"The surge of biotech development in the 1980s and 1990s was a result of increased government funding for programs like the National Institutes of Health (NIH) that bridged the gap between the academically possible and the commercially profitable.

"From 1983-1993, the budget of the NIH increased 158%, rising from $4 billion to $10 billion. From 1993-2003, that same budget increased another 163% to $27 billion.

"In the last five years under President Bush, NIH funding remained flat. However, under the Obama administration, NIH funding is about to explode once again and there is a possibility that a similar wave of innovation will follow.

"The recently-passed U.S. stimulus plan allocates $10.4 billion in new additional NIH funding to be spent before September 2010. That's a windfall of roughly 30% of the annual budget.

" In addition to the immediate flush of cash, the allocation demonstrates the new administration's commitment toward public science funding. Research and academic institutions will benefit, but so will the companies that support them.

"No area is better positioned to benefit than genomics and personalized medicine. With knowledge of an individual's genetic makeup, doctors will prescribe drugs with far better understanding of their efficacy for that particular individual.

"The cost of obtaining one's genotype through entire genome sequencing is plummeting: Sequencing cost $300 million in 2003, $1 million in 2007, $60,000 in 2008, is currently under $10,000, and will likely fall below $1,000 by the end of this year.

"Once below $300, gene sequencing will be cheap enough to be part of routine medical care. With costs this low, personalized medicine is just around the corner.

"Just as with biotechs, making money from genomics could well prove elusive. Undoubtedly, genomics will produce an explosion of innovation.

"But finding the winners in advance is tricky business. Just like makers of picks and axes during the Gold Rush, makers of the tools that facilitate rapid and cheap gene sequencing may be the safest bet.

"Today, the two leading producers of gene sequencers are Life Technologies (NASDAQ: LIFE) and Illumina Inc. (NASDAQ: ILMN).

"Life Technologies is the product of a merger of Invitrogen and Applied Biosystems. Illumina, which is our preferred pick and a member of the Model Portfolio, appears to be leading the market.

"Even in this tough economic climate, we expect Illumina to grow sales by 30% in 2009. Shares trade for 35x our 2009 earnings estimate. By the end of 2009, both companies will likely benefit from the new NIH funding, of which $1 billion is allocated toward equipment purchases.

"In the longer run, affordability of gene sequencing will take the technology out of academic labs and into mainstream commercial labs. Indeed, ten years from now gene sequencers may be as ubiquitous as xray machines.

"The risk remains that a better sequencing technology will eclipse Illumina and Life Technologies, though we believe that the opportunity justifies the risk."

Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.