The biotechnology sector has been red-hot over the long term but been out of favor with Wall Street over the past year. That mismatch is preventing investors a great opportunity to get in.

So which stocks should investors buy today? We asked a team of Motley Fool contributors to weigh in and they picked Cambrex (NYSE:CBM), BioMarin Pharmaceutical (NASDAQ:BMRN), and the SPDR S&P Biotech ETF (NYSEMKT:XBI)

A variety of pills on top of fanned-out hundred-dollar bills.

Image source: Getty Images.

Not every winner in biotech is based on a blockbuster

Chuck Saletta (Cambrex): The biotech industry is filled with minefields. First, there's the research and development, where the outcome is never certain. Then, assuming the company successfully comes up with a decent prospect for a product, it has to make it through a long and costly testing and approval process before it can sell its wares.

Even once those hurdles are passed, pharmaceutical manufacturing is one of the most tightly controlled and heavily regulated industries out there. It takes incredible know-how and substantial investment to manufacturer medications to standards once they're approved. Companies that are focused on research and discovery often find that they aren't well set up to manufacture, so outsourcing the manufacturing process is often an attractive alternative to doing it on their own.

That's where Cambrex shines. A partner capable of helping other biotech companies bring their products to market, Cambrex can win when any of its partners wins. That makes it less exposed to the "feast or famine" nature of the biotech industry as a whole. As a result, Cambrex sits in a fairly unique position of being well-positioned to participate in the ultimate success of the overall biotech industry, even without blockbusters of its own.

From an investor's perspective, Cambrex currently trades at around 20 times its trailing earnings, and those earnings are expected to increase by around 15% annualized over the next five years. While not a screaming bargain, it does look like a reasonable price to pay today to have a decent shot of participating in the potential biotech revolution to come.

A basket approach

Brian Feroldi (SPDR S&P Biotech ETF): Picking winners and losers in biotech can be exceptionally hard. At the same time, it can be a mistake to ignore the sector altogether. What to do?

One simple solution is to buy an ETF that offers broad exposure to the sector. My favorite is the SPDR S&P Biotech ETF.

This ETF currently owns 119 biotech stocks of all different sizes. This includes a range of companies, from enormous biotechs like Celgene and Biogen all the way down to small caps.

One big reason why this ETF stands apart from others is that it uses an equal-weight strategy. That means the ETF invests the exact same amount of capital into each of its components. The ETF then rebalances itself each quarter. Following this strategy helps to prevent a single holding from becoming too big, and it gives investors exposure to small caps that hold enormous upside potential.

This ETF has the numbers to prove that its formula works very well over the long term.

XBI Chart

XBI data by YCharts.

What's more, this fund's expense ratio is just 0.35%, so it isn't expensive.

The SPDR S&P Biotech ETF offers investors easy access to a growing sector and a long history of outperformance, all for a modest price. That makes it a great addition to any portfolio.

This "rare" biotech is a real gem

Sean Williams (BioMarin Pharmaceutical): As we officially enter election season (despite it being 16 months away), we move toward a period of great uncertainty for healthcare companies, and more specifically, drugmakers. Early debates suggest that Democrats will make drug-price reform a priority, which is a worry for most drug developers. However, that isn't the case for BioMarin Pharmaceutical.

What separates BioMarin from the bulk of its biotech peers is the fact that it's focused entirely on developing ultrarare-disease drugs. These are therapies that traditionally have limited patient pools, but often have little trouble gaining reimbursement from private insurers. Aside from being able to justify large price tags and modest price inflation over time, rare-disease therapies don't typically face much competition, meaning there's plenty of runway for BioMarin to succeed with its six revenue-producing drugs.

In BioMarin's most recent quarterly report, nearly every one of its approved therapies was headed in the right direction. Newly launched Palynziq, a treatment for a genetic disease known as phenylketonuria, delivered $12.3 million in sales in the first quarter and is expected to generate up to $100 million in full-year sales in 2019. Meanwhile, established therapies like Vimizim, Kuvan, and Naglazyme generated year-over-year sales growth of 7%, 8%, and 16%, respectively, with patient growth playing a key role. 

This is a company that's also on the precipice of turning the corner to profitability. Sales growth has been averaging close to 15% a year with its existing line of products but could see a boost in the years to come if severe hemophilia A experimental therapy valoctocogene roxaparvovec is approved by the Food and Drug Administration. With sales projected to nearly double between 2018 and 2022, and BioMarin having a real shot at up to $3 in full-year earnings per share by 2022, it looks to be an intriguing bargain here.