This is the time to turn bearish on pharma and healthcare stocks
Today's Financial News - Posted November 20, 2008
After booking at least 25.6% short gains on Las Vegas Sands (LVS) in the official TFN tracking portfolio, TFN’s J. Christoph Amberger turned bearish on this biopharma company.
by J. Christoph Amberger
Baltimore — (TFN): The market by now has spun out of the margins that make technical — or in fact any kind of professional analysis — practicable… or even remotely useful: Companies posting third-quarter increases in profits are selling off at the same panicked rate as those whose CEOs are standing cap-in-hand on Capitol Hill, groveling before a rogues’ gallery of incompetents who haven’t added a penny of new wealth created to the gross national product.
Few companies are bucking the trend. Today, one of them was a bio-pharmaceutical company that discovers, develops and commercializes therapeutics, such as anti-virals as well as cardiovascular and respiratory diseases.
The decline of this stock has not been as pronounced as that of other companies in the market. It hit its 52-week high of $57.63 this past August. Currently, it is bucking the trend, trading at $43.50 at a time when most other bio-pharma stocks are deep in the red, and multitudes of publicly traded companies are setting 52-week lows.
The question is: How long can a bio-pharma stock stand up to the stampeding herd?
Especially considering that it is part of an industry that will be at the center of a sweeping change in political ideology.
Healthcare reform may be a shoo-in now that U.S. executive, legislative, and soon judicative will be in liberal lockstep. But the medium- and long-term fallout of hope and change has not been figured into the prices of pharma stocks yet.
The demonization of pharma companies as entities who callously make profits off life-saving medication has really only just begun. And nationalized health care reduces both the margins and the incentive for companies to engage in research and marketing new drugs.
Add to that the increased threat of litigation as the trial lawyer lobby is re-establishing key positions in the new administration… the limited possibilities of raising new capital in a bear market… and the drying up of credit lines… and we arrive at an existential threat to the entire U.S. pharma industry.
I usually can pinpoint a trend reversal by the number of contrarians who throw in the towel and begin swimming with the current. So maybe my new recommendation actually marks the official turning point of the 2008 market decline.
I just recommended shorting this particular at today’s price levels to our Hot Stock Confidential subscribers… as a safe bet for 20-25% profits within the next three weeks. Or as the official signal that yet another bull has turned bear which means trend reversal would be imminent!
Next Article: The TFN Complete Guide to Stem Cell Companies Part 1: Share prices above $50
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