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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: techreports who wrote (48986)	11/16/2001 12:40:00 PM
From: Seeker of Truth	Read Replies (1) \| Respond to of 54805

While biotech is not part of the gorilla game, some aspects of it might be instructive. First most of it, including genomic stuff, is done by small companies, which have angels (formerly) or the public(in recent years) to back them. Why don't the big drug companies do lots and lots of it? Instead they make deals with the few little companies who achieve the beginnings of some hopeful success. The reason is that the odds are too long. The expected return is too small ON THE AVERAGE. The small investor thinks that this particular company could be the Big Thing. It's his money which is needed to finance the rapid growth of biotech. The point is that there are too many aspects, too many directions of the research. Every MD/PhD has an original idea which might possibly lead to a blockbuster drug, some day. The small company simply doesn't have the resources to actually produce, test and market the product in any quantity. So the big drug companies get much of the profits. I see it as a kind of foolish game for the small investor, which paradoxically helps humanity. Instead of spending more public money supporting university research in this area, we are forced by diabolical enemies to spend on our own immediate protection. Anyway, throwing the money away at Las Vegas gives the same result as buying some gene stock without the latter's contribution to human welfare. Medical research needs a mosaic of technologies. Any single company like HGSI,MLNM only contributes a tiny aspect to one problem. There's no gorilla for the whole problem, e.g. of a drug to cure disease X. BTW, Microsoft was never so expensive as MLNM etc. Gambling in physics often pays off. Gambling in chemistry occasionally pays off. Gambling in biology leads almost certainly to a loss. Of course one does get some more information.

To: techreports who wrote (48986)	11/17/2001 12:44:31 AM
From: Bruce Brown	Read Replies (1) \| Respond to of 54805

...what are your thoughts on the new biotech companies that use the gnome or proteins (HGSI..mlnm)? They are not cheap at over 5B dollars with PSR quite high..then again i guess AMGN and EBAY had high PS ratios when they came public and have done quite well.. Although I have followed along somewhat at the Fool by reading all the articles concerning the space as well as the Rule Breaker's choice to invest in a portion of the 'game' - it is not an area I follow very closely because of the learning curve and risk/reward ratio. If one is going to take the time to invest in the sector of biotechnology, the learning curve of all the medical implications, target markets and practical application which will lead to earnings is more than most want to dive into. However, companies that actually have earnings certainly are easier to interpret than those filled with hopes and promise, but not enough product to turn a profit at this point. I fear a lot of forward thinking to the tune of a decade or more is priced into many players and like the first wave of biotechnology which created a bubble in the 80's, this current wave will only have a few boats floating off into the sunset compared to the number of vessels currently in the water. Sounds like technology games, right? However, since I'm not up to the learning curve and reading the map of biotechnology, I do invest in the sector via a specialty sector fund hoping the managers of that fund have been through the required learning curve and understand more than I would ever hope to in terms of where investment dollars should go and at what prices. The portfolio they run maintains a diverse mix of established and emerging companies throughout the biotechnology sector. Outside of that fund, I am a long time shareholder of Amgen (a boat that floated out of the first wave of biotechnology speculation) and another family member (who follows biotechnology quite closely) is a shareholder of Immunex - neither stock is a 'cheap stock'. Mix in a few holdings in drug companies and health care and I feel I am 'exposed' enough in the sector with the proper percentage allocation. I would imagine there will be some winners over the longer run of the smaller biotechnology companies, but the learning curve is steep and a lot of hope is priced in the shares. No disagreement that the sector receives a lot of investor attention and interest - as well as trader and technical analysis interest. Unless I was willing to go through the learning curve, I simply don't know how to "invest" in the space without having professionals help me via the sector fund. There are a couple of other sectors where I feel the same and maintain sector funds. i do believe valuation matters and i don't like the idea of buying expensive stocks, but then again...many thought Aol was expensive in early 1998 or Microsoft was expensive, ect.. And they are still expensive today. Microsoft has spent a good portion of time this year and the latter part of last year at 1998 share price levels. I don't think it is correct to think we will see the type of mania that launched all technology boats from the autumn of 1998 to March of 2000. Although plenty would argue we've just been in a mini-mania since September 21. We may as well back the 1998 - 2000 out of the charts and focus more on the market position and opportunity for such companies to grow into their multiples over the next few years - or what it is that is going to drive their earnings to justify the premiums being paid. BB