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A disease: professional capital eaters
By Thom Calandra, FT MarketWatch.com
Last Update: 5:45 AM ET Nov 14, 2000
LONDON (FTMW) -- There are growing signs that individuals are becoming just as
comfortable with ejecting stocks as they were at year-end 1999 with buying them.
Tax-loss selling will accelerate as investors head toward the end of the calendar year with
gaping losses, most professionals agree.
Turnover ratios for stocks, at the same time, are increasing. New York Stock Exchange
monthly turnover was 94 percent on an annualised basis in October versus 83 percent the
previous month. (See NYSE data.) Shorter holding periods for equities suggest individual and
institutional investors are more willing than a year ago to sell money losers and bag profits on
their rare winners.
"Professional capital eaters" are making it their business to book immediate gains, whether
they are sitting at their kitchen laptops or in a Wall Street or London ivory tower. (See the
column that coined the phrase PCEs.)
There may be, as California newsletter writer and armchair psychologist James Dines says, "a
profit concealed in every loss." Yet the slide in worldwide tech shares is taking its toll on
portfolios and is bound to be felt in property markets next year and perhaps even during this
year's holiday shopping season.
The latest untouchable
stock group to fall are the
Biotech indexes lost more
than 10 percent of their
value in a day. Stalwarts
such as Biogen (BGEN:
news, msgs) and Immunex
(IMNX: news, msgs) have
been losing ground for
weeks. Giant Amgen
(AMGN: news, msgs),
with a $64 billion
valuation, is faring better
but still sits 23 percent
from a July high.
Just as cash burn hit Internet stocks hard, so too are biotech stocks suffering from the threat
that developmental drugs and drug-delivery methods won't receive American regulatory
approvals. About 80 percent of drugs undergoing clinical trials never receive Food and Drug
To be sure, biotech executives are as dedicated as ever to their research and to their stock
prices. "Companies that are going to be strong can weather short-term variations," said a
Targeted Genetics (TGEN: news, msgs) vice president for business development, Michael
Burke, in Berlin. (See the story.)
Yet if investors continue what they have started this week, they will punish biotech stocks,
deservedly or not. The group is still priced at roughly double its valuation of a year ago. Some
issues, like aptly named Millennium Pharmaceuticals (MLNM: news, msgs), are still sitting on
eye-popping stock gains while recording staggering losses. Millennium hunts for mutated
genes that can provide clues to deadly diseases. It spent $69 million on research in the third
quarter yet still had $679 million in cash and securities as of Sept. 30.
Dines, the newsletter writer who has been picking stocks since 1961 or so, is sticking with
some of his biomedical favorites. These include Immune Response Corp. (IMNR: news,
msgs),which he first recommended at the price of 8 3/4. Shares of the company, which is
developing a vaccine to fight the HIV virus, sell for about $4. One recent report said the
vaccine, Remune, failed to slow progression of the virus.