It's hard to say anything clever about this market, which has been very choppy. Declines exceeded advances by 2 to 1 on the NYSE today, and on the Nasdaq by more than 4 to 3. Investors are nervous, and any rally is likely to be short lived. A couple of hours of rising markets is certainly no base, and you will probably best be served by accumulating cash and sitting tight.

In our July 20 article, we featured Biotechs as a beat-up sector with a lot of promise if you had the guts to buy them and the guts to hold them. Of course, this is in the context of your doing your homework, and buying a number of them to spread the risk and increase the likelihood of buying a good one. All the stocks listed weren't Biotechs; there were some into Genomics or some unique drug or therapy.

One of the stocks listed was Molecular Dynamics, which I own, and which was 11½ on July 20. They had a good earnings report on July 23, and the stock worked its way up to 15 last Friday. Today, it was announced that they would be bought out by a partnership of two companies, one of which had a working relationship with Molecular Dynamics. The cash buy out offer was $20.50, subject to shareholder and regulatory approvals.

The stock ran up to 21, presumably because some investors hoped for a higher offer. When I learned that the Molecular Dynamics Board of Directors approved the acquisition, I sold out at 20 1/16, where it closed. I didn't want to wait around for an unknown period of time to nail down 7/16, and my selling commission was only $5.00. With the market this flaky, I want to have buying power available if and when the market builds a base.

In my judgement, this buy out and the April 29 offer to merge with Neurex, are the beginning of a significant period of consolidation in Biotechs/Genomics. If you are smart enough and lucky enough to own the right stocks, you can make a lot of money. Sometimes rookies ask "how do you know when the market has topped out?" and the smart aleck answer is "they don't ring a bell." Well, regarding consolidations in this field, I think I hear a loud noise. Why, I do believe it's a bell! Stay tuned.

The Market Pro - August 10, 1998