Biotech / pharmaceuticals

Amarone

Thinking of investing in this area and have undertaken research.

The U.S biotech Giants have high priced shares so possibly missed the boat as 2012 appeared the time to buy however there are a couple of decent funds in the Axa Framlington - either biotech or pharmaceutical , not sure if anyone has any opinions on these two?

Alternatively I may look at British firms who are better priced but slightly more risk due to the patents of drugs only lasting so long before other drugs mimic and profit is lost.

I'd be interested in an experienced investors opinion as I am very new to investing and have around £1000 a month. I currently have a passive tracker.

Many thanks

JohnRo

Amarone wrote: »

...I'd be interested in an experienced investors opinion as I am very new to investing and have around £1000 a month.

Just to clarify, do you mean £1K a month to invest?

Amarone

JohnRo wrote: »

Just to clarify, do you mean £1K a month to invest?

Hi John , yes that's correct.

JohnRo

Not sure what qualifies as experienced but my opinion is there's nothing profound in saying, long term, biotech and healthcare should have a promising future given the demographic trend in the West but they've also done extremely well in recent years, in terms of ROI, and there may well be short term volatility ahead.

Personally I have about 15% allocated explicitly to biotech, health and global technology in my growth portfolio using AXA funds. They've all seen substantial rises in the time i've held them.

I also hold several regional trackers in that portolio which in turn carry individual companies in this sector as well.

With £1K to invest monthly I'd personally be looking for a lot more diversification than a general biotech fund, boring perhaps but I think it's important. No idea what else you hold, if anything?

Are you asking for reassurance about the sector in general or just specific biotech recommendations?

Amarone

Hi John
I'm looking at long term but can't decide between the Axa framlington health care z fund or the Biotech managed by Linden Thomson as she has a microbiology BSc and has performed well so may be well placed? These funds cover the big US firms I was looking at but are expensive bought as individual shares and a bigger risk.
I would possibly place £250 in both per month if I can be reassured this is common sense?

Linton

The most important consideration when investing is diversification. If you have a large % of your wealth in a single sector and that sector runs into problems then your portfolio can suffer badly. So you need to invest in a broad range of sectors. Much more than 20% in biotech/health is getting too risky in my view. So it depends on how much you have in your tracker and what the tracker tracks. If its £20K in a broad global tracker then adding another £2K biotech could be reasonable bearing in mind that you already have some biotech/health investments through your tracker.

There are other areas which have given good returns in the past and may well do so again - emerging markets, small companies to name two favourites. So you could look at other things as well.

I dont think the fund manager having a BSc in Microbiology is that significant, there are plenty of more qualified technical experts around for hire. More important is her skills in fund management.

As to whether you should go for AXA Framlington Healthcare or Biotech investment trust is a fairly secondary decision. On balance in your position if the choice was one or the other I would go for the AXA fund simply because it covered more areas. I personally hold both.

BarleyGB

Im 17% in Biotech (AXA Framlington), probably a bit high in terms of my overall allocations but that's on account of strong gains over the last couple of years not to mention the spurt in the last few months.

Im holding for the moment, current priority is to spread an over allocation of UK smaller companies & equities.

meanbean

I'm 25% in AXA biotech and 25% in L&G pharma. I monitor the sp daily. I realise this is high risk in some investors eyes but am using the interest to pay off a cc and preserve the capital. Will likely reduce my exposure in coming months as the target amount will have been raised. I was briefly alarmed recently when Switzerland's markets plummeted as a top holding was Roch but the diversity within the fund seemed to cushion it very well.

Ryan_Futuristics

Now is an awful time to invest in US BioTech

People are paying far too much for it ... As Warren Buffett says "Price is what you pay; value is what you get" - and chasing past returns (buying expensive) is how most investors lose money

Also forget all those "Time in the market" adages ... When you own significantly overvalued growth assets, capital loss can cost you decades to make back ... If a sector drops by 80%, you need it to gain 400% back just to break even ... High valuation means high risk to capital

So you basically need some kind of stop-loss to invest in these sectors at these valuations - many US biotech investors right now are momentum investors (hedge funds, endowment funds, momentum ETFs) ... They'll run when the sector stumbles, leaving you high and dry with your expensive biotech stocks

AXA Framlington closely mirrors the BioTech index
http://www.hl.co.uk/shares/shares-search-results/i/ishares-trust-nasdaq-biotechnology-index-fd/share-charts

My advice: get an SMA 200 line on the chart ... Sell the lot when the price crosses the line

Good chance it'll be a false signal - in which case you can buy back ... But overvalued assets are NOT good buy-and-hold investments - protecting your capital has to be your priority in this instance


*Disclaimer: I own AXA Biotech, and I'll be selling at the first sign of trouble

Amarone

Hmm , Ryan you speak some sense there , I realise I've missed the boat in Biotech but the funds continue to perform well in a sector that , although volatile , should continue to perform due to an ageing population's need. Patents appear the big stumbling block as once they run out it's an open market and getting the drugs through approval is hit and miss.

Can I ask what a SMA is Ryan?

If I did go for one of the Axa funds I'm unsure which as the holdings appear similar?

Or may take risky punt in one UK biotech or Pharamceutical for a couple of grand one off payment.

Thanks for the advice , it is appreciated.

IronWolf

Amarone wrote: »

Hmm , Ryan you speak some sense there , I realise I've missed the boat in Biotech but the funds continue to perform well in a sector that , although volatile , should continue to perform due to an ageing population's need.

Not necessarily, the sector could do very well but stock prices decline by large amounts if the prices being paid now are too high.

If you'd bought tech stocks in 2000 you'd have lost a lot of money, despite the tech sector booming over the last 15 years.