(The following story was published May 12.)

There’s nothing like a quick 120% gain in a stock to boost your portfolio’s returns.

That’s exactly what Synageva BioPharma US:GEVA investors got last week with the announced takeover of this little-known company. And that kept the biotech buyout frenzy alive.

If you missed out, don’t worry. Biotech buyout fever is going to continue. But be careful: You need to pick the right companies and hold them for years.

Here are two reasons biotech buyouts will continue:

* A lot of big pharmaceutical companies have done a poor job of developing their own drugs. Many of their blockbusters are rolling off patent. They need to replenish their pipelines. “The easiest way is to go out and buy something,” says Connor Browne, a portfolio manager at Thornburg Value Fund TVAFX, -1.07% .

* Debt is cheap, so buyers have a lot of firepower, says Mindy Perry, a Manulife Asset Management portfolio manager who specializes in health care. There’s so much interest-rate-fueled buying power available, it’s created “corporate quantitative easing,” says Ed Yardeni of Yardeni Research.

All of this may have you wondering: Which biotech companies might get bought out next?

To round up potential targets and some of the best techniques for identifying them, I recently spoke to several biotech experts. Their short list includes Incyte INCY, -4.01% , Seattle Genetics SGEN, +3.00% , Juno Therapeutics US:JUNO, Puma Biotechnology PBYI, +2.67% and 10 other names you will find below.

Fair disclosure: I let analysts decide which stocks to suggest, but I’ve also suggested many of those companies over the years in my stock letter Brush Up on Stocks, and I have held positions in many of them for years. (My holdings are listed at the bottom of this column, and I don’t intend to sell them any time soon.)

Let’s take a look.

Go with quality

Medical Technology Stock Letter editor John McCamant has some great advice right off the bat. Yes, it’s nice to see your portfolio get a jolt by owning buyout names. But buyout potential should never be the sole reason you purchase a biotech stock, or any stock. Instead, he suggests going with companies that have quality research platforms and solid management. These are the ones that are more likely to get bought out. If they don’t, well, you should do OK anyway, with quality names.

One of his favorites is Incyte, which has a drug called Jakafi for the treatment of rare blood cancers. It also has a broad pipeline of potential cancer therapies. “Their pipeline alone would be transformative for any big pharma company,” says McCamant. “In our view, Incyte is a strategic acquisition that could propel a cancer laggard such as Eli Lilly LLY, +1.11% or Pfizer PFE, -0.51% to the top of the class.”

Browne, at Thornburg Value Fund, likes Seattle Genetics. It has a technology that attaches toxins to antibodies, which seek out cancer cells to deliver the poison. That approach is based on the company’s “antibody-drug conjugate” technology. “They’ve got what buyers are interested in, which is a full clinical pipeline in oncology,” says Browne.

Ron Garren, a medical doctor who writes the investment newsletter Biotech Insight, likes Celldex Therapeutics CLDX, +6.85% , another cancer-drug company. Its lead drug candidates include Rindopepimut, in Phase III development for use against an extremely lethal form of brain cancer called glioblastoma; and Glembatumumab vedotin, in Phase II development for use against breast cancer. The company also has several early-stage drug candidates.

Perry, at Manulife Asset Management, sees Juno Therapeutics and Kite Pharma US:KITE as potential buyout candidates. They are developing ways to help the body’s immune system fight cancer by genetically engineering T cells to recognize and destroy cancer cells. “That’s a truly innovative breakthrough, and the response in early-stage trials is remarkable,” she says. She cautions that the stocks might have to pull back a bit for buyers to take an interest.

(On the following page, learn about the biotech playbook.)

Follow the playbook

To figure out which biotech stocks might get bought out, MLV & Co. biotech analyst Raghuram Selvaraju takes a close look at the characteristics of the biotech targets that have recently pulled the biggest premiums.

His conclusion: Buyers are in the mood to pay up the most for companies with less-risky, late-stage therapies, or therapies already on the market, in two areas.

* They’ll pay up for cancer drugs. Witness the buyout of Pharmacyclics US:PCYC, which has a successful cancer drug called Imbruvica.

* And they want drugs that treat rare diseases. We saw this in the 120% premium paid for Synageva BioPharma, which has a cure for an obscure disease called lysosomal acid lipase deficiency. Though drugs for rare diseases treat small populations, companies can charge a lot for them.

On this basis, in oncology Selvaraju cites Clovis Oncology CLVS, -6.88% as a potential buyout candidate. It has drugs called Rociletinib for lung cancer in Phase II studies, Rucaparib for ovarian cancer in Phase II and Phase III, and Lucitanib for breast and lung cancer in Phase II trials.

He also cites Medivation US:MDVN, which has a drug on the market for advanced prostate cancer called Xtandi. A buyer here would be interested in the potential to expand the use of Xtandi against earlier-stage prostate cancer. One more: Puma Biotechnology, whose drug neratinib is being developed for use against breast and lung cancer. An added plus with Clovis and Puma Biotechnology is that their CEOs have a history of building up companies and then selling them off.

In rare diseases, he cites Ultragenyx Pharmaceutical RARE, +0.54% and bluebird bio BLUE, +1.32% , which have a broad pipeline of potential therapies for obscure genetic disorders.

SunTrust Robinson Humphrey analyst Salveen Richter sees BioMarin Pharmaceutical BMRN, +1.30% as a potential takeover candidate because it produces highly specialized drugs that treat rare genetic disorders.

Side with the activists

Inventors love to follow activist shareholders. Activists take big positions in stocks and often get board seats. Then they lobby for changes that they think will drive the stock up.

Sarissa Capital Management is applying this strategy at Ariad Pharmaceuticals US:ARIA, a cancer-therapy company with a drug called Iclusig for a rare form of leukemia, and two other drugs being developed for use against lung cancer.

Sarissa Capital recently succeeded in pushing out Ariad’s CEO. “With the upcoming CEO departure, we believe current activist investors will agitate for a sale of the company,” says Stifel Nicolaus analyst Brian Klein.

(On the next page, read about one final aspect of biotech investing.)

Get the right owners on your side

I’ve done well in biotech in my stock letter “Brush Up on Stocks” since launching it in 2010, with a 25-bagger in Pharmacyclics, a name I first suggested in September 2011 at around $10; a 17-bagger in Jazz Pharmaceuticals JAZZ, +1.24% , from September 2010; a 10-bagger in Puma Biotechnology from December 2012; and a five-bagger in Synageva BioPharma, suggested in early 2013.

I know I don’t have the expertise to study the science and determine which drugs are going to clear all the studies to get to market. Few analysts do. However, I know where many of them are, from studying the track records of biotech funds over the past 15 years.

I have a short list of about a dozen institutional investors who I know consistently do well in various subgroups of biotech, and I know the position sizing that suggests they really believe in a name. I go with biotech stocks when I see the right constellation of owners at a company that satisfies other qualities on my checklist — like a proprietary-research platform that can spawn many products, high-quality marketing partners and favorable treatment from the Food and Drug Administration, like special designations that fast-track drug candidates, to name a few.

By my system, biotech stocks that look like potential buyout candidates, or which should outperform nicely even if they don’t, include: Incyte, BioMarin Pharmaceutical, Acadia Pharmaceuticals ACAD, +4.07% and Anacor Pharmaceuticals US:ANAC.

If you buy any of those companies, remember that, like me, you should view them as multi-year holdings. The volatility in biotech can be vicious, and you don’t want to let it shake you out of positions just because your investment time frame was unrealistically short.

At the time of publication, Michael Brush owned shares of INCY, SGEN, BMRN, ACAD, ANAC and ARIA. Brush has suggested INCY, SGEN, BMRN, ACAD, ANAC, PCYC, GEVA, PBYI and ARIA in his stock newsletter “Brush Up on Stocks.” Brush is a Manhattan-based financial writer who has covered business for the New York Times and The Economist group, and he attended Columbia Business School in the Knight-Bagehot program.