Investing in biotech stocks - My experience so far

BrockStoker

A small update since I'm here..

Once again beating NBI (4 days in a row now, if not more) 1.44% vs 0.72% gain. Just two stocks still in the red overall now, CRIS (down 13.33% overall) and IMMU (down 5.25%% overall)

Largest gainers of the day were CLVS (+6.92%) and TXG (+7.75% at close but hit +20% intraday/soon after open).

Biggest losers were BCRX (-4.36%) and AXSM (-1.92%), seems like a period of consolidation as those are my two largest gaining stocks by quite a long way.

I think I may have lucked out with TXG. Seems there was a ruling in a patent infringement case (TXG lost the lawsuit), and the consequences were better than investors expected. That what I'm guessing.

Press release:

https://www.businesswire.com/news/home/20191223005138/en/International-Trade-Commission-Issues-Final-Decision-Affirming

Not really sure what is going on there, but it appears that it's a stock worth holding on to? A bit of googling suggests that institutional investors have been buying the stock (and pushing up the price) in the past 24 or so hrs, so I'm taking that as a "strong hold" signal unless someone can shed further light.

Update update:
Seems that hedge funds are all over the stock very recently too:
https://www.insidermonkey.com/blog/hedge-funds-are-crazy-about-10x-genomics-inc-txg-811706/

I don't know if it's worth paying much attention to all this data, but that is the most bullish looking hedge-fund interest chart I've seen yet, and hedge funds do appear to get it right more often than not, which makes me think once again that this is worth the risk holding.

Certainly, if I sell out now, and it turns out to have AXSM like performance, I'll be kicking myself later! Especially so because I invested more than 2x the amount in TXG than I did in AXSM.


Further update: Mystery solved. TXG can continue to sell the patent infringed products, so no real damage done apart from the fine. Basically a big cloud has lifted, making the stock much more attractive.

Update 25/12/19: TXG Call options going through the roof on Monday - https://slatersentinel.com/news/2019/12/25/traders-buy-large-volume-of-10x-genomics-call-options-nysetxg.html

Again I'm not 100% sure what to read into this, but I believe it's a good thing. I suppose after Monday's ruling, analysts will soon be re-rating the stock?! Anyone care to comment on what these moves are suggesting? Are the assumptions I'm making here logical?

on_ilkley_moor

Linton wrote: »

When the price is generally rising linear graphs make recent rises appear far more significant than previous ones and you may not notice if they are in fact smaller as a %.

This also affects a comparison of 2 shares, or of a share to a benchmark.

E.g. suppose a graph of 2 stocks starts with their prices rebased to 100, and initially one races ahead to 300 and the other falls back to 60. Next, the first stock keeps rising, reaching 360, while the second one bounces back a bit, to 90.

On a linear graph, it looks like the first stock is continuing to pull further ahead, because it rises 60, while the second only rises by 30. But for the first stock, that's a rise of 20%, and for the second, it's a rise of 50%. So the second stock is outperforming in the later period. In a logarithmic graph, the same percentage rise is always represented by the same vertical distance, so you will be able to see that the second stock is starting to catch up.

You can take this a step further, if you can look at a logarithmic graph of the difference in performance of 2 stocks. Because in this case, the graph will always rise when the first stock is outperforming, and fall when the second stock (or the benchmark) is outperforming. This chart of the difference in logarithmic performance is sometimes called a "telltale chart" (after a talk by John Bogle under that title).

BrockStoker

Thanks on ilkley moor.

I don't suppose you know of any free charting websites that let you compare two or more stocks/assets on a log scale?

BrockStoker

Another update..

Beating NBI by more than double today: +1.17% vs +0.53%.

Top gainers of the day were BCRX (+3.9088%) and SPSE (+4.20%).

Worst performers of the day were CRSP (-0.96%) and CLVS (-0.34%).

Even I'm surprised how consistent performance has been, although I'm sure that once the sector turns (only a matter of time!) I'll likely be doubling (or more) the NBI losses.

Merry Christmas everyone!

BrockStoker

A new first for me today (at least for this portfolio since I started keeping records) - two negative sessions in a row.


Yesterday was -0.88% vs -0.71% NBI, and today was -0.59% vs -0.93%.

It seems to me the portfolio is still a consistent performer, so far at least, and I realise it's still very early days.

Biggest positive contributions today were from SPCE (+6.74%) and TXG (+3.79%).

The most negative contributions today were from AXSM (-3.56%) and RETA (-2.95%).

Four (out of 19) stocks in the red overall after today, although 3 of those are only just barely in the red.

One other bit of noteworthy news from yesterday was from IMMU - IMMU submitted an application to the FDA for a breast cancer treatment:

https://www.barrons.com/articles/biotech-immunomedics-breast-cancer-drug-fda-51577464186?siteid=yhoof2&yptr=yahoo

The stock was up around 10% in response to the news, but I think it will be some months till there are any more catalysts, so it could go relatively quiet again for a while.

Quite a speculative stock, but if the treatment gets approval the drug has little or no competition. As for the downside, the company is already quite beaten down, so I think due the risk/reward ratio, is worth a bet.

Of course the drug might not get approved/make it to market, but the company has been talking with the FDA, and I think that there is a high chance that lessons have been learned, so an approval is more likely than not. The upside in that case could be very significant.

Londrum

I think I started out much like you... I began by putting my money into funds for a few years and then felt confident enough to give individual stocks a go. I think the worst thing that can happen when you do that is to begin with a run of good luck where they all make money. When that happened to my technology stocks I put more money in, and when I inevitably lost a load on some of them (it happens to all of us eventually!) I ended up losing more than I should have.

I continued to dabble with individual stocks for a few years but now I’m back into funds again — not as exciting, but a lot safer. If I was in your shoes I would just have 10% of my portfolio in something like the worldwide healthcare trust. That would be more than enough health exposure for me.

BrockStoker

Thanks for the feedback Londrum.

I don't think I'll be putting any new cash into this portfolio, although it will be tempting to buy more if there's a big dip I have to admit. I will keep a bit of cash (profits from the stocks) on hand, and may re-invest that instead though.

I do also currently hold worldwide healthcare trust and polar capital biotechnology R in another portfolio. Those + the stocks make up about 12% of my total wealth. I will always be overweight biotech/healthcare, but balance that out by holding plenty of low risk assets/cash as well.

Perhaps the novelty of owning individual shares will wear off after a while and I will follow your example by going back to funds only, but for the moment at least I'm looking forward to roller coaster.

BrockStoker

Just a little update.

For reasons I won't go into here, we had to abandon our home, and are currently staying in a hotel, so I haven't been able to keep detailed records of performance as I had been doing. Never the less I have kept an eye on the portfolio and underlying stocks.

As predicted this has turned out to be a roller coaster ride. Thankfully with plenty of "up", and the portfolio has held up fairly well in light of recent events (covid-19). Some stocks have actually gained as a direct result.

The best performer/largest positive contributor for a long while was Virgin Galactic, which was up to over $40 a share at one point (I bought at just under $10.50), but has since fallen a bit in the last couple of days, with a little up to end the week at over $25. That was a fairly large holding to begin with, so at it's peak that stock alone accounted for about 4K+ profit, and for a brief period a few days ago the entire gain for my portfolio was around 40%.

Then the latest bout of selling hit, with my largest single day loss so far of more than 7% on the 27th, followed by +6.15% yesterday. That has left me back roughly where I left off, with about 20% gain total.

In amongst the recent turmoil Moderna stock popped around 50% over a couple of days after it announced it had developed a promising vaccine candidate for covid-19 in only 42 days which it is currently trialing. This ability to move fast using new tech is one of the reasons I chose to invest in Moderna and similar companies, which in many cases have good shots at disrupting the current "kings of the pile". IMHO the market has/had failed to spot stocks which were/are worth much more than the market attributes to them. Wall street does not understand biotech too well it appears.

On top of that Verastem (VSTM) popped 46% yesterday, and has made well over 100% gain for me in total, once again covid-19 related since it's (blood) products are designed to be much cleaner than the current products.

There have been a couple of losers too, but still nothing significant apart from Clovis (down £1K on a £4K initial investment), and I have long term faith in that one, as I have in the vast majority of my stocks.

I did recently sell one stock (IMMU) after I saw bad numbers, and bought some SPCE + AGEN over the last couple of days, and am toying with the idea of investing more (new money) if stocks continue to fall!

Hopefully back soon for another update, but can't make any promises.

 

BrockStoker

A nice up again today of 3.5%, but I'm fairly sure we're in dead cat bounce territory, so most if not all those gains will evaporate.

Having said that, there has been a run of good news with a fair few stocks (even if all covid-19 related news is taken out of the equation). Today it was the turn of a stock that has not done much (apart from trend gradually down) for me since I bought it, but today Omeros (OMER) published some excellent data which likely means an automatic FDA nod, and also reported very nice earnings, as if the top line data was not enough.

https://finance.yahoo.com/news/omeros-corporation-reports-updated-results-210100322.html

https://finance.yahoo.com/news/omeros-corporation-reports-fourth-quarter-210300169.html

The stock was up 5.7% at the closing bell, but up as much as 17% after hours. Seems like it's taking some time for investors to digest all that news.

MRNA, AXSM, and SPCE were also up nicely today, and overall there are now just 5 (out of 17) stocks in the red (assuming OMER stays green). Clovis was once again the biggest looser of the day(again). Hope it gets some good new soon or I may have to buy more, even though it is already quite a large position relative to my other holdings - only SPCE is larger.

I really don't know which way the markets are going to go right now (although I suspect further volatility), but I'm very comfortable with all the stocks I hold, and will have new money to add soon if falls become even more pronounced. Good luck to all in these worrying times.

BrockStoker

It's been quite a week. Biotech stocks are being sold indiscriminately, even where the fundamentals are good. For the first time my portfolio value fell below the value of my contributions - currently down about 7% even after the slight recovery on Friday. I'm actually surprised it hasn't fallen more so far. Some stocks have managed to hold on to their gains which has helped.

The silver lining is that the 20K funding for my SIPP came through just at the right time, and I couldn't resist filling my boots with the biotech bargains that have been littering the stock exchanges. So I picked up another 400 Clovis shares at an average of 5.68, 60 10X Genomics shares at an average of 57.77, and a bunch more AGEN to bring my total to 600 shares. I also bought a few stocks I had wanted to buy a few months back but they were too expensive at the the time. All my buys were made on Wed, Thurs, and Friday, hopefully close to the bottom. I went a bit mad with Arrowhead Pharmaceuticals which is another company with a very promising disruptive technology, that had fallen way more than was justified. Bought 200 shares at an average of 27.35, and have booked another buy for a further 100 shares if the price comes down to 22.78.

On top of that I picked up some Illumina shares, some Intuitive Surgical shares, and some Gritstone Oncology.

I've also booked buys for Onelife Healthcare and Fate Theraputics. That should use up nearly all of the 20K of new money. I think the worst of the market falls may be over now, but if they are not I will have further new money to go into the stock market in 1-2 months time, although I think I have plenty of biotech now, so I will look at other sectors. I did already buy 20Ks worth of an S&P 500 ETF on Thurs in another portfolio, with another 20K waiting on the sidelines if there are further dips. If last week was the bottom then that should have got close too it, depending on valuation point.

At this point I honestly think the market has priced in an Ebola pandemic effectively, so although there may well be further volatility, I think the markets might be heading mostly sideways, if not up from here on in.

Hope others have managed to pick up a few bargains along the way!