Better Buy: Novavax vs. Inovio Pharmaceuticals
One scary thing about penny stocks, or micro-caps, is that the companies are either too small to get traction or the companies used to be bigger, but markets have crushed the stocks. A penny stock is either a wannabe or a has-been. If you find the right stock, your returns will be incredible. You can get a 10-bagger or more since a micro-cap company that becomes a 10-bagger means the stock reached small-cap level.
Of course, biotech investing is also quite risky in and of itself. You're investing in scientific research that might not pay off. Novavax (NASDAQ: NVAX) and Inovio Pharmaceuticals (NASDAQ: INO) are two unprofitable biotechs. Both companies have minuscule revenues and no drugs for sale. That fits the profile of a lot of biotechs, including major ones with fairly large capitalizations.
If and when a biotech receives bad news, there can be a massive sell-off, and the stock gets hammered. If that happens enough times, the stock can fall all the way down to micro-cap status. Both Novavax and Inovio have had multiple failures in clinical trials. Failure is discouraging. People give up. And make no mistake, it is far more lucrative to invest in success than to invest in failure. On the other hand, if you learn from your failures -- and trial and error is a great teacher -- and you adapt, grow, and achieve the success that previously eluded you.
Source Fool.com
