Biotech stocks are an unappreciated way to profit from lower rates, Goldman says

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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Our approach to the stock market heading into the Fed's big Wednesday decisionEvery weekday, the Investing Club releases the Homestretch; an actionable afternoon update just in time for the last hour of trading.
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