Yes, Biotech Is Ailing. Here Are My Top Five Defensive Picks.

Did you know Warren Buffett's first rule of investing is Never Lose Money? I bet you have NEVER heard that before. :-)

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This weekend’s news of mass layoffs across the federal public health and regulatory spectrum was yet another depressing headline for biotech investors who have already weathered a four year bear market and were eager for good news and any sign of a turnaround. Year-to-date I would hope investors following this newsletter have done well — the 2025 “No Trades” portfolio is up handily on the year despite the XBI being down (performance update next week!) — but I can understand how the negative stories from other biotech blow-ups and “easy money” being made in areas like big tech and crypto can be discouraging. Hell, I have had unsolicited messages from biotech investors saying they are thinking about quitting. In the words of Alex Van Halen talking about Sammy Hagar in a 1996 interview: “No judgment, no judgment.”

I share this because some readers here are institutional investors, but many are not. Many of you didn’t go to the JPM conference in-person to commiserate over drinks and dinner with a like-minded peer going through the same frustration. Some of you might not even know another biotech investor in your city. I work from home and when I tell people in my neighborhood what I do they look at me like I’m growing a third eye and then politely say “Oh…interesting…” I don’t think they find it interesting!

All of this to say: You are not alone. You are not stupid for being interested in this or thinking it could one day actually pay off. Yes, the last couple years have proven this is a very hard way to make an easy living. (Or even side income for that matter.)

I don’t know what to say to that other than I have no plans on stopping. This is what I do and I love it.

In fact, with some of the bargains presenting themselves, I’m very much bullish. We feel pretty damn close to capitulation and I’m showing a decent gain year-to-date despite everything that has happened. I’m in the game and the #1 objective is to stay in the game. You can’t win if you don’t stay in the game.

In light of the fact that the current administration has 3.9 years left in office and the erratic nature of governing shown so far, it’s probably safe to assume there is more turbulence ahead. I said earlier it felt like we were close to capitulation, but I have to acknowledge also that we are living in one-of-a-kind times and there is no historical precedent for the current adminstration. Could the XBI go as low as 60? I suppose anything is possible. At that point, I’d be liquidating my Jordans, rare vinyl records, and anything with eBay value to get my grubby hands on more shares but I think it’s valid to have a plan for everything. But we aren’t there yet. My point is basically: No one has a crystal ball for where the index will go. But it likely could go lower, at least temporarily.

With that in mind, I wanted to write about my five favorite ideas if you wanted to play a little more defensively. The ideas below do not have much clinical risk if any, do not have financing risk or need cash, and should be trading higher a year from now barring an unforeseen catastrophe.

Here are my top five defensive picks in Biotech…