As investors await the Federal Reserve rate decision Wednesday afternoon, Goldman Sachs highlighted to clients an overlooked group of stocks poised to benefit from the move. Biotechnology stocks offer an under-the-radar and unappreciated way to profit from the central bank's looming campaign to start cutting the cost of borrowing, according to Goldman Sachs.
Rates play a larger role than growth in driving share prices in biotechnology ," Goldman told clients. Shares in many speculative, small capitalization biotech companies have an "option-like structure" that "inherently creates interest rate risk. With little to no profitability today, but expected profitability if trials are successful, biotechnology cash flows are generally long duration," Flood wrote.
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