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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Oblomov who wrote (33343)	1/24/2009 12:34:28 PM
From: E_K_S	Respond to of 78666

Hi Oblomov - Several of the more risky biotech stocks have JV's with the large Pharmas that IMO reduce the risk of holding the stock. As the biotech companies proceed with their trials and move from phase II to phase III receive larger payments with the eventual possibility for a buy out. This is the case with the two I currently own (AMLN and VVUS). I recently started a small position in Amylin Pharmaceuticals, Inc. (NasdaqGS: AMLN) who receive progress payments from LLY for their BYEITA drug. These companies also burn through a lot of cash so I am very careful to select only those companies that have been able to manage their cash reserves so they have staying power to complete their drug trials. VIVUS, Inc. (NasdaqGM: VVUS) is one I hold (a very small position) that seems to maintain their cash reserves. I have peeled off enough shares to cover my seed money and continue to hold as I have a very low cost basis. My main strategy on investing in this sector is for steady dividend income with reasonable growth as I believe this whole sector will grow with an aging population. About 7% of my Pharma portfolio investment are in emerging biotech companies. Maybe it might be good to add some type of sector fund that would provide me a basket of biotech companies. Any ideas? I have focused on those companies that develop drugs and devises for the diabetes market as this disease is growing in the US. NOVO NORDISK A S (NYSE: NVO) and LILLY ELI CO (NYSE: LLY) are a few of the large companies I am looking at. LLY is my favorite as their current dividend is now yielding 5.2%. Another area that would complement my Pharma holdings are drug stores that would benefit from the distribution of generic drugs. CVS, WAG, WMT and COST might be possible value plays. I recently sold my WAG but might start a small position if we see new lows. Many of these companies have recently started an inexpensive generic drug program which should generate more traffic in the store. Given the large percentage of money spent on health care (insurance, hospital, drugs, prevention etc) and the continued increase in costs (even in a deflationary environment), I thought it might be wise to increase my portfolio exposure from 8% to something higher. Most middle class families spend 10%-20% of their income on health care and related services. Since the Obama administration wants to promote universal coverage, I expect continued growth in expenditures for all of these services. EKS