Portfolios update.
Staggering loses all around.
The best performer thus far in March has been the Hypertension Diagnostics Warrants (HDIIW, +18%) - apparently responding to an ongoing stream of good news. The worst performer....let's not go there.
The equipment sector got clobbered again last week, down ~11%. The outlook for a turnaround remains very uncertain and the ongoing warnings are exacerbating an already bad situation. While the is some divergence among the stocks in the SEM-Hubris group, it’s clear that the selling is relatively non-specific - rightly or not, the stocks in the sector are being treated in a uniform manner...investors perceiving that the tech contraction will have blanket-like effects. In spite of these difficult circumstances, this scenario - if similar to most previous cycles - is consistent with a recovery in the industry in 9 months or so...and thus a significant upturn in the SEM stocks in the next 3-6 months. In fact, according, to one measure, the SEM sector bottomed in late November.
If the equipment stocks have been ‘clobbered’, then there may not be strong enough negative adjectives to describe the biotech sector. The eight stocks in the Hubris-biotech portfolio are now down, on average, 67% in 6 months! A two month tracking of the VD portfolio shows a 44% decline (the less widely followed BT stocks in the DVD portfolio are down 11.2% during the same period). This is an industry-wide bailing from biotechs on a scale and at a rate that appears to be unprecedented. And the uniformity with which the BT stocks are down strongly suggests that, to the degree there has been indiscriminate selling over the past 6-9 months, there was an equal if not more protracted degree of completely indiscriminate buying in late 1999 and early 2000. There was a lot of very easy money to be made in BTs during the bubble formation. The last 6-9 months is the natural consequence of such performance. At this point few other groups have been hit as hard as the BTs; perhaps the dotcoms have done worse...an ignominious comparison. Perhaps, in the end, none of us should be all that surprised at the devastation of the BTs nor should it be news that the severity of the decline is spread quite evenly across countless stocks in the group. After all is said and done about pipelines and promise, about platforms and leverage, the vast majority of BT companies won’t see bottomline profits for years. In a stagnant or contracting economy, this is a death knell for a stock. If a sector like semi-equipment manufacturing, an industry that is very accustomed to boom/bust cycles and an industry that is an extremely profitable investment when emerging from a bust (as it is expected to do sometime in the next ~9 months), can decline 20% at the cusp of a recovery, it shouldn’t be any surprise that an industry that expects to lose huge amounts of money over the next 12-24 months - the biotechs - would be one of the worst performing groups in a bear market. This is sufficient justification for the OPINION that the biotech area remains a place to completely avoid for the foreseeable future. Not only do the BT stocks face the challenge of attracting investors to high-risk equities in the midst of an extremely gun-shy investment climate, but the residue of the current debacle in the BT sector may take a very long time to wear off.
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6 month portfolios
Hubris - SEM -21.2%
Pariah -35.4%
Hubris - Biotech -67.0%
Hubris - SEM
LRCX +4.3%
KLIC -13.4%
KLAC -14.9%
NVLS -17.6%
TER -17.9%
AMAT -30.2%
AMKR -39.7%
ASML -40.0%
Hubris - Biotech
NBSC -52.9%
RGEN -63.0%
NBIX -63.8%
TTP -65.5%
VRTX -66.1%
MLNM -70.1%
SEPR -72.6%
BTRN -81.9%
Pariah
KLIC -13.4%
SBC -15.2%
DXT -17.9%
HDIIW -40.6%
MXR -66.5%
PTX -81.8%
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2 month portfolios
DVD -11.3%
VD -44.0%
DVD
ARNA +46.0%
LMNX +20.4%
AAII +4.8%
CVD -3.4%
CEPH -6.9%
GNSL -16.3%
HDIIW -38.7%
ORCH -43.6%
CALP -45.8%
ESPR -51.6%
VD
PRCS -22.2%
CELG -25.1%
LEXG -29.2%
TRMS -35.1%
VRTX -40.7%
INCY -46.8%
MLNM -50.9%
SEPR -52.3%
CRXA -53.9%
BTRN -57.6% |
