By Mike Cintolo, Cabot Top Ten Trader

Investors should remain cautious regarding the general stock market. For now, it's imperative to focus on the best-acting stocks and sectors. In the biotechnology sector, we like two stocks.

Gilead Sciences (GILD) is making its third appearance in Cabot Top Ten Trader this year, and the news fueling its strength remains in place. And Regeneron Pharmaceuticals (REGN) has been a monster winner in 2012, but the stock is acting as if it has even bigger things in store.

Gilead

For some time the company has had a leading combination therapy for HIV/AIDS called Atripla.

Now Gilead has brought out a new combination therapy for HIV/AIDS, called Stribild, which is even more effective and has the advantage (from Gilead's point of view) of being made entirely from in-house components.

The other good news is that its new treatment for hepatitis-C had good results in clinical trials. The compound in trials combines one drug developed in-house and one acquired via Gilead's takeover of Pharmasset, and results have been outstanding.

Even though Stribild will be taking market share away from Atripla, investors are betting that the increase in profit margin will prove advantageous and that the candidate treatment for hepatitis-C will turn into another blockbuster.

These new drugs haven't contributed to the bottom line yet, but Gilead looks like a sure bet to deliver on its promise.

GILD enjoyed a big rally that began in December 2011, then began another push to new highs in September. It gapped up on huge volume on November 12 on the Stribild news and has inched higher since then on decreasing volume.

It's likely that the stock will need a little time to digest its big gap-up gains, and you should get a chance to get in on a pullback toward $72.

Regeneron

The company has gone from development stage to highly profitable during the past few quarters thanks to EYLEA, a treatment for age-related macular degeneration (so-called wet macular degeneration).

This represents a market that, in the U.S. alone, totals about $1.5 billion every year, and that doesn't even include about the same amount that's treated off-label by Avastin.

All told, then, you're talking about a $2 billion to $3 billion market just in the U.S. Estimates are for upwards of $5 per share in earnings in 2013, which is likely conservative.

While the story is well-known, but EYLEA is one of the largest biotech drug launches in history, and management believes it can continue growing for many quarters to come.

REGN has had a big run. Shares took off at the start of the year and recently pushed to new-high ground on big volume.

If you really want in, you can buy a small amount here, but we prefer to put our buy range down a bit, hoping to buy on weakness, with a stop near $155.

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