Football season is here, but Wall Street players really want to know:
Are you ready for some biotech?
September kicks off biotech conference season, which means a host of CEOs, fund managers and analysts will arrive in the Big Apple to engage in their own version of fantasy football.
The big difference between the two is that one disappointing announcement at, say, the Bear Stearns Healthcare Conference next week, can sink a company's stock price for an entire year or maybe more.
In pro football, on the other hand, there is always the chance for a player or team to get back on track the following week.
One fund manager who will be closely following the action -- and who has been having a phenomenal season in his own right -- is Frank Sustersic, the stock-picker behind the $48 million
Touchstone Healthcare and Biotech fund. Sustersic's fund is up 13.8% year to date, beating both the
S&P Healthcare SPDR
iShares Nasdaq Biotechnology Index
ETF by nearly nine percentage points apiece.
"This time of year it's make or break for a lot of companies, especially the ones who need to make a splash with big news to get analysts and investors excited," says Sustersic. "Companies that don't trade on earnings -- and many don't -- use these forums to separate themselves from the pack by announcing successful phase two or three trial results."
Want more? Check out TheStreet.com TV video. Gregg Greenberg talks with the manager of the Touchstone Healthcare and Biotech fund.
Sustersic prefers to focus on growth companies, which is why his concentrated fund -- only 46 stocks at last check -- holds more biotech than the average health care fund. The fund currently breaks down into 40% mid- to large-cap pharma, 20% biotech and the remainder in assorted areas like medical devices and lab instruments.
Of course, that ratio could change suddenly, considering the fund has an annual turnover of 158%.
"Biotech has a higher organic growth rate and a healthier end-market," says Sustersic. "It has companies like
, which is a leader in AIDS drugs, and
, which is a leader in treating certain blood disorders like PNH
Paroxysmal Nocturnal Hemoglobinuria."
One stock Sustersic has avoided is biotech giant
, which is down almost 25% so far in 2007. And while its sheer size -- it has a market cap of $56 billion -- forces its inclusion in many health care funds, Sustersic says it's now a value play and he would "rather not catch that falling knife."
"The use of its anemia drug epogen will drop. It's just a matter of how much," says Sustersic. "Since I can't answer that question, I'm staying away."
In the case of profitable stocks like Amgen, Sustersic, who holds the CFA designation, makes a lot of the stockpicking decisions himself. In other cases, however, he has a doctor on staff that also has a Ph.D. in immunology.
"In this arena, the best info comes from clinicians, so you have to maintain that dialogue constantly."
One dialogue he generally avoids is the pronouncements of the presidential candidates. That makes him unlike many health care fund managers who keep their squawk box open to Washington as well as Wall Street.
"I don't really care about politics on the national level as it pertains to health care stocks," says Sustersic. "I put it in the same vein as Social Security -- it's just too big to take on. And it can get a bit tedious as well."
Speaking of boring, there is one old fashioned, big-cap pharma stock that Sustersic is sweet on despite the biotech blitz this month on Wall Street.
right now," says Sustersic. "It has the highest growth rate with its Vytorin and Zetia cholesterol franchise drugs."
Schering Plough, which makes up 4.5% of Sustersic's portfolio, has risen seven points from $23.60 to $30.60 so far this year.
Seven points? That's a touchdown plus an extra point no matter what field you play on.
Before joining TheStreet.com, Gregg Greenberg was a writer and segment producer for CNBC's Closing Bell. He previously worked at FleetBoston and Lehman Brothers in their Private Client Services divisions, covering high net-worth individuals and midsize hedge funds. Greenberg attended New York University's School of Business and Economic Reporting. He also has an M.B.A. from Cornell University's Johnson School of Business, and a B.A. in history from Amherst College.