NEW YORK (TheStreet) -- Which biotech and pharmaceuticals stocks should investors buy in 2015?
J.P. Morgan (JPM) analysts named six "Pharmaceuticals, Biotechnology" companies with the best investment cases as part of its top U.S. stocks picks for 2015. The overall stock picks list includes 48 companies across sectors and strategy focus. The firm only chose companies with at least $5 million in average daily trading volume.
Overall, the annualized return of the J.P. Morgan U.S. 2015 Top Picks Basket would have been 18.9% vs. S&P 500 Index's annualized return of 16.1% during the same time period, according to a report issued on Dec. 11. The biotech sector has outperformed broader markets this year. The Nasdaq Biotechnology Index is up 44% this year. Four of the six stocks featured in this list are included in the index.
The outperformance "begs the question of how much longer this streak can continue," J.P. Morgan's small/mid-cap biotech analysts wrote in the report. "Importantly, fundamentals still look strong, and we remain generally constructive on the sector heading into 2015. That said, investor selectivity could become increasingly important."
"We continue to expect investor risk appetite for biotechs to be driven by high-profile clinical and regulatory catalysts and commercial performance," the analysts wrote. "While M&A in the biotech space has clearly taken a back seat to pharma, there exists the potential for increased activity facilitated by plush pharma balance sheets and more mature biotech pipelines... and this potential tailwind may be necessary for biotech to once again significantly outperform the broader markets. We see the biggest fundamental risk to the sector to be around building pressure against premium pricing."
Consolidation will continue to be a "major theme" across the specialty pharmaceuticals industry in 2015, given the "current financing environment, still attractive valuations across the sector and significant synergy potential from transactions," J.P. Morgan's specialty pharmaceuticals analysts wrote in the report.
Click through to see JPMorgan's biotech and pharmaceuticals investment picks.