per the Fools;
Biotech
Biotechnology stocks came into favor after Internet companies and they have risen sharply the past 10 months. The hype has been a few degrees cooler than it was with Internet companies, but there is still a great deal of excitement factored into most biotech stock prices. Sure, there is plenty of long-term promise at the best companies, but that promise will take years to reach fruition. Meanwhile, all of the second-tier and third-tier biotech companies with stocks that soared just because the whole sector soared will likely disappoint investors for many years after the excitement subsides.
Next year (2001) may be biotech's turn to take a back seat with investors. Why? Because, in the long run, all stocks are valued on earnings creation, and most biotech companies are several years away from creating meaningful earnings. Be forewarned that investors may choose to remember this fact next year, or the year after, and they may grow impatient -- as they did with Internet companies. Once they do, most biotech stock prices will contract for some time. In the long run, only the very best biotech companies will outperform. (Probably companies such as Amgen (Nasdaq: AMGN), MedImmune (Nasdaq: MEDI), Millennium Pharmaceuticals (Nasdaq: MLNM), and, we hope, riskier play Human Genome Sciences (Nasdaq: HGSI), among select others.) The other 90% of biotech stocks will lag.
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