Another strong play from medical stock expert Rob Fannon.

Rob says that although Big Pharma stocks are cheap right now – bellwether Pfizer (PFE) is cheaper than it’s ever been – drugmakers are racing off the side of a cliff.

This is because when patents expire drugmakers loose billions of dollars to generic manufacturers.

But biotech drugs can’t be copied easily. And the sector is in an uptrend. Rob recommends using a biotech ETF to play this trend.

Biotech drugs are harder to copy than traditional drugs, making them more expensive to produce and less prone to future competition from generics. So drugmakers are willing to pay up to get a few biotech drugs in the pipeline.

In April, for example, the biggest Japanese pharmaceutical company – Takeda Pharmaceuticals – paid close to $9 billion to acquire Millennium Pharmaceuticals. In other words, Takeda handed Millennium shareholders a 53% profit over the previous day’s closing price. These deals will only get more frequent as Big Pharma gets more desperate. That’s why I love biotech stocks for the long term…

The problem with this long-term thesis is that biotech stocks in general have been “dead in the water” for the past few years. The sector enjoyed a big run from 2003 to 2005. It’s taken time to digest those gains… and money managers have been more focused on commodities since then.

But I think this “dead money” period may be ending…

In the past month, biotech was one of the few sectors to show positive returns. Oil stocks, financial stocks, and consumer-spending stocks have been killed. Many biotech stocks, on the other hand, are doing well. As Brian Hunt mentioned in yesterday’s Market Notes, the S&P Biotech ETF just hit a new high for the year.

There’s a good reason for this strength. A struggling economy won’t hurt biotech and medical as much as, say, an automaker, retailer, or restaurant chain… And biotech is one of the few industries showing solid sales growth.

A big holding in the S&P Biotech ETF, Gilead Sciences, just reported a 22% increase in quarterly sales growth. A slew of big biotech players report earnings next week, and I expect more great numbers.

Several ETFs give you broad exposure to biotech. Just enter “biotech” in the search box on www.etfconnect.com for a full list of funds. (A warning on the HOLDRs Biotech ETF – I’d avoid it… It’s ridiculously weighted toward just four high-profile companies.)

The really huge gains in biotech will be made with the best individual companies. Pick the right one and you could easily multiply your money by four or five times.

Whichever route you choose, I encourage you to pay attention to the biotech sector. It has a terrific long-term outlook and it’s getting started on another run higher.

Source: The Decade’s Most Irresistible Opportunity