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Biotech / Medical : VD's Model Portfolio & Discussion Thread
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To: Vector1 who wrote (1140)6/11/1997 2:53:00 PM
From: Boyce Burge   of 9719
 
Vector, thanks for the thoughtful reply.

I agree with your point about the disproportionate amount of $$ being spent for research by the biotechs, compared to MRK. Surely we should see the benefits of that in our biotech portfolios, eventually. Also, Its possible that biotech advances are being ignored by the market only temporarily - just because biotechs are small cap, and the market likes large cap for the moment.

On the other hand there are LONG historical periods when large companies are more efficient and have more pricing muscle than small caps. Check Barron's this week for an article that outlines that argument. Big caps seem to be favored during periods of low inflation and modest growth, like now.

I'm not planning to shift from AFFX/INCY to PFE any time soon... those big pharmas are TOO rich right now and will have to come down. But I'm also a trend follower, and the trend I see now is away from the small to the large. Its seductive to think that, if you are smart enough, you can ignore a trend, and pick the few biotechs that will quadruple this year - but that's a gamblers argument, not an investors.

We can't answer this Biotech vs Big Pharma question in the short run - but lets look at VD's portfolio vs the DRG index at year end, and see who's on top.
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