Murphy New World Biotech Is No. 4 Stock Fund: Personal Funds
By Kathie O'Donnell
Half Moon Bay, California, June 28 (Bloomberg) -- Lissa Morgenthaler made Murphy New World Biotechnology Fund this year's No. 4 open-end U.S. stock fund by following a simple strategy: Buying low and selling high. Just don't call her a value investor.
``To use the term value buying in biotech is just hilarious on its face,'' Morgenthaler said, adding that out of some 350 publicly traded biotechnology companies only about 10 are profitable on a year-round basis, with another 30 expected to be profitable a year from now.
Murphy New World Biotech has returned 70 percent in 2000 through Tuesday. Still, times weren't always so good for the $20 million fund, which became a biotechnology fund in December 1996. In 1998, the year Morgenthaler came aboard, it lost 13 percent to lag the Standard & Poor's 500 Index by 41 percentage points.
``We were in the smaller stocks, and they just weren't moving, the bigger ones were,'' she said.
Biotech firms have benefited from ``Internet nuttiness,'' Morgenthaler said, adding that investors got used to paying ``outlandish'' valuations for Internet companies. When Internet business-to-consumer companies ``cratered'' and started taking business-to-business Internet companies with them, biotech companies, many of which have made ``spectacular'' progress, began luring investor dollars.
``Biotech has become the beneficiary of all that momentum trading, all that day-trading fervor, all that hunger to make fast money,'' Morgenthaler said. ``And it's a nuisance if you are a fund manager.''
Ideally, the manager would like to buy the stocks and watch them go up about 0.5 percent a day.
``But they don't want to do that,'' she said. ``They want to go up 20 points today, and go down 30 points tomorrow.''
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Those who really know biotech companies feel safe buying the way Morgenthaler did on Friday, when she bought stocks like Millennium Pharmaceuticals Inc., Human Genome Sciences Inc. and Protein Design Labs Inc., all of which suffered losses that day.
``The stocks had run too far too fast earlier in the week, they got ahead of themselves,'' the manager said.
Biotech stocks rose earlier last week in anticipation of announcements made by PE Corp.'s Celera Genomics on Monday that efforts to create a working draft of the blueprint for the human genetic code were complete.
Still, biotech managers are used to market fluctuations.
``Volatility is going to be the name of the game in biotech for as far as I can see because these stocks are a momentum trader's dream,'' Morgenthaler said. ``There's real stuff that's going on. There's hope and fear, they have new drugs that come on line, they have exciting drugs that come out and then drugs crater because they do badly in clinical trials.''
Her fund's top 10 holdings account for almost 50 percent of her portfolio, with the top five accounting for 33 percent. The top five as of May 31 are: Protein Design Labs Inc., Celera, Affymetrix Inc., Genentech Inc. and Human Genome Sciences Inc.
Risks
The fund has a ``fair amount'' of turnover, making it best suited for tax-free accounts, such as an individual retirement account. The fund is also not a biotech index fund, Morgenthaler said.
``We don't ever intend to outperform the index on the upside, but we also intend to do better on the downside,'' she said. ``Our hope is in the long run we will outperform because we smooth the curve.''
Performance
The fund has returned 70 percent year-to-date through Tuesday, beating 99 percent of all U.S. funds tracked by Bloomberg and 96 percent of health and biotechnology funds. Murphy New World Biotech has returned 23 percent in the past month, and 103 percent in the past year through Tuesday.
In 1999, the fund returned 21 percent, lagging the S&P but beating 80 percent of its health and biotech peers.
Leadership
Morgenthaler graduated from Princeton University in 1980 with an economics degree. Prior to becoming a fund manager, she was a technology company analyst for what is now Credit Suisse First Boston as well as for an investment banking firm called Woodman, Kirkpatrick & Gilbreath. She joined California Technology Stock Letter as a senior analyst in 1985. She has specialized in biotechnology investing since 1990, and has taken sabbaticals to study chemistry and molecular biology, and to work in labs around the country.
``I was originally focused in technology and semiconductor stocks and such, but I fell in love with biotech,'' she said. ``It's been said that no drug ever cured a disease, but biotech can.''
Morgenthaler's love for biotech stocks deepened when her brother was dying of cancer.
``Like a lot of people, personal things pushed me more and more into direction that I had already been interested in,'' she said. ``I had a grandmother who was a nurse, it's sort of in the blood.''
Cost and Taxes
Murphy New World Biotech is a no-load fund with a total expense ratio of 1.99 percent, according to Morgenthaler. That's higher than the 1.63 percent expense ratio of the average specialty-health fund.
The fund paid a capital gains distribution of 21 cents a share in 1999, and no income distribution.
Investment Objective
The fund seeks capital growth through investing primarily in equities of companies that its investment adviser believes can produce products or services that provide or benefit from advances in biotechnology.
Fund Facts
To purchase the fund: 1-800-669-1156
Following are the fund's top 10 holdings as of May 31, and the percentage they represented of the fund's assets:
Protein Design Labs Inc. 9.13 PE Corp.'s Celera 7.62 Affymetrix Inc. 5.60 Genentech Inc. 5.51 Human Genome Sciences Inc. 5.26 Millennium Pharmaceuticals Inc. 4.29 MedImmune Inc. 3.99 Biogen Inc. 3.26 Abgenix Inc. 2.70 Alexion Pharmaceuticals Inc. 2.55
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This lady is hot. All her largest holdings are doing great recently.
PDLI, CRA, AFFX, DNA, HGSI, MLNM,BGEN, ABGX, only the last one I don't know much. |
