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The Boston Globe OnlineBoston.com Boston Globe Online / Business / Globe 100
Biotech, telecom stocks blazed bright

But state's disappointments, led by J. Jill, defied categorization

By Peter J. Howe, Globe Staff, 5/16/2000

The Bulls

1. NetOptix
2. Natural Microsystems Corp.
3. Interleaf Inc.
4. Cubist Pharmaceuticals
5. Seachange International

[ See complete chart ]

The Bears

1. J. Jill Group
2. Raytheon Co.
3. Mac-Gray Corp.
4. Lifeline Systems Inc.
5. RoweCom Inc.

[ See complete chart ]

rom an investing standpoint, it's pretty easy to say what kinds of Massachusetts companies were hot for the 12 months ended March 31: those involved in biotechnology and telecommunications, or in selling the tools that dot-coms and e-commerce companies use.

What was not hot, however, was all over the map.

In several cases, cold winds buffeted companies that had not done much, if anything, wrong in 1999 - except watch their stocks get bid up to excessively fizzy levels before the market meltdown in March.

If you had just had enough sense to spend $30,000 for 6,000 shares of NetOptix Corp. on March 31, 1999 - when it was a foundering Sturbridge technology company on its way to becoming a sharply focused optical communications concern and takeover bait for Corning - you would have been a millionaire come this March 31.

But if you were a fan of J. Jill's women's fashions and took mutual funds guru Peter Lynch's advice to buy what you know, your $30,000 would have dwindled to $7,560. J. Jill's turn from sensible clothing for professional women to an edgier, urban look for last fall flopped.

With J. Jill, you would have made the worst investment you could have made in a Massachusetts-based stock during the 12-month period.

But overall, the ninth year of the bull market offered far more opportunities to hit home runs than to strike out with the 408 Massachusetts-based public companies evaluated for The Globe 100.

A dollar invested in any of the 10 worst-performing companies would have lost 50 to 75 cents during the year.

But a dollar invested in any of the top 10 would have grown to anywhere from $7 to $35.

Biotechnology, after years of lagging the stampede into Internet stocks, suddenly became a Wall Street darling last winter. That helped vault several Bay State companies into the bulls column.

''Just like the Internet increased our productivity and changed how we communicate and buy things, biotechnology and genomics will create a whole new pharmaceutical industry, which the public, investors, physicians, and patients are just now starting to see,'' Mark Levin, founder and chief executive of Millennium Pharmaceuticals, said in February.

Cubist Pharmaceuticals, Cytyc Corp., Genome Therapeutics, Genzyme Transgenics, and Immunogen Inc. were among the companies that late in the 12-month period struck Wall Street's fancy. Their shares grow by a factor of 4 to 13 during the year ended March 31.

The biotech tide did not lift all boats, though:

Boston Scientific Corp. dropped nearly 48 percent, chiefly because it had to digest a big takeover. Cambridge Heart Inc., a maker of medical diagnostics, lost nearly 40 percent of its value.

Internet companies' financial results and stock performances varied greatly.

Two big losers were RoweCom Inc., which manages online subscriptions, and NewsEdge Corp., a personalized content deliverer. Both fell by over 50 percent. A planned merger of the two that failed to pan out also hurt their stocks.

But being the equivalent of an arms merchant during the e-commerce wars proved to be a brilliant strategy for investors.

The Globe 100's top 25 list of highest-returning companies was studded with sellers of tools and services for the Internet economy, including Elcom International Inc., Interleaf Inc., LTX Corp., and Netegrity Inc.

Likewise, companies engaged in several aspects of telecommunications, led by NetOptix, benefitted from the insatiable demand for bandwidth, and it showed up in their stock performance.

Analog Devices, CTC Communications, Northeast Optic Network Inc., and Signal Technology Corp. were all what Lynch would call five- to seven-baggers, companies whose shares quintupled, sextupled, or septupled during the year.

Some of the losers, however, included a number of companies that were big winners in The Globe 100 for 1998.

Lifeline Systems Inc. and The First Years Inc. had been in the top 100 for return on equity, only to see over half of their share value erode during the 12 months up to March 31.

The September cancellation of Lifeline's merger with Protection One Inc. over regulatory delays was a key factor for the Framingham medical-alert company.

Laundromat supplier Mac-Gray Corp. of Cambridge, a 1998 ''growth gazelle,'' based on two years of sales and income, was the third-worst stock on the latest list, having dropped 65.3 percent.

Another growth gazelle from 1998, Parexel International Corp., lost over half its value.

And Raytheon Corp., struggling to consolidate its acquisitions and cope with plunging foreign sales, fell like a scud rocket taken down by a Patriot missile, losing nearly 69 percent of its value during the period.

Other big local companies that had fine years financially nevertheless saw their shares drop from what investors apparently concluded were irrationally exuberant levels. Among them were Gillette Co., Staples Inc., and TJX Cos., which all dropped by over a third.


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