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Biotech / Medical : VD's Model Portfolio & Discussion Thread

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To: LLCF who wrote (7961)	5/22/2000 4:11:00 PM
From: scott_jiminez	Read Replies (2) of 9719

<< this market has no rationale>> The behavior of the market could be interpreted as completely consistent with a rising interest rate environment. This is especially true NOW, following the last rate hike, since the Fed indicated it will continue to tighten until clear signs of mellowing become manifest. In this environment, the vast majority of stocks will retreat, regardless of prospects , since valuations in an inflationary context (and/or when rates are rising) are significantly less than those when prices are stable. I could give you ten rock solid reasons why the stock of Kulicke and Soffa Industries should be trading at $150. It is currently at $45. And this stock has REAL earnings and is expected to earn about $5.50/share next year. While many who tout biotech stocks (I am one) make a case based on the incredible potentialof XYZ treatment/approach etc, the vast majority of time the earnings just aren't there. In a environment of tightening monetary policy, there certainly is some degree of 'rationalization' for tumbling stock prices, ESPECIALLY for those companies with stratospheric valuations and those with non-existent earnings. I suggest biotech investors be very, VERY patient before (re)investing in the sector. The NASDAQ has given no sign of bottoming; moreover, earnings starved sectors such as the dot coms and the biotechs may be very slow to recover.

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