When we first started publishing biotech research in 2001, biotech investors were patient and had investment horizons measured in years. Beginning about 2004, this changed. The general impatience that increasingly characterized the overall market became a larger part of the biotechnology sector. Investors, particularly professional hedge fund investors, shortened their time horizon to a few quarters from a few years.
An excellent fundamental understanding of a company is no longer sufficient to achieve investing success. Fundamental analysis must have a tactical overlay in order for hedge funds to obtain the outperformance required in their industry.
BSR+AlphaTM is designed to fulfill this need for tactical information.
The difference between tactical and fundamental analysis may not be immediately obvious, but understanding it is critical to understanding the significant potential of the BSR+AlphaTM product. These are not two separate approaches. Rather, they are a framework to understand how biotechnology stocks trade today. The key concept here is that the value of a development-stage biotech company is only coincidentally related to its stock price. This is caused by variances in investors’ perception of value at any given point in time. With that in mind:
Fundamental analysis tells us whether the science is valid, the management is sound, the regulatory strategy is sensible, and the products under development can reasonably be expected to succeed in the market place.
Tactical analysis tells us how the market is perceiving the fundamentals of a company as reflected by the price of the stock, activity in its equity options, investment patterns by large institutions, executive stock transactions, and the company’s stock price performance relative to its peers.
In today’s development-stage biotechnology market, it will take excellent fundamental analysis paired with a tactical overlay for hedge funds to succeed in securing the outperformance necessary for their business models.
BSR's fundamental research has a proven track record. While tactical analysis is key, it only provides outperformance when the base fundamental analysis is sound.
BSR+AlphaTM leverages the BSR Biotech IndexTM, an index of all the development-stage biotechnology companies trading on the major exchanges (NASDAQ, NYSE, and NASD). This group of about 250 companies will serves as the core universe for BSR+AlphaTM .
BSR+AlphaTM combines key fundamental data on companies in the BSR Biotech IndexTM with an overlay of tactical information. The tactical overlay will be generated from quantitative analysis of equity and options trading patterns and institutional trading data. The tactical overlay will be able to detect unusual activity relative to either prior patterns, the BSR Biotech IndexTM as a whole, and/ or the current fundamental situation in the company.
BSR+AlphaTM will be available in 2007. A limited number of customers for the product will be accepted to preserve the utility of this unique approach. If you would like more information or join the growing waiting list for a BSR+AlphaTM subscription, please use the contact information located here.