, biotech stocks as a group had an extraordinary run – good for 1,347% profits.

The coming bull market could match that boom... These stocks are THAT cheap today. The Nasdaq Biotech Index is down more than 50% from its 2000 highs.

Innovation hasn't stopped in those nine years. The companies continue to make new discoveries. Yet the stock prices are half what they were nine years ago.

Now we're finally seeing an inkling of an uptrend – biotech stocks held up well last year, and they're moving up off their recent lows. Biotech stocks are ignored – they've been off of everyone's radar for years. And the value is there... In many cases, you can buy them for less than the cash they have in the bank.

Buy biotech now, the one sector that's held up in the last few weeks as just about everything else has fallen. Remember, with an average gain of 566% per bull market, if you catch just one biotech bull market in your lifetime, you may never have to work again...

Good investing,

Steve

NEW HIGHS OF NOTE LAST WEEK

StemCells (STEM)...biotech

Anadys Pharma (ANDS)...biotech

Life Technologies (LIFE)...biotech

ITT (ESI)...secondary education

DeVry (DV)...secondary education

Apollo Group (APOL)...secondary education

Cocoa, Japanese yen

NEW LOWS OF NOTE LAST WEEK

Nokia (NOK)...cell phones

Saks (SKS)...luxury retail

MBIA (MBI)...bond insurer

J.B.Hunt (JBHT)...trucking

Seagate (STX)...disc drives

Pep Boys (PBY)...auto parts

Luxottica (LUX)...eyeglasses

Hanesbrands (HBI)...apparel

Scholastic (SCHL)...publishing

CSX (CSX)...railroad

Union Pacific (UNP)...railroad

Norfolk Southern (NSC)...railroad

Schlumberger (SLB)...oil services

Citigroup (C)...bank

Wells Fargo (WFC)...bank

Bank of America (BAC)...bank

SPDR Regional Banking (KRE)...ETF

HSBC (HBC)...British bank

Barclays (BCS)...British bank

Lloyds TSB Group (LYG)...British bank

Royal Bank of Scotland (RBS)... British bank iShares United Kingdom (EWU)... ETF General Electric (GE)... conglomerate Visa (V)... credit cards Capital One (COF)... credit cards American Express (AXP)... credit cards Portfolio Recovery (PRAA)... debt recovery Microsoft (MSFT)... world's largest software company Crude oil, Natural gas, British pound

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On December 11, 2008, Gildan Activewear ("GIL") released earnings that disappointed investors.  In sympathy, Hanesbrands Inc. ("HBI" or the "Company") experienced a significant sell-off.  GIL dropped roughly 35% that day from its December 10 close of $14.17 to $9.19 while HBI dropped 24% from its December 10 close of $14.17 to $11.01.  On December 12, HBI fell a further 7% compared to a 4% decline with GIL.  While HBI has generally recovered from GIL's earnings disappointment, the Street has failed to distinguish the different end markets HBI and GIL serve.  In addition, HBI had been highlighted as an attractive short-sell recommendation by an[More...]

Today in the market, Friday July 25, 2008:  Well the market was certainly volatile this week and its great that it ended the week with a modest gain.  The S&P500 was up +0.42% and the Nasdaq +1.33%.  This week was filled with news, both good and bad, that caused some wild gyrations.  On that note let's bid farwell and look forward to smoother sailings.  (Wishful thinking)

RSI’s Themes:  The ETF/CEF picks lean toward world and emerging income plus environmental services.  Areas that certainly need due consecration in one's portfolio.  The stock picks lean in the direction of the consumer..electronics, coffee, clothing and furniture.  This is very contrary to conventional market wisdom.  We shall see.

ETF/CEF Low Volatility:

• AWF - Alliance Wrld Dlr Govt II
• EMD - Western Asset Emerging Markets Income Fund Inc.
• EVX - Market Vectors Environmental Services

 

Stocks Medium Volatility:

• ACC - American Campus Communities Inc.
• ATU - Actuant Corp.
• EMR - Emerson Electric Co.
• GMCR - Green Mountain Coffee, Inc.
• HBI - HanesBrands, Inc.
• SVR - Syniverse Holdings Inc.

Stocks High Volatility:

• FBN - Furniture Brands Intl Inc.

Stock Picks New to RSI:

• Furniture Brands International, Inc. designs, manufactures, sources, and retails home furnishings.
• Hanesbrands, Inc., a consumer goods company, engages in the design, manufacture, sourcing, and sale of apparel essentials for men, women, and children in the United States and internationally.
• Emerson Electric Co., a diversified global technology company, engages in designing and supplying product technology and delivering engineering services to industrial and commercial, and consumer markets worldwide.

ETF/CEF Catch a Falling Knife (CFK):

ADRD    BLDRS Developed Markets 100 ADR Index Fund
APF    Mgn Stnly Dean Wtr Asia P
EAD    Evergreen Income Advantage Fund, Inc.
EWD    Sweden iShares
EWG    Germany iShares
EWP    Spain iShares
EWU    United Kingdom iShares
EZA    South Africa iShares
GAF    SPDR S&P Emerging Middle East And Africa
HHH    Internet Holders
IJT    SmCap 600 Growth iShares
ISI    iShares S&P 1500 Index Fund
IVV    S&P 500 iShares
IWB    Russell 1000 iShares
IWV    Russell 3000 iShares
IYY    Total Market iShares
JKJ    iShares Morningstar Small Core Index Fund
ONEQ    Fidelity Nasdaq Composite Index Fund (OneQ)
PBW    Powershares Wilderhill Clean Energy Portfolio
PWB    Powershares Dynamic Large Cap
SCD    LMP Capital and Income Fund Inc.
SSO    Ultra S&P 500 ProShares Fund
TTF    Thai Fund, Inc.
TY    Tri Continental Corp.
VOX    Vanguard Telecommunication Services VIPERs
VTI    Total Market VIPERs
VXF    Vanguard Extended Market VIPERs

So there you have it....have a great weekend, I certainly will.