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

To: Thomas M. who wrote (5424)	8/4/1998 8:48:00 PM
From: Peter Singleton	Read Replies (2) \| Respond to of 9719

Tom, My question on Asia / deflation was not sector specific. I'm trying to unpack the following: 1 - biotech bear market Clearly, the biotechs are in a sector specific bear market, and have been for many months. 2 - small cap bear market The biotech's are also getting dragged down in the undertow of a small cap bear market. The WSJ reported Th 7/30 that the NYSE <$250M market caps were trading 43% below their 52-week highs. Undoubtedly now 50% or more after the past 4 trading days. 3 - macro market The biotech bear market and now small cap bear market have occurred within the context of a continuing large cap bull market. What happens to them if we correct sharply from here? Normally in corrections, smaller less liquid companies take greater hits during the slide. It doesn't make intuitive sense the biotechs (and small caps) would trade much below current valuations ... but there are times the market doesn't make sense. And what happens if the market takes a major, bull-market ending hit sometime in the next few months? What happens to the sector then? Will companies trading now at 80% their true value eventually trade down to say 60% or 50% of what they're worth? Or is there a point at which the biotechs get so cheap relative to their value that they bottom and prices firm, no matter what happens to the larger market? Why did I ask about Asia and deflation? Because those are problematic, confounding variables which could provide an exogenous shock great enough to crack the 16-year bull market. My crystal ball is pretty foggy from here, though .... : ) Peter