WSJ: Save the Children (and Make money)

[Guest guest]

From The Wall Street Journal

Wealth Adviser

Save The Children (And Make Money) By Altucher

Two decades ago, one in 20 kids had asthma. Now one in 10 has it. A decade ago,

600,000 children were allergic to peanuts. Now 1.5 million are.

In developed nations, an epidemic in autoimmune illnesses and disorders has

emerged among children: diabetes, asthma, Crohn's disease, potentially deadly

food allergies, multiple sclerosis and others. Children's immune systems are

increasingly unable to fight off diseases and allergic reactions that barely

affected us older investors when we were kids.

This trend is not going away and will only get worse. With that in mind, an

" Autoimmune Index " may be in order. Such an index would consist of the best mix

of stocks that have good, lower multiples and that will supply the arms in our

ongoing war against autoimmune diseases.

Novartis AG makes the drug Xolair, which is used to prevent the allergic

reactions that trigger asthma attacks. Xolair is in Phase II trials now to see

if it can be used to suppress peanut and other food allergies.

Additionally, Novartis is dirt-cheap. The company trades at over 11 times

forward earnings and has a 4% dividend. So you can get paid while you wait.

The stock is trading at a historically low price/earnings ratio and book value

per share has gone up every year for the past six years. It has all the

characteristics I like in a buy-and-hold investment: strong demographic winds

behind it, cheap P/E, nice dividend.

On the more speculative side, I like MAP Pharmaceuticals Inc. Billionaire

financier Soros owns 19.8% of the company. MAP is working on drugs that

treat children with asthma and other respiratory diseases.

Biogen Idec Inc. is the leader when dealing with Crohn's disease and multiple

sclerosis. Biogen co-markets with Elan Corp. PLC the drug Tysabri, which over

43,000 patients use and which results in over $1 billion in revenue. Elan,

however, said Thursday that it has sued Biogen, asking a federal judge to find

that a deal for & to invest in Elan does not violate the Tysabri

marketing partnership.

Biogen trades for over 12 times forward earnings, making it not only dead-center

in a strong demographic trend, but strikingly cheap. One of Biogen's largest

investors is Carl Icahn, who owns 5% of the company. Biogen happens to be

Icahn's largest position, making up over 28% of his portfolio, according to

recent filings of his Icahn Capital fund.

The increase in autoimmune illnesses and allergies in children may be due to

high exposure to antibiotics and vaccines at an early age, preventing infections

but also inhibiting the body's ability to develop immunity to later infections.

The body develops critical cells at early ages that help in the formation of

antibodies. What helps those cells form is exposure to a variety of infections.

Without that conflict within the body, too much peace leads to complacency in

its immune system.

Hopefully, the companies I've mentioned can disrupt that complacency and help

reduce the youngest generation's medical risks over time, while making money for

investors along the way.

Altucher is a managing partner of Formula Capital, an alternative asset

management firm, and an author on investment strategies. Unlike Dow

reporters, he may have positions in the stocks he writes about. He can be

reached by email at james@.... Dow Newswires is enhancing

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