When Santa asked me this year whether I was good, I had to admit "not all the
time." That's because, in looking back at the stories I wrote in 2011,
it's obvious I often was too optimistic in my coverage of health care
companies. When reporting on news and developments, it's my responsibility to
provide better balance to the comments from company executives who (not
surprisingly) too often view their organizations' investment prospects through
rose-colored glasses. So this writer is making a New Year's resolution to be a
more scrutinizing Scrooge in 2012. Next year, I pledge to search for and report
the opinions of those who might take a more critical view of company
developments to achieve more evenhanded coverage and better serve our readers.
Now that's not to say I didn't have some winners in 2011. I point with pride
to my Aug. 10 piece about Celgene (NASDAQ: CELG ) titled "Is it Time to Join
CEO and Jump on Celgene Shares?" One good reason cited was the purchase of
10,000 shares by Bob Hugin, CEO of the San Diego-based biotechnology company.
His purchase price was $52.70. Based on Monday's closing price of $64.58,
Hugin's four-month profit on his investment is a nifty $119,000, or nearly
23%. Over the same period, the iShares NASDAQ Biotechnology Index Fund (NASDAQ:
IBB ) was up about only 17%. Other reasons for a possible run-up in Celgene
shares included: The company's stock had been hit hard prior to the Aug. 10
article, declining 15% in the previous 30 days. Celgene had upped its guidance
for 2011 and was selling at a relatively reasonable price-to-earnings ratio of
15. Sales of its best-selling cancer treatment Revlimid were up 35% in the
second quarter, and the company had some promising drugs in its pipeline.
That's the good. The bad and ugly were combined in my assessment of
gene-sequencing company Illumina (NASDAQ: ILMN ). In the April 27 article
"Illumina Leads Race for Gene-Sequencing Payday," I reported that one
analyst likened the company to Apple (NASDAQ: AAPL ) for the ability to replace
its products before they became stale. The absurdity of that statement is
illustrated by the performance of the two companies' shares since that date.
Apple is up 10%, while Illumina shareholders have seen the value of their
investment tumble nearly 62%. Ouch! I suggested there were many reasons to like
the company, including: The planned summer rollout of a compact, less costly
personal sequencing system known as MiSeq. A 2010 sales gain of 45% and an
increase in operating profit of more than 36%, along with a projected revenue
increase of 20% in 2011. What we didn't foresee for Illumina was a third
quarter that came in below market estimates and a $15 million to $17 million
restructuring plan. It was implemented because of concerns about reduced
research funding by government and academic institutions as well as a soft
global economy. Guess that P/E of 80 at the time of the story should have been a
red flag, too, huh? But I'm not disheartened. As a lifelong Chicago Cubs fan,
there's always next year! Accountability at InvestorPlace.com From
InvestorPlace Editor Jeff Reeves , whose own review of 2011s hits and misses can
be found here : In the new year, I hope to continue some regular disclosures
from all our InvestorPlace columnists as a way to show that we are giving
recommendations in good faith and that we are not afraid to own up to our
mistakes. If you have any comments to share with our writers or have ideas on
how we can best achieve some form of transparency, please send your thoughts to
me at editor@investorplace.com . We are a site run by investors, for investors,
and we are in this together. It's very important to me that all readers can
trust our commentary so please don't hesitate to drop us a line. As of this
writing, Barry Cohen did not hold a position in any of the aforementioned
securities.
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