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Five Things You Need to KnowAbout Biotech: Don't Fall in Love, Overnight Risk, Rules of the Game, Economic Immunity, Get Help

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Typical market rules can be useful guidelines, but if you invest here you need to understand things do work differently.

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Editor's Note: While we congregate in Vail for Minyans in The Mountains 3, we asked each Professor to prepare some thoughts on fiscal literacy, how to listen to the market and their area of expertise.

1) It is especially easy to fall in love with these stocks, but doing so is a key to disaster.

2)
The "overnight" risk both directions is considerable -- 50-60% on the downside, 20-40% on the upside.

3)
This sector is different. Typical market rules can be useful guidelines, but if you invest here you need to understand things do work differently.

4)
Biotech stocks are fundamentally immune to almost all economic issues, but they are particularly susceptible to changes in investor psychology.

5)
Get help. The more research sources you can add to your own due diligence effort, the more successful you will be.

Random Thoughts

  • Did the FOMC learn not to go too far from the last time they tried to pound speculation out of the stock market as a tool of monetary/inflation policy?

  • Why aren't short sales disclosed the same way long positions are disclosed?

  • Will Reg. SHO finally be given teeth now that more than just the CEOs of a pair of publicly traded companies seem to care about the issue?

  • What's your *ideal* biotech research site look like? And yes, I really want to know! Look me up and tell me while you're here at MIM-3.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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