Can Following The Insiders Into VMware, Inc. (VMW) and NewLink Genetics Corp (NLNK) Lead To Big Rewards?

As is the case with most speculative biotechnology companies, NewLink’s returns on equity and assets are atrocious. The company usually has no earnings to speak of until its hopefully get approval for the next blockbuster drug. Of course, whether it actually will is anybody’s guess. If it does strike gold, investors will be handsomely rewarded — but if the trials do not go as well as expected, buyer beware.

As a more conservative investor, I would look more towards a well-established biotech firm like Amgen, Inc. (NASDAQ:AMGN). The company has a consistent revenue stream, now exceeding $17 billion annually; great returns on equity of 23%; and it’s trading at virtually its expected growth rate. At a current paltry 26% payout ratio, investors can expect its consistently growing 2.2% dividend yield to continue being hiked in the near future.

Moreover, as big pharmaceutical companies such as Pfizer and Merck continue to look for any way to replenish their depleting pipeline, well-received Amgen drugs such as Neulasta and Neupogen are thriving. They could make Amgen a possible buyout candidate, since Pfizer and Merck could support such a large acquisition. Of course, I never base my investment decision on an expected buyout — but it could still become a nice surprise.

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Overall, I think that with such large insider buying that we see here, any shrewd investor should take notice and put these stocks on their radar.

The article Can Following The Insiders Into These Stocks Lead To Big Rewards? originally appeared on Fool.com and is written by Brian Gorban.

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