For most of my career, biotech was an automatic “no.”
It wasn’t worth the headache.
I don’t understand the science. I don’t understand the drugs. And I’ve seen what happens when people convince themselves they do.
Early on, some of the guys around me made that lesson easy to learn.
They weren’t investing. They were betting everything on a headline they couldn’t predict. I watched people swing for 50% and 100% overnight moves and end up blowing themselves up instead.
That sticks with you. So I made a decision in my early 20s that I wasn’t going to play that game.
For a long time, I didn’t.
But markets change. More importantly, if you’re doing this right, you change with them.
Fast forward to today, and some of my best trades over the past year have come out of biotech.
Not because I suddenly became a scientist. Not because I know anything about drug pipelines or clinical trials. I don’t.
What changed is the approach.
Instead of chasing stories, we’re following positioning. Instead of swinging at anything that moves, we’re defining risk.
Market cap thresholds. Heavy short interest. Clear setups where the unwind can be violent in our favor.
This isn’t the same game I watched 20 years ago. If you treat it like it is, it’ll end the same way.
But if you respect the process, this space can go from a place you avoid to one of the most rewarding hunting grounds in the market.
That’s been my experience.
And it’s probably the last place I ever thought I’d be making money.
Adventrix Pharmaceuticals
When I was in my early 20s, I got a front-row look at how this space can chew people up.
A few brokers at my firm thought they had biotech figured out. Maybe they did at one point.
They came from a shop that had a brilliant doctor feeding them ideas and, for a while, it worked. That kind of early success will convince you you’re smarter than you are.
Then they showed up at a new firm without that edge, no doctor in sight, still chasing the same trade.
Same behavior. Same oversized bets. Same need to be all in on the next big thing.
Adventrix Pharmaceuticals (ANX) was one of those names. They owned everything. Stock, options and even the warrants.
If there was a way to get exposure, they had it. And they weren’t sleeping, either.
These announcements hit overnight, so they’d sit there drinking and doing drugs all night, waiting for the outcome like it was a coin flip that decided their future.
Sometimes it went their way, allegedly. Most of the time it definitely did not, from what I could see.
And when it didn’t, it wasn’t just a bad trade. It was damage, real damage. To their accounts, to their clients, to their lives.
That was enough for me. I didn’t need to learn that lesson the hard way. I already watched it happen over and over again.
So I made a promise to myself early on that I wasn’t going to play that game.
What I didn’t realize at the time is that avoiding the game completely isn’t the only option.
There’s a way to participate without becoming that guy.
JC the Scientist
If you looked at my portfolio over the past year, you’d think I traded biotech for a living. Like I’ve been down in the basement running experiments in a lab coat.
Some of our biggest winners have come from this group. Not because I figured out the science. Not because I suddenly understand clinical trials. I definitely do not.
I just followed the money and stuck to the plan.
At The Divergence, we’re hunting for extremes. When positioning gets so one sided that it can’t sustain itself, the unwind can be violent. That’s where the opportunity is.
Last year, small caps were the most heavily shorted we’ve ever seen. A lot of biotech lives in that bucket by default.
And on top of that, short interest within biotech itself was near record highs.
That’s not a story. That’s a setup.
So yes, we leaned into it. But not the way those guys did back in the day.
We’re not messing around with tiny lottery tickets. There’s a line in the sand. If it’s not at least a billion dollar market cap, we’re not interested. You can call that limiting the opportunity set.
I call it “stacking the odds in our favor.”
There’s a big difference between participating and gambling. I learned that the first time around.
Names like BridgeBio Pharma (BBIO), KalVista Pharmaceuticals (KALV), Kodiak Sciences (KOD). These weren’t guesses. These were setups. Defined risk and position size with clear price targets.
Take Kodiak this week. We were already in with a nice cushion. Then we added to the position on Wednesday live in front of the entire Divergence community.
Same size, different entry, same thesis. Within two days the stock doubled and we were gone by Friday morning.
In and out… and paid:
That’s how this is supposed to work.
So yeah, I guess I love biotech now. Not the way those guys did. Not because I think I know something others don’t.
Because there’s a process.
Position sizing matters. Market cap matters. Short interest matters. The broader environment matters.
If those boxes get checked, I’m in. If they don’t, I don’t care how good the story sounds.
And just to be clear, I still don’t know anything about biotechnology.
I don’t know anything about oil drilling either. But if you looked at my portfolio this quarter, you’d think I grew up as a West Texas Wildcatter.
I didn’t.
I’m just a washed up baseball player from Miami who follows price and hunts where everybody’s wrong.
This Week in Everybody’s Wrong
On Monday, we wondered whether it’s me who’s wrong.
I’ve built an entire framework for approaching the market around the idea that everybody’s wrong.
But is “zero introspection” actually the way to go?
On Tuesday, we talked about Michael Jordan, Scottie Pippen and the biggest test for stocks.
You don’t get real bull markets without the Transports participating.
Will this be the great whipsaw of 2026?
On Wednesday, we went looking for $20 trillion that’s missing in action right now.
Your best players are supposed to lead.
And it’s time for the Magnificent 7 to step up.
On Thursday, we shared some advice for people who expect the stock market to be “fair.”
Maybe try basket weaving.
The market isn’t fair, it never has been, and if you can’t get over that fact it’s not for you.
On Friday, we took another look at the bond market.
The thing is, nothing is happening.
When that changes, stocks are going to feel it.
On Saturday, we welcomed back Grant Hawkridge from Down Under for another deep-dive into getting better.
Grant is always looking for an edge.
And he always finds it in the data.
Have a great Sunday.
We’ll see you Monday morning…
Stay sharp,
JC Parets, CMT
Founder, TrendLabs