Why Now's the Time to Buy BiotechBy Brett ArendsMutual Funds...

Why Now's the Time to Buy Biotech


By Brett Arends
Mutual Funds Columnist
7/9/2007 11:29 AM EDT
If at the dawn of the new millennium you had asked a wise person where in the markets, away from the IT bubble, the future might lie you would probably have received two answers: Asia and biotech.

Asia, because it had a huge, young population standing on the brink of an industrial revolution.

Biotech, because of demographics and science. The industry was poised to crack the human genome, potentially unlocking the door to new treatments that could transform health care.

And, as the world's population ages, the wise investor would have added that demand for new treatments should soar. So far, it hasn't quite worked out quite that way. Those Chinese and Asian stock markets are certainly skyrocketing. Any U.S. investor who welcomed the 21st century by putting their money in a vehicle like the venerable Greater China Fund (GCH) or The China Fund has more than quadrupled their stake.

As for the biotech industry ... the human genome was indeed cracked, as early as the spring of 2000. But anyone who bet their money on biotech back then by investing across the American Stock Exchange Biotech index, may have only just broken even ... assuming they stuck with the sector through the down market of 2000 to 2003.

Leading shares like Amgen (AMGN - Cramer's Take - Stockpickr) are still down from their peaks.

Are cheap valuations enough reason for you to invest in biotech stocks?
Answer Here
Of course, a lot of that is a function of where they started. Biotech back then was buoyed by the high-tech bubble. China, and the rest of "emerging" Asia, was cheap stock market scrap in the wake of the "Asian flu" of 1997 to 1998.

But if biotech was expensive then, it doesn't look like it is now.

"Valuations in the biotech sector are at 10-year lows," says Stephan Patten, portfolio manager for the Quaker Biotech Pharma-Healthcare fund (QBPAX).