<<As a doc, you should be able to make the same kinds of calls in medical high tech issues. The gains can be higher than computer-related stocks.>>
Ay, there's the rub. Indeed, some biotechs explode upward, but
those that don't often fail. There's not much of a middle
road. And you can often lose your shirt (>90%) on a regulatory
decision or a new side effect that raises the lawsuit specter.
Hence, while I am a physician, I am hesitant to recommend any
biotechs as value plays. I do not personally know anyone who
plays the biotech market exclusive of owning the big pharms that
does well long-term. Way too much guessing -- even if you know
what you are talking about.
An example:
Theragenics makes radioactive implantable seeds to be placed
in a cancerous prostate. What a market! Yes, they work. Yes
the morbidity is low. I knew this before the market.
And I bought at 13 -- at a PE of about 60. It's now at 44
or so. I got out at 17 1/2 -- a PE of 90. And that's one of
the few "values" I've found.
Needless to say, little to no margin of safety. Discounts to Sales are rare and often deserved as the market for the product is failing. Biotechs just about all also fail both Fishers' rules -- namely, there is just too much competition. One discovery anywhere in the world can obsolete 20-100% of your company's product line. The regular techs
have more predictability (relative to biotech). AMAT I bought
April 96 at 37 only to see it fall to the value you bought it at.
I got out at 31. Looked smart for about 4 months.
When I do find a biotech value play -- PE<50 and >0 in a market
I know will explode -- the full value is often not realized
as the behemoths buy up your company before realization of
the market. Hence, I wonder now whether it is worth the
risk and sleepless nights for a value investor to buy biotechs
at all anymore.
Good Investing,
Mike |
