Shares of virtually every biotech issued declined Thursday as adownswing in the sector carried into a second day of trading.
On Wednesday, top-tier stocks were the primary losers, asinvestors began rotating into cyclical stocks.
"In a true bull market, you see a rotation of groups, keepingthe general market buoyant. But individual groups see sell-offs," said Richard Bock, a broker at Sutro & Co. "We've been inone for a year, and now we're starting to see something typicalof them."
"The capital markets are breathing organisms," said VectorSecurities International analyst Peter Drake. "This group hasinhaled and exhaled several times over the past two years.Yesterday began a period of exhalation."
Drake is not among those analysts who say the biotech groupwas overvalued. "I thought the group was fairly valued a fewdays ago," he said. "Many of these stocks are nowundervalued."
Biotech stocks are likely to continue downward for the nextweek or two, said Drake. But money is continuing to move intothe health-care funds, he noted, guaranteeing continued play inthe biotech sector.
"If you're an investor willing to look out two years or a yearand a half, this is a fantastic buying opportunity," said Drake.
Bock said it's too early to tell what kind of sell-off this will beor how long it will last. "If stocks fall another $3 or $4 (today),it could be headed for a free-fall," he said, "only becauseeverybody will want to take their profits."
Alternatively, Bock said, biotech stocks could rally today andthen start to move up and down. "That could drag on for acouple of months," he said.
Even if the active traders move into cyclical stocks, biotechstocks will remain volatile, Drake said, because, with theexception of Amgen Inc. and Genentech Inc., they are thinlytraded.
In addition, said Bock, volatility will continue as long asinterest rates are low and people see no alternatives forinvesting their money. Many investors coming into the marketnow are not normally stock market players, and they panicquickly, he said.
-- Karen Bernstein BioWorld Staff
(c) 1997 American Health Consultants. All rights reserved.