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Biotech / Medical : Biotech Valuation -- Ignore unavailable to you. Want to Upgrade?

To: Sam Citron who wrote (17015)	6/8/2005 5:18:07 PM
From: Rocky9	Read Replies (1) \| Respond to of 52153

"It's only a little harder to backtest to determine what screen parameters might have identified these 10-50 baggers in their formative stages. Surprising that so few do so." In my experience, it is DURATION of growth (with earnings hopefully) that has produced the 10-100 baggers. But it is a lot easier when you start with values being at lows anyway. Those that made investments in the early '50s, in '74-'75, or in '82 had a much easier time getting great returns simply because the market was very cheap in general. Going back to the issue of duration, unfortunately it is not easy to guess which companies will have duration of growth that greatly exceeds the market expectation. If energy is in a secular bull market now, it might be one area. Drugs in general have had great long term returns due to duration of growth, but right now that growth seems to have stopped for most big drug companies. My second best drug investment has been AMGN, which was not cheap, but definitely exceeded the growth duration estimates. My best overall investment, by far, has been PGR, which has growth tremendously over a 30 year period and started at a p/e of 6-8. But there was no way to guess that the growth would continue for so long. I was very lucky. In the companies that this board follows, pipeline is the best estimate for duration of growth, but many things can go wrong, as we have seen on a regular basis. I bought more MOGN today, in part, because of my estimate of duration of growth. I will probably be wrong, but it is how I make my decisions.

To: Sam Citron who wrote (17015)	6/8/2005 6:56:01 PM
From: Biomaven	Read Replies (1) \| Respond to of 52153

You have to be very careful with backtesting because of the issue of survival. The only real candidates for 50 baggers are very low-cap companies that intrinsically have a very high mortality rate. Thus it's pretty deceptive when you look backwards - you miss all the companies that died. The same issue arises more subtly in mutual fund families. The real dogs among the funds get killed off, and the net result is the overall returns look much better than they really are. Peter