Nasdaq---Anthony (slow)
Expectations for 2004
Interview: Timessquare Capital Mgmt.---Huang, Weidong---Analyst
>> the nasdaq rallied more than 1% in the final 90 minutes of trading to finish the day higher. let’s go to anthony massucci at the nasdaq market site in times square.
>> and microsoft went up for the day. it was raised today to an outperform over at soundview. they see the stock going up $7 in 2004. that’s the estimate from soundview. this stock is flat so far in 2003. but they like it to go higher for the next 12 months. peoplesoft also managed to go up four cents on the day but r.b.c. capital markets cut the stock to an underperform. they think peoplesoft will underperform its peers such as oracle, siebel, due to increasing investor expectations. peoplesoft shareholders that would be. the risk-reward they don’t see as being favorable and with that the downgrade on peoplesoft from r.b.c. capital but it shook it off and finished higher. cisco systems trading at a multiple-year high, up for the year 82% and still after those moves upgraded to a buy at legg mason. they see the stock going to $29 over the next 12 months, which would be a 22% rally for cisco even from here. they increased sales and earnings estimates for 2004. keep an eye on cisco shares. the internet stocks were down ebay, amazon, yahoo!, all down more than a dollar. they bounced back with the nasdaq but closed the day lower. banking stocks strong ahead of the fed decision tomorrow. biotech stocks were weaker, though, amgen and biogen both falling on the day. jetblue did bounce back a bit. it fell 29% last week and rallied today. now merrill lynch thinks it’s a buy. back to you in the studio.
>> well, the nasdaq biotech index has jumped 39% so far this year while the s&p 500 has gained just 21%. crucial f.d.a. drug approvals and mergers have helped biotechs move higher, reversing a 9% decline last year. but the big question is―can that momentum continue next year? weidong huang, an analyst at timessquare capital management talks about his expectations for 2004 and sorts this question out. 39% year to date. are we going to do it again in 2004 for biotechs? yes or no.
>> i think it’s unlikely. the strong fundamentals for the biotech sector are largely reflected in the current stock price. in 2004, i think they’ll be more or less in line with the rest of the stock market which i think will do well.
>> 10%? 15%?
what do you think?
>> probably in that range.
>> so, biotech stocks , which are inherently more risky than the broader markets, if they only give you the same return, that would seem like a bad investment for the risk you take?
>> i think for most portfolio managers, they always need some exposure to high volatility, a high-risk stock such as biotech has a place in most investors’ portfolios.
>> let’s talk about appetite for risk. is that something you see going higher or lower? i mean, there was a time not too long ago this year where people only wanted to talk about dividends. now, suddenly, it’s all growth. and next year with things flatening off again, what might that do, in your opinion, to investors’ appetite for risk?
>> this year i think we have a big swing towards high-risk stocks . i think next year we’ll see some moderation, people coming back to more discipline, more value, focused approach such as the growth and reasonable rate approach to stock picking.
>> with these biotech companies, like so many of the start-up pharmaceutical companies, it’s all about drug approvals. what’s in your crystal ball of the stocks you follow? what’s the most exciting drug in the pipeline right now or drugs?
>> i think by far the most exciting drug is a cancer drug being reviewed by the f.d.a. made by genentech. it’s strong clinical data this year. i think once the drug is approved early next year, it’s going to be used widely off label in breast cancer, lung cancer and kidney cancer. it’s going to be a billion-dollar drug, a blockbuster.
>> isn’t that clearly the speculation in the price already?
>> yes, i think so. genentech is trading about 56 times next year’s earnings, healthy for a biotech.
>> what’s another pipeline story maybe we don’t know about that’s in the stock or was in the pipeline and got booted out or delayed a couple years?
>> one of the stocks i like right now is called millennium pharmaceutical company and they have a drug approved in may for blood cancer. that approval really is the catalyst for the biotech rally earlier this year. of course people are worried about the drug’s launch. but it turns out the launch is much better than expected. the company has raised its sales guidance from $25 million to $50 million this year and i think it will beat that number when they report in january. >> well, rather than squeezing you for one more answer, thank you, and we’ll have you back again someday. thank you very much. appreciate you coming on.
>> thank you.
>> weidong huang, with―don’t want to get it wrong -- timessquare capital management. stay with us. sales in the u.s. soared last month for one asian automaker at least. and still to come, we’ll tell you about hyundai motor’s gain and what’s the latest on its credit rating.
