Biotech stocks are on fire…

The iShares Nasdaq Biotechnology (IBB) ETF just hit a new all-time high. It’s up 29% so far this year. The S&P 500 is up just 3%.

This is nothing new… biotech stocks have been killing it for years. IBB is up 59% in the last year… and an incredible 409% in the last five years. The S&P 500 is up just 99% in the last five years.

Biotech stocks are doing so well for good reason. Some biotech companies are doing amazing things. In a recent edition of Extraordinary Technology, Chris Wood explained how a new biotechnology called “CAR T cell therapy” can effectively fight certain forms of cancer.

The following excerpt describes the process and its incredible results…

CAR T is an adoptive cell transfer therapy. In short, doctors remove immune cells from a patient’s body, reengineer them to attack cancer, and then reinsert them in the patient.

The immune cells that doctors collect in CAR T therapy are called T cells. They take the T cells from the patient’s blood. Then, they genetically modify the T cells to produce special receptors on their surface…

These special receptors are called chimeric antigen receptors (CARs). CARs are proteins that allow the T cells to recognize a specific protein (called an antigen) on tumor cells.

Doctors grow the engineered CAR T cells in a lab. Then they infuse the cells into the patient.

If everything works right, the CAR T cells multiply in the patient’s body. And, thanks to the engineered receptor, they recognize and kill cancer cells that have the antigen on their surfaces.

Doctors can engineer CAR T cells to recognize any antigen. But researchers look for antigens that are common on cancer cells but rare on normal cells. Then they let the engineered T cells do their thing.

The science is difficult, but the idea is simple. And it works…

A recent article in the New England Journal of Medicine published the results of a Phase 1 trial using CAR T cell therapy in relapsed acute lymphoblastic leukemia (ALL).

ALL is extremely difficult to treat if it comes back after chemotherapy. With traditional treatments, these patients have less than a 10% chance of going into remission. In this trial, however, 90% of the 30 patients went into complete remission

And the results lasted. Nearly 70% had no further signs of cancer after six months.

Cancer experts don’t throw around the word “cure” much. But many of the patients who received CAR T cell therapy are basically considered cured.

•  But there are some signs that the biotech sector might be getting frothy…

The Wall Street Journal reports:

A burst of initial public offerings of biotech companies over the past few years raises other concerns that these companies and selling insiders may be cashing in on investor excitement at the expense of public shareholders. That is why some investors are becoming wary.

“Some of these companies are attractive,” says Rob Arnott, founder and chairman of Research Affiliates, a firm that has developed strategies for products with $170 billion in assets around the globe. “But identifying which are cheap and which are froth is awfully difficult; it’s a safe bet a majority don’t deserve their current multiples.”

We asked Chris Wood, editor of Extraordinary Technology, if the biotech sector looks overvalued after rising 409% in five years. His answer might surprise you…

A lot of people are saying biotech is in bubble territory right now. I’m not so sure. I definitely don’t think the biotech sector is due for a 78% drop like the Nasdaq had when the tech bubble burst in 2000. That’s because a lot of the gains we’ve seen in biotech have come on the back of strong revenue and earnings growth.

Look at the three top holdings of IBB – Gilead, Biogen, and Celgene. On average, those three stocks are up more than 20% this year. But they’ve all posted strong growth in revenue and earnings as well. Gilead grew revenue by 101% and earnings by 210% over the past twelve months. Biogen increased revenue and earnings by 32.5% and 71%, respectively over past twelve months. And Celgene’s revenue and earnings are up 18.4% and 81.4% over the past twelve months.

These are impressive numbers. These companies’ stocks are supposed to be rising fast. That’s exactly what should happen when great companies post great results.

Now, are some biotech companies’ valuations getting frothy these days? Yes. But that doesn’t really matter to me because there are always good deals out there. That’s what we’re focused on, finding the next big thing that others haven’t caught on to yet.

The lesson: buy great companies at fair or better prices. If you can do that, you don’t have to care whether a whole sector is cheap or expensive. All that matters is whether you get a good deal on the company you buy. If you do that consistently, you’ll make money.

•  Meanwhile, the current US stock bull market is closing in on record territory…

Since bottoming out during the financial crisis in March 2009, the S&P 500 has risen 213%.

We could tell you dozens of impressive stats about this bull market. But this one is might be the most impressive…

The S&P 500 has gone 1,382 days, or almost four years, without a “correction.” A correction is when stocks decline at least 10%.

The current streak is up there with some of history’s biggest bull markets.

The 1990-1997 bull market holds the record. It went an incredible 2,553 days without correcting. That’s almost seven years.

The 2003-2007 streak was second longest. The S&P went 1,673 days without correcting.

The current, 1,382-day streak is in third place. If it continues to May 3, 2016 without a correction, it will leapfrog into second.

Here’s a look at the five longest of these streaks in the S&P’s history:

It’s true that the stock market is “overdue” for a correction. Since 1949, the S&P 500 has averaged a 10% correction every 517 days. At 1,382 days and counting, we’re at more than double that.

But “overdue” doesn’t mean much. Just because something hasn’t happened in a while doesn’t mean it will happen soon.

The only thing we know for sure is that another correction will come. But “when” is an impossible question to answer. It could be next week, next year, or in 2020.