Being aware of the likelihood of M&A can be extremely useful, especially among the small-cap stocks that often become targets for much larger players in their respective industries.įinally, it's often valuable to look at losing stocks to see whether their losses are justified. Investors now hope that they'll end up with a huge amount of Verizon stock once their planned acquisition closes. The only non-biotech, Straight Path, is a great case in point, as the owner of wireless spectrum assets found itself in the right place at the right time when major players in the wireless telecom industry got into an exciting bidding war for the company. Investors should also recognize that the merger and acquisition environment can make a huge difference to returns among top stocks. Although 2017 was noteworthy for seeing some large-cap names put up impressive returns, the truly massive gains were reserved for smaller companies with explosive growth potential. First and foremost, you can see that nearly all of them started out the year as true small-cap stocks, with only Nektar having a mid-cap market capitalization before its extensive gains for the year. The more important thing about these winning stocks is what they all have in common. The real lessons to learn from these winners Sangamo and Ignyta were both down more than 60% in 2016, although the 2017 bounce has given their long-term shareholders solid gains. Dynavax was the big loser, plunging 83%, and that means that investors who bought into the stock at the end of 2015 are still down on their initial investment despite the stock's huge rebound last year.
Biotech struggled in 2016, and seven of the nine biotechs listed above saw their share prices decline by at least 25% that year.
Yet you need to take 2017's gains in these stocks with a grain of salt, because the explosive returns that they posted last year came only after most of them suffered significant losses the previous year.
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