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Market Update

Biotech Looks Healthy

Innovation and demand dynamics should bolster the sector long-term -- and there are bargains to be had.

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Anyone who has paid any attention to the U.S. stock market over the past several years knows the biotechnology sector has been one of the best-performing industries. Over the past decade, the S&P 500 biotechnology subindustry index has surged 344%, compared with a 102% rise for the overall index as of this writing. The biotech index has done nearly 100 percentage points better than the technology index, which counts Facebook (FB), Amazon (AMZN), and other high-flying tech operations among its constituents.

Over the past three years, though, the sector has taken a bit of a step back, underperforming the S&P 500. Since Feb. 1, 2015, the biotech sector has returned a paltry 5.3%, while the broader index has delivered a 34% return. While the two indexes are moving more in line today--the biotech sector is up 16.8% compared to the S&P 500's 14.8% since Feb. 21 of last year--investing experts think the once-mighty industry could soon outperform again.

Bryan Borzykowski does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.