Investors use the “defensive” label to describe businesses that enjoy steady demand for their products – like food, cigarettes and electric utilities.

The thinking goes, you want to own these sectors when the economy stinks. Their sales and cash flows should hold up better than retailers and hotel chains when consumers are broke.

This from Rob Fannon, guest editor on Today’s Money Morning:

Considering we’ve just had the worst credit crisis in 80 years, and one of the worst-ever bear markets in stocks, the new “defensiveness” shown by biotechnology stocks is extraordinary.

Biotech is typically a wild sector. Most people don’t think of it as place to find safe stocks. But have a look at the accompanying chart, which tracks the SPDR S&P Biotech ETF (XBI) over the past two years. This fund has big holdings in the 10 or so large biotechnology companies that have viable products bringing cash in the door.

As the chart shows, the XBI ETF is actually higher today than it was back in 2007. You can’t say that about oil, real estate, retail stocks, food stocks, tech stocks, gold stocks, or financial stocks.

The strength in biotech shares is confirmation of something I’ve been predicting for the past few months: We’re due for huge rally in biotechnology stocks.

Biotech companies are much different than giant pharmaceutical companies like Pfizer Inc. (PFE) or Merck & Co. Inc. (MRK). Biotech firms make their drugs from living cells, rather than from mixtures of chemical compounds. Biotech drugs treat life-threatening diseases – so recessions barely dent sales growth. People can pass on the cholesterol-lowering effects of Lipitor for a while, but stopping a cancer treatment can kill a patient in weeks to months.

And because most biotech drugs are made from living cells, they’re hard to copy. Right now, the U.S. Food and Drug Administration (FDA) has no approved pathway for generic biotech drugs. While Big Pharma is struggling with dwindling pipelines, big biotech companies are profitable, have growing sales, are generating tons of cash, and face no generic competition in the near term. Biotech bull markets are often good for gains of 300% to 500% – across the entire sector.

That’s why I think you should become familiar with the sector immediately.

I recommend you start with three of the hottest areas of biotech. Each one has the potential to generate new “blockbuster” drugs (drugs with annual sales of more than $1 billion). Those three key areas are:

• Metabolic disorders: “Metabolic syndrome” is a politically correct term for patients who are obese, diabetic, and face increased risk of heart disease. There are good drugs to control diabetes and help prevent heart disease, but no good drugs to treat obesity. With half of the U.S. population technically obese or overweight, an effective diet pill is the Holy Grail of drugs. Right now, Americans spend more than $50 billion per year on over-the-counter diet remedies. An FDA-approved fat pill would be a monster seller.

• Vaccines: With new products to prevent cervical cancer, avian flu, and the common cold, vaccines are back in vogue. Big Pharma player Wyeth (WYE) has one of the biggest vaccines businesses in the drug world. It’s part of the reason the company recently fetched a $68 billion buyout offer from Pfizer. Dutch biopharma player Crucell NV (ADR: CRXL) is the top remaining independent vaccine players in biotech. I predict it’ll be acquired before 2009 is over.

• Infectious diseases: The transformation of HIV from a death sentence to a chronic disease has turned the infectious-disease-drug market into a multibillion-dollar industry. Gilead Sciences Inc. (GILD) is the top player in this space. The next frontier is an effective treatment for Hepatitis C. Current drugs have terrible side effects and only “cure” 50% of patients. A handful of biotech companies – Vertex Pharmaceuticals Inc. (VRTX), Human Genome Sciences Inc. (HGSI), and Pharmasset Inc. (VRUS) – are nearing pivotal clinical data for next-generation Hepatitis C drugs.

There’s never been a more exciting time to be a biotech investor. Big Pharma companies have nearly $100 billion in cash that will keep buyout offers large. We have plenty of “Holy Grail” areas to focus on. And, as you’ve seen, we have a strong trend on our side.

P.S. I expect the biggest opportunity in biotech (or the entire stock market for that matter) will arrive on March 30. By this day, one company will announce test results for a new drug that could create the single biggest return of any investment I’ve ever found. One drug expert calls the potential market for this drug the “biggest untapped goldmine in the industry” and speculates that it would be worth $10 billion per year. Click here for the full details of the situation.

Source: The Market’s Safest Sector Also Has Enormous Potential to Rise

Stock in US ethanol producer Pacific Ethanol (NASDAQ:PEIX) sold for more than $18 in November 2006. It now sells for just over $1.60. Meanwhile, investors in ethanol producer VeraSun (NYSE:VSE) lost nearly 70% this year.

But Rob Fannon says there’s a bigger ethanol bubble coming – one that can make big bucks for early investors…

This from Rob in The Growth Stock Wire:

With corn prices where they are today, corn-based ethanol is just not a viable business. But you don’t need corn to make ethanol.

Cellulosic ethanol comes from just about any part of any plant: wood, grass, sugarcane, even banana peels.

Just like corn, cellulose – what gives a plant its structure – can break down into sugars to produce ethanol. But cellulose “feedstock” is cheap and abundant. Scrap wood and discarded yard clippings are practically free, compared to $6-$8 per bushel of corn. So theoretically, a gallon of cellulosic ethanol could cost half as much to produce.

Right now, cellulosic ethanol production is confined to labs. The ramp-up to commercial scale is a few years away, which is where the investable opportunity is today… and how this story came across my radar screen.

There are two ways to invest in cellulosic ethanol… First, you could buy stock in enzyme suppliers. These are biotech and specialty chemical companies that produce the enzymes needed to break down cellulose. Or you could buy stock in integrated producers, companies building cellulosic ethanol production plants.

Rob says it’s too early to tell which the best route is. But he says, “it’s a safe bet that several winners from both sides will emerge from the race to the next energy bubble.”

The Department of Energy has already pumped $700 million into alternative fuel technologies last year. And the Energy Independence and Security Act calls for the use of 9 billion gallons of ethanol this year.

Corn-based ethanol may not have taken off, but that doesn’t mean the cheaper-to-produce cellulosic ethanol won’t.

Phase 1 Investor editor Rob Fannon recently wrote that biotech was one of the few market sectors to show positive returns as  many other stocks were getting hammered. He sees great values in the sector.

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.

Today, Steve Sjuggerud of Daily Wealth calls biotech, the first “screaming buy” of 2008.

I asked Rob about the Genentech buyout offer from Roche – the one that I called the “catalyst” for the sector back in July.

Rob said the Genentech bid “is a bad move for Roche… but it’s terrific for the industry, for a couple reasons.”

• First, big, profitable biotech companies like Biogen (BIIB), Gilead (GILD), Genzyme (GENZ), or Celgene (CELG) are perceived as safer ways to play biotech. Like Genentech, these companies already have drugs on the market that command premium pricing and offer multiple years of remaining patent protection. They could be takeover candidates as well.

• Second, once Genentech is acquired, $40 billion of money dedicated to biotech will need to find a new home. Investors will search for new spots to park this cash… We’re seeing it already. Sector valuations are already on the rise.

According to Rob, the whole sector “is prone to swift surges of joy.” An easy and diversified way to own biotech is through the SPDR biotech ETF (XBI). It holds mostly mid- and large-cap companies.

But Rob says the real money will be made in small-cap biotechs – like the ones he often features in his newsletter. He told his readers, “I’m betting the entire small-cap space could jump as high as 25% in the coming months. And that could be just the beginning…”

I trust Rob, who’s finally bullish about biotech. Everything is lined up, as far as our “cheap, hated, uptrend” mantra goes. And the sector has just begun to rise. You haven’t missed a thing.

In short, if you haven’t bought biotech yet, buy it now! It’s the first “screaming buy” of 2008.

Likewise, Jim Nelson in the Penny Sleuth sees great profit opportunities for biotech right now.

You see, investors have been too busy buying up investment banks and mortgage fiascos. Now that the dust is starting to settle (even though we expect that to take quite a while), more and more interest is being paid to technologies and biotechs. That hasn’t happened on any large scale since the tech bubble burst.

A few weeks ago, Big Pharma went head first into this recent breakout, when Switzerland-based Roche Holdings offered to buy up the other 44% of Genetech Inc. (NYSE:DNA) that it didn’t own. The news of this possible deal sent shares flying 15% overnight.

Just a few days ago, Bristol-Myers Squibb (NYSE:BMY) offered to buy ImClone Systems (NASDAQ:IMCL) — a small $5 billion biotech — for $60 per share. While that one was instantly rejected it did send ImClone shares flying, giving investors a nice, one-day 40% gain.

These stories are starting to roll in now.

Genetech has formed a special committee of independent directors to evaluate the $89-a-share acquisition offer from Roche, which already owns 56 percent of the US biotech firm.

If the deal does go through it may be bad news for Roche and Genentech shareholders, according to Phase 1 Investor editor Rob Fannon in The Growth Stock Wire. But it would be good news for the biotech industry as a whole…

While I believe the bid is a bad move for Roche – and not a great proposal for Genentech shareholders – this mega-deal is actually good for the entire biotech industry… and its investors.

With Genentech gone, the top of the biotech food chain is empty. Many investors will be searching for new spots to park their biotech cash. And sector valuations are on the rise. Both major biotech indexes – the Nasdaq Biotech Index and AMEX Biotech Index – are up more than 7% in just a few weeks.

Small-cap biotechs are cheap right now. So I’d be willing to bet the sector could jump 25% or more in the coming months. And big-cap names like Biogen (NASDAQ:BIIB), Genzyme (NASDAQ:GENZ), and Elan (NYSE:ELN) have jumped to the top of Big Pharma’s short list of buyout candidates.

If you’re thinking of dabbling in the biotech sector, Roche’s bid for Genentech just may be the buy signal you’re waiting for.

Source: The Buy Signal You’ve Waited For

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

So how can you turn a profit in this turbulent sector? By investing in contract research organisations, or CROs, says biotech expert Rob Fannon. When the big pharmaceutical companies outsource research to CROs they get paid whether or not the new drugs ever make it to market.

There’s another way to profit too – contract sales organizations, or CSOs. They’re another way for Big Pharma to outsource, but instead of doing research they sell. Investing in them is a low-risk method to turn a big profit from Big Pharma’s woes…

Today, I want to tell you about a group of stocks ready to explode as the world’s largest drugmakers slim down… As I’ve explained before in Growth Stock Wire, Big Pharma is in trouble. The industry is facing slowing sales, patent expirations, generic competition, and withering pipelines. Now drugmakers are on a massive diet. The biggest losers – Pfizer (PFE), Merck (MRK), and Sanofi-Aventis (SNY) – are dumping employees and slashing costs.

One of the winners in this situation is contract research organizations, or “CROs.” Rather than perform the work in-house, drugmakers are outsourcing research and clinical trial work. As I’ve written before, I love CROs. They get paid whether or not new drugs make it to market. So they’re a uniquely safe health care investment.

I recently told Phase 1 subscribers about another industry set to reap big rewards from drugmakers’ downsizing. Let me explain…

By far, the biggest victims of Big Pharma’s cutbacks are drug reps: attractive, well-paid twenty-somethings visit doctors bearing free samples and branded mugs. The largest drugmakers in the world are firing their rank-and-file sales force in record numbers. For the first time in more than a decade, the total number of drug reps actually fell last year.

Leading the bloodbath is Pfizer, the world’s largest drug company. Last October, it kicked off a cost-savings plan that included a 10% reduction in its global workforce: 10,000 jobs. That includes 2,200 sales positions, nearly 20% of its U.S. fleet. Shortly after, Pfizer’s peers announced similar cutbacks…

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Britain-based AstraZeneca will trim 7,600 jobs, 11% of its roster, including most of its European sales force. Johnson & Johnson will cut 5,000 folks, including 400 drug reps right away. Sanofi-Aventis is firing one-third of its domestic sales force. And 3% of Novartis’ employees, including 500 U.S. sales reps, got canned.

Of course, these companies still need to sell drugs. But at $165,000-$170,000 a year, traditional drug reps are too darn costly. The industry must sell more efficiently. That’s where contract sales organizations, or CSOs, come into play.

Today, Big Pharma players can “borrow” sales reps on a temporary basis from a few CSO players. For example, Novartis may need a short-term team to push its flu vaccine in the fall. Or Merck might want to boost a drug launch and build brand awareness quickly. Using CSOs, drugmakers can supplement their internal sales force with top reps without taking on permanent, costly employees.

Right now, CSO reps make only 5% of total drug sales. This figure is set to triple in the next three years. That would make the substitute sales-rep industry worth about $2 billion. But CSOs do much more than farm out salespeople. They also recruit, train, and place new reps at drug companies. And they do market research, brand management, and other types of consulting.

The industry’s biggest player is inVentiv Health (VTIV). The company loans out sales reps, crafts sales and marketing strategies, and provides staffing services. It brings in about $1 billion per year

Like CROs, the CSO industry is a perfect example of a low-risk, high-reward way to profit on Big Pharma’s crash diet.

Good investing,

Rob Fannon

P.S. inVentiv is trading near fair value. But I prefer clear bargains… Last month, I recommended a CSO pioneer to my Phase 1 readers. Incredibly, the company was trading just above the amount of cash it held in the bank.

We’re up about 8% on the position in a few short weeks, but this is just the beginning. I expect the stock could net readers at least 50% returns in the next year. Click here to learn about a risk-free subscription to Phase 1.

Source: Another Perfect Health Care Investment