Is it time for biotech stocks? I know it may be tough to believe - here in the wake of the worst-ever start for the stock market (in any year) - there were and are some stocks worth a look. However, the numbers don't lie. We've seen biotech and life science stocks mostly shrug off the recent harsh selling, and instead continue on their upward path.

When I see that kind of resistance to the market's tide, I have to dig deeper. In biotech's case, I like what I found. Maybe biotech is just what the doctor ordered to patch up some newly unhealthy portfolios.

Symptoms

As of the middle of January, the scoreboard doesn't look too exciting for too many teams. Over the last six months, the Russell 200 is lower by 18%, and the best-performing index was the NASDAQ....with only an 11% loss. Don't get too excited though - the NASDAQ's 8.3% loss over the last month is the worst of any index. The best? The S&P 500, with a mere 8.9% dip.

You'd think with the selling tsunami, all stocks would be much lower. Guess who's not though...biotech. The AMEX Biotech index (BTK) is actually up a hair (+1.5%) over the last month, and up 1.9% from six months ago. That's not tons of gains, but it sure beats being in the red.

More than that, the long-term outperformance suggests (to me anyway) this group may have an edge.

The Examination

When looking at the individual stocks within the biotech sector, one thing is clear - there are a heck of a lot of them. Some good, some bad, and a lot somewhere in between. Our interest mostly lies with the stocks in the 'good' category...what are they, and where are they likely to go?

So, here's the incomplete and officially unofficial list of biotech stocks we felt (1) were driving the growth of the biotech indices, and (2) had a decent shot at doing so in the future. Factors we considered were technical, fundamental, and novelty...an open-ended category that lets us add to the list some companies with promising breakthrough technologies.

Curis Inc. (CRIS) - What got into Curis over the last few days? The stock broke out of a range on some serious volume, but with no news...at least none yet. We've seen this kind of move before though, to no avail (see April of 2007). Still, Curis has me curious. (Sorry - couldn't resist.)

Pharmasset Inc. (VRUS) - Normally I don't like to chase big moves out of nowhere. However, Pharmasset's fight against Hepatitis C looks really good. Had the stocks surged on the news then pulled back, I may not have even bothered mentioning it. It seems to be holding its ground though. It's still a huge technical risk, but may be worth watching.

Idenix Pharmaceuticals (IDIX) - After a long drought, Idenix finally came to life in early '08. I don't see what specifically prompted the recent rise, as it's business as usual for this company. They're fighting the good fight against Hepatitis B and C, as well as HIV. Maybe that's enough.

Rigel Pharma Inc. (RIGL) - Rigel popped up from 8.00 to 25.00 in one day during December. My only problem is that it's stayed right there since then...not the kind of action that excites any follow-up. The move was inspired by some good news about Phase II testing of their Rheumatoid Arthritis treatment.

Tercica Inc. (TRCA) - A biotech stock that didn't become an overnight sensation? It's true - Tercica is doing it the old-fashioned way...by gaining over time. The pace is picking up though, which is what got my interest. Their focus is on endocrinology drugs like their Increlex - a replacement therapy for the treatment of children with severe primary insulin-like growth factor deficiency, Really shaky fundamentals, but the numbers may be deceptive...they've made some deals that could be big eventually.

Allos Therapeutics (ALTH) - Given that their only drug in the pipeline is a cancer treatment still in Phase II testing, this may be the most dubious pick of all. Somebody seems to like 'em though.

Alnylam Pharmaceuticals (ALNY) - If you like volatility, you're gonna' love Alnylam. The volatility can work in your favor though...this stock has actually pulled back from October's highs, but is still in a long-term rally mode. They may not have a bottom line, but the top line is starting to take a nice shape. What I like best here is the heavy short interest; that can fan the buying flames nicely sometimes.

Martek Biosciences (MATK) - After getting beaten up since 2004, 2007 finally seemed to be the year MATK would start to recover. It's back above the key moving average lines, and starting to make higher highs. Martek's fundamental may be the best of any of the stocks we're looking at today. And like Alnylam, the short interest here could make for one heck of a short squeeze. Still, I see Martek more as a multi-year holding.

Emergent Biosolutions (EBS) - Don't get too excited about the recent rally...Emergent Biosciences has a bad habit of taking one step forward and two steps back. If one of those rallies could take hold though, look out above. The unfortunate part about being an owner is that the company is actually doing pretty well (i.e. is profitable). It's just that the stock hasn't reflected that success yet.....and I did say 'yet'. Keep an eye on it.

Prognosis & Prescription

The stocks we just detailed were some of my favorites, but they weren't the only ones. Plus, I'd be the first to confess I wouldn't buy all of them. (I don't own any of them right now, but reserve the right to in the near and not-so-near future.) For that matter, I couldn't realistically buy all of them - not enough room in my portfolio.

If that sounds like you too, the solution is obviously an ETF. That said, there's just something uninspired about an ETF when an individual stock could offer so much more potential. Yes, the antithesis is much more downside with stocks as well, but I'm ok with that for a smidgen of my holdings. So, while I don't want a library of biotech names either, maybe two or three of them would be a good number...with one of them being a biotech ETF. (Is that conservatively aggressive, or aggressively conservative?)

Regardless, I think the group is heating up again after a not-disastrous pullback from October's highs. The confirmation comes in the form of these stocks collectively rising in the early part of 2008 - and not falling like most other stocks did.

I'll stay bullish as long as the sector does. As far as I'm concerned, the bull/bear line is the AMEX Biotech Index support line (the one that goes back to 2003), currently at 757. That's also the January low - and the rebound point. As long as we stay above that line, I think biotech has more to offer in early 2008 than most other stocks.