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Biotech / Medical : VD's Model Portfolio & Discussion Thread -- Ignore unavailable to you. Want to Upgrade?

To: Peter Singleton who wrote (5331)	7/15/1998 9:17:00 PM
From: Biomaven	Respond to of 9719

Peter, Lots of good questions, to which I mostly have only inadequate answers, so I'll just give you a few random thoughts. I agree that there isn't time for any one person to do extensive DD on more than a handful of stocks, even assuming he/she worked at it full time, which very few of us can do. I personally certainly don't have the time, as I have a full time "day job," albeit with somewhat flexible hours. So what I mostly do is rely on other people at SI to perform the screening function you speak of. I'm further handicapped by the fact that the science behind many companies is beyond my limited grasp, and here I generally just outright rely on the judgment of the usual suspects. I further save time by having two classes of stocks in my biotech portfolio. I typically hold big stakes (for me) in three or four companies, and these constitute about half my biotech porfolio. These I watch very closely, and can afford to spend time on. The other half consists of very small stakes in _lots_ of companies, which gives me some diversification. For each of these I will at least always read the last couple of 10-K's carefully, and compare one year's against the next. If they ever do an offering I'll also read the prospectus very carefully, as that's where they are least likely to lie to you or cover stuff up. I also accept that I'm always going to have imperfect information. However you don't need perfect information to make money - you just have to be a little more perspicacious or a little quicker than "the market" -- a little luck doesn't hurt either. I'm not sure I could give you that much better a roadmap on a company like SEPR that I follow closely than you can get for yourself by reading their 10-K and browsing through their thread here on SI. One partial answer to what you want would be a "key post" indicator on each thread, perhaps voted on by the thread participants, or somehow flagged by people in their profiles. Peter S. (the other one)

To: Peter Singleton who wrote (5331)	7/15/1998 9:41:00 PM
From: Thomas M.	Respond to of 9719

I'm by no means qualified to answer your questions, but here's my 2 › anyway. -g- I think that biotech requires significantly more legwork than anything else, but therein lies the opportunity. I have been following the market for 5 years, and I have become strongly convinced that the vast majority of money managers do not give biotech more than a passing glance, because it is too tedious. I suspect that's why this is the last bastion of value in this picked-over, highly-priced stock market. To scan through the entire biotech market is a Herculean task, and requires serious know-how (e.g. Richard Harmon). My own experience has told me that to improve returns by looking at more stocks is not as successful as learning my pet stocks well and trading them. Michael Burke seems to take this approach, and does extremely well. Tom

To: Peter Singleton who wrote (5331)	7/16/1998 12:31:00 AM
From: Vector1	Respond to of 9719

Peter, The time for me is a major problem. I have an intense day, and sometimes night job. I find researching biotechs relaxing and do it mosly at night after the kids are asleep or on the plane when traveling. Biotech investing is complicated and difficult but as someone else said therin lies the opportunity. In additon I think it is difficult to make quality investments in the industry without being familiar with at least 30-40 companies. It helps when making judgements about relative value. There is plenty of info available. I try ( but don't always) apply the following disciplines before making a purchace: Read the last years public filings Read all analyst reports over the last 6-9 months discuss the technology issues with at least one expert in the field Have a phone converstion with an analyst who covers the company if I know the analyst Call the CFO of the company and discuss the prospects (sometimes the CEO if he/she will talk to me). IR people are a waste of time. Read the last 200 or so posts on SI Send and email or call someone I respect like Rman for his view. ----- The preceeding takes an initial investment of about 8-15 hours depending on the company. It is much more than most investors and about the same as most fund managers. Of course with all the work I still make plenty of mistakes. Many of them are layed out for everyone to look at in the Model. I am still and always will be learning. V1

To: Peter Singleton who wrote (5331)	7/16/1998 1:31:00 PM
From: Andreas Helke	Respond to of 9719

Maybe we should create something similar to the USENET FAQs for every company A document that assembles the important facts and the current wisdom about a topic or in our case a company. I have the problem that I regularly forget important facts about companies on my watch list. Sometimes I even forget what the company is doing at all and why it made it onto my watch list. Andreas

To: Peter Singleton who wrote (5331)	7/16/1998 2:07:00 PM
From: Andreas Helke	Respond to of 9719

I am using a two tiered system in my portfolio. I have a few core investments in which I have the majority of my capital and which I know reasonably well. And then I have a lot of small positions with only 0.5 to 1.5% of my money in each. I might get into such a small position without knowing much about the company and I can't afford to keep up with every detail of all those minor investments. I try to restrict my buying to companies where simply buying and holding no matter where the price is moving can be considered to be a reasonable strategy. If I have to be concerned about getting out near a top I think I would make to many mistakes to make such a strategy worthwhile. I think that even if you manage to learn every thing that can be known about a biotech company that this will still be of pretty limited help to figure out how the company and its stock will actually performing. By now I have figured out that it is almost impossible to find a relationship between the business development of a early stage biotech company that is years away from potential profits and the movement of its stock price. Probably there does not even exist a causal relationship between the two. I now concentrate on companies where profits are already existing or at least are visible enough to lead to analyst estimates of substantial future profits. There are a few exceptions for companies that have an absolutely important development project (EntreMed) or are cheap enough to offset the considerable risk of product development and possible business failure (CHAI) or a really interesting technology combined with a low market cap (CRXA and RZYM). Since a few months I have compiled long term earnings estimates from the NASDAQ web server and now tend to concentrate on companies that are undervalued compared to future earnings estimates while I shy away from companies that are already highly valued. A major problem for biotech investors is that development projects take many yeas and you can't really know if the expected market is still existing when you are finished. There are many companies that are developing products for the shrinking Kaposi sarcoma market. And I think there are about 60 companies which are developing treatments for breast cancers. Only a few of them will be able to make major money in this market. Andreas