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Leonard Yaffe
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I am an MD by background who runs a healthcare hedge fund. I worked as a sell-side medical analyst for 20 years, covering pharmaceuticals, medical devices, PBMs and drug distributors.
  • There's Something Happening Here.... 0 comments
    Jan 8, 2014 2:40 PM

    And yes, there are battle lines being drawn….Back in the 1980s and 1990s, stocks for the most part only went up. Analysts were bullish and their compensation was tied into the very profitable area of investment banking. Those of us young folks on the sell side kept recommending volatile, growth stocks, and we were rewarded with ever higher prices. Today's sell-side analyst(and hedge fund manager) learned early on that stocks only decline, due to the stock market weakness last decade, so rallies were meant to be shorted. Furthermore, on a stock advance, it made sense from a trading standpoint (investment banking had largely disappeared) to downgrade it, then re-slap a buy rating after the correction. As we are seeing with the Goldman Sachs drug industry downgrade this week, to mix song references, the times they are a-changin'. For some time I have commented on the inappropriately low price targets that widely exist on growth medical stocks, as well as the difficulty analysts will have in re-recommending stocks or sectors that they have downgraded at lower prices (witness what appears to be a dilemma upcoming for Goldman Sachs). Furthermore, there appear to be abnormal levels of short interest in some very high quality medical stocks for reasons that may be more valuation related than fundamentally researched. Therefore, favorable news, as we saw yesterday with Epizyme, can lead to disproportionate price moves. I would expect this scenario to continue to play out over the upcoming months. I continue to recommend the Fab Four (BIIB,CELG, GILD, REGN), the SuperSpec 5 (ADHD, ANAC, GALT, KERX, OSUR), ORMP and CVS.

    All the best/Go Pats, Len

    Disclosure: I am long BIIB, CELG, GILD, REGN, ADHD, ANAC, GALT, KERX, OSUR, ORMP, CVS.

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