It’s getting tougher and tougher to find safety. The tech sector is getting hit. Formerly high flying overseas are giving back some of their handsome gains. Even with oil prices hitting $100 a barrel again yesterday, the entire oil sector is off about 10% for the year.

The bears have had their way. And, frankly, there aren’t too many drivers out there to help get things turned around. However, that doesn’t mean there aren’t opportunities; they’re just getting tougher to find.

But as all of us have learned the hard way, if you’re not looking in the right place it can be almost impossible to find winners. That’s why today we’ll turn our attention to a sector that didn’t just survive every recession in the U.S. over the past two decades… it handsomely outperformed the major indexes.

There have only been two recessions in the past 20 years, according to the National Bureau of Economic Research. The first lasted three quarters from July of 1990 through March of 1991 and the second started in March of 2001 and ended November later that year.

It wasn’t that long ago, was it? Do you remember how truly bad a recession was for your portfolio?

Chances are it wasn’t too bad at all. During the recession of the early 1990s, both the Dow and S&P 500 increased 1% and 3.5%, respectively. During the recession that kicked off the new millennium, the Dow fell 11.7% and the S&P 500 was off 12.6%.

All in all, nothing too extraordinary for a recession in the overall markets. Yet, there was one sector that almost tripled the returns of the major indexes during both recessions: biotech.

That’s right, the biotech sector was one of the best places to be during each of the past recessions. The leading large-cap drug stocks, including Pfizer (PFE:NYSE), Merck (MRK:NYSE) and Amgen (AMGN:Nasdaq) returned on 30.3% during the nine months of recession starting in July of 1990. During the 2001 recession, the same large-cap drug makers and biotech stocks beat the Dow 8.5% when the sector traded down only 3.2%.

Clearly, the drug makers have been showing some life during recessions. But, as we know, when an entire sector is doing well, the biggest gains will be had in the small-cap players in the sector. And that’s where we’re going to find the top performers during this recession-inspired biotech rebound.

Just take a look at what happened in April of 2001, when a small company unveiled a unique laser treatment called Lyra. Developed by Laserscope — which has since been acquired by American Medical Systems (AMMD:Nasdaq) — Lyra was a laser-based treatment for exposed leg veins, hair removal and scarred skin.

Shares of Laserscope were trading for a mere 97 cents apiece in April of 2001.

The recession was just getting started, and as usual, that recession was going to be one of the worst ones on record. (Sound familiar?) Investors just didn’t seem to care the company was developing a laser treatment for enlarged prostates.

Laserscope was just taking its proven technology and finding new uses for it and tapping into the growth potential of growing markets, as close to a sure thing as you’re going to get in the biotech and healthcare sector.

But to investors, it simply didn’t matter. A recession was coming and no one in their right mind was buying stocks.

Over the next three years, that would all change. Shares of Laserscope climbed to more than $33 apiece and outperformed 99.9% of all other biotech, medical and healthcare stocks during the recession. The start of the recession turned out to be a great buying opportunity for this little biotech dynamo.

And that’s the kind of opportunity we’re facing right now. Drug maker and biotech sectors are about to become the most attractive sectors around.

Kiplinger’s Personal Finance says, “Health care stocks are holding up better than the rest of the market.” There are always winners in this sector, and those that can pull it off are going to start attracting a lot of attention.

Imagine if you saw someone else pulling in quadruple-digit gains… in the middle of a U.S. recession, no less. You’d start taking a serious look at the sector, right? It just makes sense.

After all, Lasercope, climbed 3,449% in only three years. That’s an annualized gain of about 325%.

There’re winners like this all the time in the biotech sector, regardless of what’s going on in the overall economy. For instance, Urologix (ULGX:Nasdaq) climbed 721% in 14 months. Bovie Medical (BVX:AMEX) hit it big when is ran up 379% in 17 months. Transition Therapeutics (TTHZF:OTC) scored a 1,015% gain in 10 months.

That’s the kind of gains that can be had in the biotech sector, and it’s only going to get more likely as biotech gets more and more attention as the recession gets worse and worse, dragging the overall markets down with it.

Andrew Mickey
TFN