The Medical Technology Stock Letter believes in the long-term advantages of growth stock investing.  Among growth stocks, biotechnology stocks have a number of unique advantages:

• Technological advances resulting in multiple new first-in-class products
• Demographic increases in demand
• Immunity from the economic cycle.

The perceived disadvantage of growth stocks is their greater volatility. While volatility is often equated with risk, it is also a source of considerable opportunity. Dips in stock price provide outstanding opportunities for investors to establish positions or add to positions. While investors are always most aware of risks when the stocks have dropped in price, the better growth stocks often have the lowest risk at the time they are considered to be the riskiest. For example, after the 1987 crash, many biotech stocks were selling for at least 50% below their 1987 highs and were perceived as high-risk investments. They were trading at levels which were close to hard asset value, and clearly less than their acquisition value. At these prices, the long-term risk was greatly reduced. Thus, we started the Aggressive Portfolio with a leveraged position.

It is often difficult for individual investors to assign a value to development-stage companies. Most of them are losing money, and their value is in products that are not yet approved for sale. The visibility is increased and the risk is reduced as these products progress through the regulatory cycle. Stock prices may jump when a prominent medical publication publishes results, or the product passes a major regulatory hurdle. However, the real value changes as clinical trials prove that the drug actually works. Investing in biotech stocks is further complicated by the speed with which events get discounted. Our goal is to provide the savvy experience, judgement and patience to help our subscribers negotiate these treacherous waters.

Over the years, we have become increasingly impressed by the importance of management in the long-term success of biotechnology companies. The many years it takes to get a product approved make managerial decisions critical, particularly in regard to when and how to raise cash. We believe that our fiercely independent evaluation of management has been an integral part of our success.

We are frequently asked, 'How do I build a portfolio?' There is no right answer, except that you must be cognizant of your tolerance for risk. A few of the larger companies such as Genentech and Chiron have only modest long-term risk. The smaller companies require more diversification (at least 4 or 5 stocks) to reduce long-term risk. All of the stocks have more than normal volatility and thus high short-term price risk.

One of the essential keys to growth investing is a long-term outlook. Reading each issue of MTSL will provide the understanding necessary for an intelligent reaction to events. Through your patience, perseverance, and an investment strategy which fits your investment needs and desires, your growth investing in biotec