Another influential voice was added Monday to the growingconsensus that biotech stocks have peaked.
Merrill Lynch chief market analyst Robert Farrell told thecompany's annual economic and investment outlook pressconference that the music has changed for biotech stocks,indicating that the market as a whole has reached either anintermediate or a cyclical peak.
In an interview with BioWorld, Farrell said he expects biotechstock prices to decline through mid-1992. "It's a tough call tosay biotech has peaked," Farrell said, but nevertheless heforesees the biggest correction for the stocks since the October1987 decline.
In 1990, biotech stocks lost about 21 percent, said Farrell, but1987 was the last time they went down more than the rest ofthe market. Farrell expects the sector to lag behind the marketonce again.
"This is not a statement about the attractiveness of biotech," hesaid. "My concern is over speculation and volatility."
Farrell said 57 percent of the money allocated to equities inFidelity's switch funds -- funds that can quickly flow betweenstock, bonds and cash -- are now in Fidelity's biotech andhealthcare funds.
"That kind of concentration is extremely high," Farrell said.Such concentrations haven't been seen since 1983 in computertechnology companies or 1980 in the energy companies, hesaid. -- Karen Bernstein
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