Cary,
I don't have any conscious rules for how I allocate among different types of holdings. My percentage holdings are considerably driven by what has happened to the stock since I bought it - I try to be tax-efficient, so I tend to let successful stocks ride but sell any losers prior to year-end. So my biggest holdings tend to be stocks I've held the longest or less commonly where there was some sort of special situation that encouraged me to buy a bunch.
My biggest overall holdings are among the "emerging" biotechs - second-tier type companies that are not yet profitable. In order by size of holding:
SEPR, ITMN, NBIX, KOSP, CVTX, ADRX, MLNM, CELG, OSIP, ABGX, SCIO, AVIR, HGSI, IMGN, MEDX, CBST, NRGN, ALXN, IMCL, INCY. (and there are a bunch of others in the same category). Many of these have a very low basis - they were typically moderate or small-sized holdings when I first bought them.
Then there's what I'd call special situations where either I think there is some favorable event coming up or there was an unjustified decline. Biggest holding here by far is IGEN (currently my second-biggest holding overall). KOSP from the previous group also fits in here to some extent in that I added considerably to my holding when the duPont merger was announced.
Next is pharma (acquired in munches) or emerging pharma. JNJ (via AZA), FRX, KG, MRK (via RSTA).
Next are some royalty plays - these are small companies that have a royalty interest in a drug being developed/marketed by a larger company. NTII, IPIC, BTRN, NPRO (sort-of).
Another group are the Rick-type value stocks like KDUS, HMSR (although it's unclear what the latter is now given the recently announced reverse merger).
Next are a few trickle stocks - IVGN, TECH, TRPS, NBSC.
Finally, there are some early-stage companies. KOSN, DDDP, TELK, AMEV, LEXG, POZN, TLRK. Overall these constitute around 5% of my portfolio.
(I also have about 10% in value of the portfolio hedged in some way - a BBH short, a QQQ short, some naked written calls, etc.)
So as you can see I'm a strong believer in the big-basket theory of biotech investing. I give up the ultra-high returns that someone like Rick can get with his bigger holdings in a much smaller basket, but in theory I have less risk as well. (Of course Rick is also a successful biotech daytrader - something I've never had much success at).
Looks like I'm going to eke out a small gain for the year, dragged down a bit by some non-biotech holdings. I'm pretty happy with that, especially given that my biggest holding (SEPR) was down about 20% for the year despite its recent recovery.
Peter |
