George:
Since Lampert's taste often overlaps with mine, I can take a guess as to how he picks stocks.
My fundamental belief......... research premiums are significantly undervalued. That is, I feel that excellence in research, backed by patents, is currently available at discount.
That said, this "rationale frame" has positioned my long-term portfolio to underperform since last October. Early-stage biotech has stunk. I've been lucky... my trading has been adept.
So.... how does he pick stocks? If you look at choices like MCDE, SIBI, CVAS, RGEN and NRGN (those with which I am most familiar)..... it would appear that he picks a mixture of diversification and leverage...... research programs with respected science/scientists that fit into business plans with potential for explosion (leverage).
The leverage for MCDE hasn't materialized on time.... the anti-fungal and cell surface protein projects have not yet attracted partner $$s. NRGN's leverage potential, despite an on-going effort to hire excellent scientists, keeps getting mowed down by ugly pharmachem surprises in the early-stage projects. RGEN has a microcap and low burn, backed by sales from an existing product, respected (but limited) combichem experience, an independent project in angiogenesis, and several potential sources of royalty revenue. Nobody cares. SIBI's business plan is intact.... partnered projects have uncovered numerous lead compounds for big indications, screening patents/technologies are generating license revenue and royalty ops, and the non-partnered projects, while rather crap-shoot in nature, have made steady progress with one project now having started phase II. Nobody cares. CVAS..... mini-cap that is promising to have five molecules in clinicals by the end of '98, with NIF recently entering phase I for a big indication (stroke). Nobody cares.
It's the "nobody cares" part that has bitten Lampert and me of late. I'm certain that it has bitten others who contribute to this thread. While pharma market caps continue to fly through the roof, early-stage research is considered dirt.
In '93 and '94, we went through a prolonged period where pharma was focused on cost constraints, managed care, and distribution. Research premiums got whacked. In '95, portfolios got up and danced. Lampert's one-year performance, sometime soon, will set a target for future generations of fund managers.
I hope.
Rick |
