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Technology Stocks : John, Mike & Tom's Wild World of Stocks -- Ignore unavailable to you. Want to Upgrade?

To: wlheatmoon who wrote (1704)	8/10/2000 12:03:30 AM
From: John Pitera	Respond to of 2850

LLY is tough for the longs and after the big BMY blowup just over 3 months ago, it'll raise a bit of concern. --------- Prozac's Not Going to Help This Time By James J. Cramer 8/9/00 7:07 PM ET Click here for the latest from . It always shocks you when a stock like Eli Lilly (LLY: - news - boards), a behemoth, respected by all, trades like a K-Tel or a Books-A-Million after the bubble pops, doesn't it? Isn't it totally unnerving to see a stock go down 35 points on some court ruling? What's behind such a sharp decline? Can something like this be avoided? Does it make any sense? And isn't it always a buying opportunity? Fear. No. Yes. Maybe. Let's take them one at a time. Portfolio managers fear downgrades. Analysts fear number cuts and down sequential earnings on growth stocks. Everybody fears a hole in the numbers. Lilly took a gaping hole in the numbers as surely as if a torpedo hit it broadside. Here's why: When Prozac comes off patent protection, the thinking is there is going to be a big decline in earnings, unless something could make up for it. Recently, Lilly was real lucky and found a drug that could extend Lilly's growth by the time Prozac came off patent, which was expected to be 2003. This court decision shortened that period of protection to 2001. That left two years between when the new drug kicked in and the old drugs stopped generating big numbers. Analysts were told to plug in down numbers, actual down numbers, for their yearly estimates. Growth companies don't have down numbers. So that was all she wrote. People sold rather than wait until they get to 2001 and have to live through down numbers. Can this kind of decline be avoided? People didn't think that Lilly was going to lose this suit. I didn't think they would. Most analysts didn't think so. It was unexpected. Sure, maybe you should have said, I want to take a little off the table after the huge run Lilly had just had. But I don't think this was so easy to spot and it was a true shocker. Does it make sense that the stock fell so much? Yes, if you consider that this was where it was before it discovered that new wonder drug that got it moving. We are talking about hundreds and hundreds of millions of dollars that could be wiped out. Some people, I'm sure, are glad that they even got out where it was before the wonder drug was discovered. So is it an opportunity? Yes, but only for investors with a long-term outlook. Look at Bristol-Myers (BMY:NYSE - news - boards), a stock I like and that I am long. I have no doubt that Bristol-Myers will do very little until some new drug gets discovered or it gets a takeover bid. I think something good will happen and in the meantime the fundamentals are not deteriorating. So I will have the patience to wait. It is not going to hurt you. But that isn't how money is run in this country. What won't hurt you will kill you in this business. That's why long termers should start buying Lilly, but they should understand that the near-term opportunity has pretty much been vanquished.