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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: Crimson Ghost who wrote (21394)	1/12/2002 4:18:57 PM
From: jim heger	Read Replies (1) \| Respond to of 99280

Latest thoughts of Barton Biggs thanks to J.D. Kelley on the Bio thread: Message 16899480 To:PeterSuzman who started this subject From: J.D. Kelley Saturday, Jan 12, 2002 10:51 AM View Replies (1) \| Respond to of 5414 An excerpt from this mornings Barrons Rountable discussion: Q: In that case, let's move on to stock-picking. Barton, you're up. Biggs: The bear market is 75%-80% over. The September lows were very important. I think we're going to go back and test them at some point this year. I hope to hell they hold. Q: And if they don't? Biggs: Then we are in a secular bear market. Mutual funds will get a cascading round of redemptions. But I don't think that is going to happen. Anyway, things have gotten crazy again. We have gone back to being underweight equities and overweight bonds. We are very underweight tech. They are blowing up the same bubble that existed before. Our big concentrations are in growth stocks. This is a slow-growth, low-inflation world, and growth stocks are going to do great in that environment. They are going to sell at very high P/E ratios. I think the biotech sector is going to be the next bubble, because it has all the right characteristics of dreamability. It has no earnings. No analyst can possibly understand these stocks and really be of added value. Q: Would you short them? Biggs: Gosh, no, not at this point. The bubble has not been blown up yet. Look at the technical pattern of the biotechs. They have bounced off a big, long bottom that was put in place since the 1990s. There are going to be some great stocks here. People tell me there is a great story in Regeneron, which has a drug that makes you lose weight and keep it off. But you really have to buy the broad-exposure companies like Genentech. Q: How long do you think the bubble will last? Biggs: Maybe 18 months. We have a major overweight in U.S. healthcare again. I am not a believer in PEG [price to earnings growth] ratios, but the drug companies are not going to grow as fast as people think they are. There is going to be tremendous price pressure. The big drug companies aren't going to grow 12%, 13%, 14% a year, but they are going to grow 7% or 8% or 10% a year. I think they will sell at 1950s and '60s-type P/E ratios on that kind of growth. So Bristol-Myers Squibb, American Home Products, Abbott Laboratories, Schering-Plough, and in Europe, Novartis, make sense to me. Schafer: One thing that will keep the biotech bubble going is that the big drug companies, which heretofore merged with each other, are now buying biotech companies. That is their only area of growth.