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Biotechnology
Biotech stocks anyone?

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By IcyWolf
September 19, 2001

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Hi Jseigler,

Others here are clearly more experienced and qualified to address your query but maybe I can help get the ball rolling. But I warn you up front, I may not be able to provide for you what you may want in terms of biotech investment suggestions, but maybe I can start to point you in a direction that may be rewarding in many ways, including biotech investing.

First off, Biotech seems more a general term of convenience more than a clear defining corporate feature. In other words, the market sector we call Biotech, seems to be the summation of quite a few different segments that are not necessarily related or expected to behave similarly as investments. If you were to scroll back on this message board you might find some thread titles about various "ports" (portfolios). These posts represent truly wonderful attempts by many people to identify at least some of the different segments within Biotech. Their posts are initiating some very important and significant analysis of these segments and the main companies within each. Some examples would be the Genomics, proteomics, drug delivery, cancer drugs clinical research organizations, pharmaceuticals, equipment manufacturers, specialty chemicals, etc. etc. ports.

Next, your request for some "quality" biotech companies to "invest in" ... well, "quality" would seem to really be different for different people i.e. Do you mean very LARGE cap companies who might be expected to maintain a slow but steady growth with the least possible risk? Or might you mean some mid sized company with some solid financials but poised for major upward stock price movement? Or an unfairly undervalued outfit due to come back into its fair market valuation? Etc., etc. See what I mean?

Similarly, the idea of any of us "investing" would seem to involve understanding risks both in terms of the company and our own tolerance. That not only are all investments inherently risky (relative to government securities), but every company has market risks, sector risks, segment risks, and finally company specific risks. So that unless we want to simply throw darts at a dartboard display of companies (and when chimps do this for the WSJ, they tend to beat active fund managers 7 out of 10 times if I recall my stats correctly ), as Foolish (vs foolish) investors we may need to understand the risks involved. And it gets worse because we probably need to clearly define for ourselves exactly what level of risk we PERSONALLY can tolerate for specific percentages of our investment pie, etc. etc.

I guess what I am trying to suggest, and please do note I am trying to be helpful in a friendly way and do NOT mean to sound preachy etc., is that you may want to look before you leap ... read and learn something about basic investing advice for individuals (have an overall investment strategy) and then find the personal variation on those themes that best fits YOU. Almost all such plans include some reading and thinking and learning along with diversity of holdings and some sort of regular evaluation and adjustment of your holdings. Maybe the value we can expect to see from anything is indeed related to the effort we are willing to put into it ?

There are some great easy starter books to read which include The Motley Fool Investment Guide, Peter Lynch's "Beating the Street", etc. etc. Maybe even easier is to read the 13 basic steps for investing here on this site or for something more specific and advanced, just go back on this BioTechnology board and read some of the past messages. It is by far the most erudite and helpful message board (and group of posters) I have ever had the pleasure to visit (no, I don't work for TMF but began and continue learning about investing here). There are plenty of other boards and books etc. ... but maybe its well to remember that advice given is usually worth only the paper its printed on (maybe especially true for message boards <g>). Read and do research and learn and finally think for yourself .

If you are already versed in basic investing etc., please do excuse my ramblings, but it may help others a bit.

Personally, I think the safest long term Biotech offerings are the larger pharmaceutical manufacturers who are very active in R&D and or acquisitions AND are diverse in their product markets. J&J, Pfizer, Merck, Bristol-Meyers, and more come to mind. Probably many of the pure genomics companies still have some downward adjustments to realize. But companies that have more advanced genomics / proteomic R&D efforts as PART of their drug / vaccine discovery process, well that appears another story. Quite a few folks have offered a strong case for CROs (Clinical Research Organizations), because as more and more drugs and vaccines require data for FDA approval, projections for lots of growth abound for CROs. Then there are the companies that make biotech equipment and materials � everything from the Affymatrix chips for genomics / proteomics, to syringes and catheters (BD), to organic chemistry outsourcing shops (Albany Molecular Research,), etc. etc. There are some really exciting developments regarding drug delivery systems (Inhale Therapeutics, Aradigm, etc.). For me right now, stocks currently represent about 15-18% of my total worth, and about 20% of my stocks are in various areas of Biotech (I presently hold 7 different biotech stocks).

I think that right now various segments within Biotech offer great "safe" investments, very speculative but potentially lucrative opportunities, some short prospects, some pure growth plays, some pure value plays .... Essentially, I think Biotech is a separate market unto itself that has all the diversity (good and bad) that the broader market offers.

Be careful ... research & learn ... and when you decide to invest, good luck in whatever you decide!

Take care,
A rather Foolish IcyWolf

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