Glad to hear you've had a good experience in biotech. My experience has been pretty limited.
A number of years ago, I researched a few small biotech companies because they were trading in the market as net-nets (i.e., their market capitalization was less then the discounted value of the their current assets minus all liabilities). I was looking at them because they were cheap, not because I knew that much about their products (usually just one or two experimental drugs or therapies) or their prospects.
I don't think I ended up investing in any of these biotech firms. I think most of these companies went under or raised more money and severely diluted existing shareholders. However, there was one biotech firm that received FDA approval for one of its drugs and the next day its stock price went up 7x.
If I were to invest in a biotech stock (especially one that didn't have consistent profits for the foreseeable future), I would need to buy it on an asset basis (for example, when it is a net-net) and I would need a large margin of safety in my purchase. In other words, I'm not willing to pay for uncertain future prospects, just net assets (and at a discount). Any upside beyond net asset values would just be gravy.
Biotech companies can be extremely lucrative if you pick the right ones, but how do you do that consistently? Biotech stocks can be very tricky to get right. Many times, these companies go public by telling their initial investors that they have this revolutionary product or drug that just needs some additional development, testing and governmental approval. However, the company's projections and financial forecasts are usually too rosy. In reality, many of these companies are consistently losing money (in the form of R&D and SG&A expenses) in the hopes that their drug works, gets FDA approval, and then is embraced by customers. There are a lot of hurdles to clear in order to achieve success.
I don't have any specific expertise or industry contacts in the biotech space -- I'm a true outsider. So, there is a very low probability of me guessing which company or companies are going to succeed. And even if I was an expert or insider, it could still be extremely difficult to pick the winners. In fields with constant and dramatic change, the future is not that clear.
I know some people try to trade biotech stocks based on investor expectations or quarterly earnings, but that's not my game.
If you have any specific biotech ideas that you want to share, please feel free to post them in the Investment Ideas board by stock ticker and name.
A number of years ago, I researched a few small biotech companies because they were trading in the market as net-nets (i.e., their market capitalization was less then the discounted value of the their current assets minus all liabilities). I was looking at them because they were cheap, not because I knew that much about their products (usually just one or two experimental drugs or therapies) or their prospects.
I don't think I ended up investing in any of these biotech firms. I think most of these companies went under or raised more money and severely diluted existing shareholders. However, there was one biotech firm that received FDA approval for one of its drugs and the next day its stock price went up 7x.
If I were to invest in a biotech stock (especially one that didn't have consistent profits for the foreseeable future), I would need to buy it on an asset basis (for example, when it is a net-net) and I would need a large margin of safety in my purchase. In other words, I'm not willing to pay for uncertain future prospects, just net assets (and at a discount). Any upside beyond net asset values would just be gravy.
Biotech companies can be extremely lucrative if you pick the right ones, but how do you do that consistently? Biotech stocks can be very tricky to get right. Many times, these companies go public by telling their initial investors that they have this revolutionary product or drug that just needs some additional development, testing and governmental approval. However, the company's projections and financial forecasts are usually too rosy. In reality, many of these companies are consistently losing money (in the form of R&D and SG&A expenses) in the hopes that their drug works, gets FDA approval, and then is embraced by customers. There are a lot of hurdles to clear in order to achieve success.
I don't have any specific expertise or industry contacts in the biotech space -- I'm a true outsider. So, there is a very low probability of me guessing which company or companies are going to succeed. And even if I was an expert or insider, it could still be extremely difficult to pick the winners. In fields with constant and dramatic change, the future is not that clear.
I know some people try to trade biotech stocks based on investor expectations or quarterly earnings, but that's not my game.
If you have any specific biotech ideas that you want to share, please feel free to post them in the Investment Ideas board by stock ticker and name.