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Go After Some Bargains

By Michael Shulman

The recent performance of the biotech sector indicates that, regardless of conditions, the market is still willing to pay for potential growth, real growth and companies with cash. Simply put, the market will go to those companies that meet the Street's expectations.

So now is the right time to do a little shopping. Some companies are on sale, and the smart shopper knows that when there are bargains, it's time to buy, even in a market where we are still wary about the likelihood of further downturns.

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Michael Shulman is the editor of ChangeWave Biotech Investor. Do you want to miss Michael's next 10-bagger? Bet not! Click here to find out more.

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Influential economist and a mentor of Warren Buffett, Ben Graham, was a guru of value investing.

He always looked to the stocks that everyone else hated as potential repositories of great value.

I believe Graham would say we should once again start looking around with a critical eye, and find the beaten-down stocks of the companies that are not beaten up.

With Graham's credo in mind, we're going to take a look at the diagnostic imaging space -- a market segment of the life sciences where stocks have indeed been beaten down, and where bargain-hunters can find some good buys.

Diagnostic Imaging

Diagnostic imaging is a large and somewhat fragmented market segment. But it's an area with companies that are introducing the new products, tests and services that will be in demand, regardless of economic conditions.

Quite simply, this segment and the companies that occupy it represent some of the best investment opportunities in the biotech sector right now.

Let's take a closer look at the technology in this space to see what areas of imaging drive the market and provide the opportunities for life sciences companies to succeed.

Software-to-Digital Imaging

By itself, imaging hardware has too many products and too few choices for aggressive-growth investors.

Plus, hardware for X-rays, MRIs, CT Scans, PET Scans and other types of imaging are dominated by the biggest vendors, like Canon (CAJ), Siemens (SI) and General Electric (GE).

The major investable trend is software-to-digital X-rays, and the ever-increasing complexity attached to revealing more and better details and data from a patient's image.

Imaging, as a segment, has been characterized as a boom-and-bust area for investors.

Sales happen quickly because it's all about a new, exciting and innovative product. But sales also tail off as the product is snapped up by customers and sales reach the saturation point.