Biotech Values

[DewDiligence]

Good Riddance

[Steven Syre is a business columnist for the Boston Globe. While lamenting on the horrid performance of Massachusetts-based stocks in 2008 to date, he notes that IDIX (+138%) was the best-performing stock of any company based in the state, while MNTA (+53%) and VRTX (+24%) were among the few winners. In other words, good opportunities do exist even in the worst of markets.]

http://www.boston.com/business/markets/articles/2008/12/26/good_riddance/

›By Steven Syre
December 26, 2008

No doubt 2008 will be cursed in the investment world as the year nothing worked.

Nearly everyone lost money by the buckets, no matter how they invested. Reasonable people could look at their portfolios and wonder if any stocks went up in 2008.

Of course there were a few, here and there, that did go up in value this year. A list of Massachusetts stocks that went up this year, a very short list, tells you something about how the markets have suffered and what investment ideas do better when times get tough.

There are just 17 Massachusetts stocks that have gained ground this year. That's 17 out of 234 stocks, which means about 93 percent have lost value in 2008. Another perspective: Eleven Massachusetts stocks have lost more than 90 percent of their value in 2008.

Most local companies are relatively small, but their experience as a group is similar to the declines suffered this year in the world of blue-chip stocks. About 95 percent of stocks in the Standard & Poor's 500 index are down this year. All but two of the 30 that make up the Dow Jones industrial average have lost ground. Among the 100 largest Nasdaq stocks, nine of every 10 are losers.

So what about the stocks that did manage to climb higher amid all that suffering? In Massachusetts, a majority of them fell into one of two categories.

One of those categories speaks to the enduring power of hope. In any given year, there is a handful of local biotechnology companies and other life sciences firms making progress toward some new breakthrough. A half-dozen companies working in those medical fields saw the value of their shares go up in 2008.

Shares of Idenix Pharmaceuticals Inc. have jumped 138 percent this year, the biggest gain of any Massachusetts stock. The Cambridge company hasn't reported a quarterly profit in more than four years, but its work on a once-a-day HIV treatment and hepatitis drugs kept investors interested.

Vertex Pharmaceuticals Inc., a much larger Cambridge company, is in the final stages of testing a much-anticipated drug to treat hepatitis C. Vertex shares, which have been on a roller coaster for the past three years, are up 24 percent for 2008.

Among the others, Momenta Pharmaceuticals Inc., of Cambridge, whose shares have climbed 53 percent this year, is trying to develop better versions of existing drugs. Cubist Pharmaceuticals Inc., a Lexington company working on drugs to treat infections, has seen its stock climb 18 percent this year. ImmunoGen Inc., of Waltham, up 1.2 percent this year, is testing drugs to treat cancer.

The other category of local stock winners this year doesn't have anything to do with glitz and glamour. They are the little banking companies whose names are unfamiliar beyond their local communities.

United Financial Bancorp is the holding company for United Bank in West Springfield. Its shares have jumped 35 percent this year. Westfield Financial, another banking company working in Western Massachusetts, has seen its shares climb 9.8 percent in 2008.

Shares of the holding company for Benjamin Franklin bank are up 5 percent this year, and Berkshire Hills Bancorp is right behind it on the list. Brookline Bancorp shares are up for the year, but just barely. A whole other crop of small local bank stocks have lost value, but suffered much less than the national banking giants and the overall market.

Small bank stocks turned out to be big winners the last time the stock market fell flat on its face, in 2000 and 2001. Safe and steady turned out to be a compelling story when other investments were going south.

Those banks may become stock market darlings again as the Federal Reserve cuts short-term interest rates to almost nothing, literally. Any business with access to free money has to have a leg up.

But banks could have more problems with loans and investments this time. Most small banks stick to basic bread-and-butter business, but a bad economy hurts all lenders eventually. Even conservative investments are taking their lumps.

No one with stocks in his or her portfolio is going to remember 2008 as anything but an expensive mess. [Not true, Steven!] But there are always a few bright exceptions in a bad market. You just have to look very hard this year.‹