Biotech Stocks: Something for Everyone.
by Michael Shulman
BiotechBlitz
Biotech stocks almost always evoke at events such as cocktail parties (have you ever been to one? I haven’t) images of rapid riches, 100% losses and the next great cancer drug. It is the same at my Money Show seminars – everyone says they are disciplined investors and then ask for a tip on the next 1000% gainer. If I knew for sure, it would be baguettes and Camembert in my beach front cottage in Normandy. With French roast coffee of course.
My point is biotech stocks – and I really mean life sciences stocks, which include genomics companies, diagnostic companies, generic drug companies and so on -- range form the conservative to the hyper-speculative. And for this reason, although I am not a registered investment adviser and do no manage money other than my own (which I do quite well, thank you, up 12.16% this calendar year including 10% in cash and 25% of the portfolio in high yield stocks that are not suppose to appreciate to much) investors should have at least 15% of their portfolio in these stocks, probably 20%-25%, matching GDP and GDP growth for the next few years. I bounce around, as high as 50% last year to 33% around now due to other opportunities, two boys three years away from college and growing opportunities in real estate.
Where was I? Oh, my point is there are stocks for everyone, not just the next great pre-clinical company that could go bust or go up one hundred fold. This is where you should look:
Very Conservative – Companies with no exposure to science or regulators, just patients and revenues. For example, Wilfred Brimley’s diabetes supply company (he is the ad man, not the owner), Polymedica (PLMD). A 20% plus grower with no scientific or regulatory risk.
Conservative – Generic drug manufacturers, business is good and going to be great in the next five years as all sorts of blockbusters with sales nearing $100 billion go off patent. Also, lots to choose from – look for a company with a business model that creates higher gross margins, the engine of growth. I have a favorite, you look it up, largest generic drug company in the world. A hint – it is based in Israel.
Growth – The solid growth companies with minimal risk are in, of all things, pet care and cosmetic medicine, often the same customers. These companies average 15% growth a year. The best pet company has the best symbol on the market – WOOF – Veterinary Centers of America – my first pick after 9/11. In October of 2001 pet sales went up 40%.
Aggressive Growth – These companies face some regulatory risk but also face 25% growth. Go for a disease that cannot miss – see how that guy next to you squeezes into the movie seat, ever seen a menu without the words JUMBO on it – go for diabetes. Tobacco killed our parents, calories are killing us. Lots of diabetes companies to choose from – my favorite makes the first GLP-1 inhibitor to get approved by the FDA. Yup, still quiz time.
Speculative – We are no entering the traditional realm of biotech. Think cancer and other diseases without cures or great treatments. A wide variety of choices, all too complex too explain without getting paid – or at least a free meal, my normal fee and one reason why diabetes is a great choice for a disease to target with your money. Find cancer companies with late stage (Phase III) drugs in trial for a form of cancer still very lethal and with a large marketing partner that will help them through the trial. Maybe a company in Phase II trials – mid stage, riskier – if you have the stomach for it.
Las Vegas – Be Prepared to Lose It All – Again, think cancer, but also Alzheimer’s Disease (AD). Any company in Phase II trials – and if they have a marketing partner paying for the trials, great. You can go nuts and invest in a company that is only in Phase I. These are the one hundred baggers – the two dollar puppy that could en being a $200 mastodon. There are only a handful of AD companies, check out the Australian one with a Phase II trial underway in Sweden.
Why am I being so coy, creating quizzes and so on? Because life sciences takes some work – if you are not willing to do it, you need to buy that information – packaged services or advice -- or move on. Many other areas of investing, such as my son’s specialty, What His Friends Are Buying – are easier to invest in if less remunerative (benefits of a good education, that word). While everyone says the risk matches the reward, and the some, in life sciences, the work does too – a little bit of work, and I mean an hour or two a week in the era of Google – and your returns go up dramatically.
Please, do not ask your doctor for a prescription for that wonder drug that keeps you awake but is not speed, Provigil. It could revolutionize self-management. The company that makes it, a large cap biotech, is…..
See ya.
BiotechBlitz is a regular contributor to BioHealth Investor
_______________
BiotechBlitz
Biotech stocks almost always evoke at events such as cocktail parties (have you ever been to one? I haven’t) images of rapid riches, 100% losses and the next great cancer drug. It is the same at my Money Show seminars – everyone says they are disciplined investors and then ask for a tip on the next 1000% gainer. If I knew for sure, it would be baguettes and Camembert in my beach front cottage in Normandy. With French roast coffee of course.
My point is biotech stocks – and I really mean life sciences stocks, which include genomics companies, diagnostic companies, generic drug companies and so on -- range form the conservative to the hyper-speculative. And for this reason, although I am not a registered investment adviser and do no manage money other than my own (which I do quite well, thank you, up 12.16% this calendar year including 10% in cash and 25% of the portfolio in high yield stocks that are not suppose to appreciate to much) investors should have at least 15% of their portfolio in these stocks, probably 20%-25%, matching GDP and GDP growth for the next few years. I bounce around, as high as 50% last year to 33% around now due to other opportunities, two boys three years away from college and growing opportunities in real estate.
Where was I? Oh, my point is there are stocks for everyone, not just the next great pre-clinical company that could go bust or go up one hundred fold. This is where you should look:
Very Conservative – Companies with no exposure to science or regulators, just patients and revenues. For example, Wilfred Brimley’s diabetes supply company (he is the ad man, not the owner), Polymedica (PLMD). A 20% plus grower with no scientific or regulatory risk.
Conservative – Generic drug manufacturers, business is good and going to be great in the next five years as all sorts of blockbusters with sales nearing $100 billion go off patent. Also, lots to choose from – look for a company with a business model that creates higher gross margins, the engine of growth. I have a favorite, you look it up, largest generic drug company in the world. A hint – it is based in Israel.
Growth – The solid growth companies with minimal risk are in, of all things, pet care and cosmetic medicine, often the same customers. These companies average 15% growth a year. The best pet company has the best symbol on the market – WOOF – Veterinary Centers of America – my first pick after 9/11. In October of 2001 pet sales went up 40%.
Aggressive Growth – These companies face some regulatory risk but also face 25% growth. Go for a disease that cannot miss – see how that guy next to you squeezes into the movie seat, ever seen a menu without the words JUMBO on it – go for diabetes. Tobacco killed our parents, calories are killing us. Lots of diabetes companies to choose from – my favorite makes the first GLP-1 inhibitor to get approved by the FDA. Yup, still quiz time.
Speculative – We are no entering the traditional realm of biotech. Think cancer and other diseases without cures or great treatments. A wide variety of choices, all too complex too explain without getting paid – or at least a free meal, my normal fee and one reason why diabetes is a great choice for a disease to target with your money. Find cancer companies with late stage (Phase III) drugs in trial for a form of cancer still very lethal and with a large marketing partner that will help them through the trial. Maybe a company in Phase II trials – mid stage, riskier – if you have the stomach for it.
Las Vegas – Be Prepared to Lose It All – Again, think cancer, but also Alzheimer’s Disease (AD). Any company in Phase II trials – and if they have a marketing partner paying for the trials, great. You can go nuts and invest in a company that is only in Phase I. These are the one hundred baggers – the two dollar puppy that could en being a $200 mastodon. There are only a handful of AD companies, check out the Australian one with a Phase II trial underway in Sweden.
Why am I being so coy, creating quizzes and so on? Because life sciences takes some work – if you are not willing to do it, you need to buy that information – packaged services or advice -- or move on. Many other areas of investing, such as my son’s specialty, What His Friends Are Buying – are easier to invest in if less remunerative (benefits of a good education, that word). While everyone says the risk matches the reward, and the some, in life sciences, the work does too – a little bit of work, and I mean an hour or two a week in the era of Google – and your returns go up dramatically.
Please, do not ask your doctor for a prescription for that wonder drug that keeps you awake but is not speed, Provigil. It could revolutionize self-management. The company that makes it, a large cap biotech, is…..
See ya.
BiotechBlitz is a regular contributor to BioHealth Investor
_______________
posted by Nico at
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