Well, apparently we weren't quite yet "there." However, note that the pharma were actually sharply up today, and the events of the last few weeks have gone a long way to correcting the relative valuations of pharma and biotech.
In some sense, the Nasdaq:NYSE dichotomy (new stocks vs. old) is also the biotech vs. pharma comparison. Interesting that in this case, the biotechs were actually a leading indicator. (The biotech canary died before the tech canary).
However, things are not quite the same as pre-crash. First, and perhaps most significant, the biotechs that moved quickly gobbled up a whole bunch of cash while the going was good. (About $5 billion worth of IPO's and follow-on offerings in the first quarter). On the down-side, we have a whole lot of unhappy investors in these follow-ons, with the MEDX and CRA investors the unhappiest, as they hit the very peak).
Trying to take a longer term view here, the basis of the biotech bull market is still intact. Lots of successful biotech products will emerge in the next few years; the iron grip of the pharmas has been loosened some; there's lots more capital in the sector and the excitement from the genome project will doubtless re-emerge once we get a few publicized practical discoveries. Look for MLNM to be the key here.
My advice:
1. Don't panic (unless of course you are over-extended, in which case of course you should have panicked before everyone else.)
2. Look for bargains in the more solid companies - companies like SEPR and MLNM.
3. If you're smart and brave, you can make a killing intra-day when a stock totally collapses and then recovers. I don't have the guts for this, but Rick did this very successfully today.
4. Other than day-trades, realize that this is not necessarily the end of the carnage, and realize further that you might have to hold stocks you buy today for a year or more. In general, quality will recover before junk.
5. Tomorrow may be critical as the margin calls from the last few days come in.
Peter |
