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It seems to me that talking in percentages would be more appropriate for this subject, instead of dollars and cents. If the NASDAQ 100 is up 1%, then the TQQQ should be up 3%. I don't think it matters if I have 100 shares at $180 each or 300 shares at $60 each, my holding should move 3%, and the result to me would be identical. Correct?
Are you saying that the split changes the leverage of TQQQ? How's that?
Thanks, Gottfried, that link takes me there on my desktop. The link I posted takes me there on my i-phone. As you say, strange... In any case, here is the text for anyone interested...
U.S. Listed Chinese Stocks: Mistreated and Undervalued (Part 1)
By Kurt Shrout
More and more, we are seeing written articles, web blogs, message board postings and television segments in which U.S. listed Chinese stocks, especially those that came into being via a reverse merger, are characterized as far more risky and/or frauds.
These characterizations have occurred ad nauseam. Sometimes these characterizations have been made regarding the stock segment as a whole, sometimes they have been made in regard to individual stocks within the segment, and sometimes they have been made in regard to the segment as a whole and an individual stock(s) in conjunction.
In brief, these characterizations are almost entirely false. As with any stock segment, a stock like RINO International (RINO) is occasionally found. (RINO International appears to have overstated their past revenue since two contracts for which they reported receiving revenue were never finalized.) Despite the very bright spotlight thrown on this stock segment for an extended period, there is not reliable evidence that these stocks are far riskier; in fact, it is becoming clearer and clearer over time that, entirely or almost entirely, the underlying companies are not frauds.
To illustrate, see this quote from the SEC website (here):
…the SEC suspends trading only when it believes the public may be making investment decisions based on false or misleading information. Suspensions give notice to current and potential investors that we have serious concerns about a company. A suspension may prevent potential investors from being victimized by a fraud.
It appears that there were about 236 SEC trading suspensions in 2010, and it appears that very few of these suspensions involved Chinese companies (see the list here). (I was able to find three Chinese companies on this list.)
In fact, since the prices of these stocks have been beaten down to such a ridiculously low level based upon almost-entirely false information, I believe that they represent a fantastic buying opportunity for individual investors. Normally, this kind of buying opportunity is limited to venture capitalists and the like. In this segment, however, individuals have a venture capitalist-like opportunity. Like a venture capitalist, though, you need to do your due diligence to separate the truly great opportunities from the overstated opportunities and the occasional fraud. In this way, it is just like investing in U.S. or Western European based companies, but it has far greater upside potential.
For example, as of February 9, 2011, per MSN Money, the following stocks had a trailing P/E and forward P/E below 10: CTFO, CHBT, SDTH, BORN, LIWA, HEAT, DQ, CFSG, HEAT, YUII, CHNG, HRBN, CGA, YONG, CNGL, GFRE, ONP, ABAT, SUTR, CJJD, DHRM, CELM, DGW, CHOP, CPHI, GPRC, CNIT, SPU, CVVT, CCME, CADC, CBEH, UTA, NEWN, CNET, ALN, TSTC and BSPM. The following stocks had a trailing P/E and forward P/E below 5: NEP, SIHI, AMCF, NIV, ZOOM, CSR, XIN, CIL, NFEC.OB, SKBI, ZSTN, CSKI, and CCCL. (These are only partial lists.) Sometimes, there are a large number of additional future shares that are not accounted for in these P/E ratios; but this is the exception, and not the norm.
Most of these stocks are growth stocks, growing revenues and net income at up to a 100% a year or more pace (e.g., YONG). Some of these stocks have balance sheets with a lot of extra cash and zero debt (e.g., CCME, CHBT, and CEU). They are benefiting from an environment of not only about 10% annual GPS growth, but wherein capitalism is relatively new and there is, subsequently, much more opportunity. Many of them have Big 4 auditors or Top 10 auditors. There are over 70 companies with Big 4 auditors on the list here.
What has been happening is this: Short-sellers know that they can easily make money in this segment by shorting the stocks and, then, often with or via collaborators, they communicate a series of what appear to be lies, exaggerations, and/or misrepresentations that will drag the stock price down. Sometimes these missives hit on what proves to be, in part if not in whole, a true flaw regarding the investment. Usually, though, they hit on nothing or nothing significant. It doesn’t matter much, if at all, to the short seller whether any of these point hit. The stock price still goes down, at least for a while.
A case in point: Based upon Muddy Waters Research’s June 28, 2010 report, in which it stated
We are confident than ONP (Orient Paper) is a fraud. Its purpose is to raise and misappropriate tens of millions of dollars.
The Audit Committee of the Board of Directors of ONP (see here - Audit Committee of the Board of Directors of Orient Paper, Inc. Presents Findings of Independent Investigation and Orient Paper Provides Appraisal and Capacity Check Update) launched and independent investigation, involving Deloitte & Touche, into 12 different matters. To date, 10 of these matters have been shown to be non-issues. The other two matters, involving inventory and raw material purchases, are still being worked. Muddy Waters is 0 for 10. No person or entity that is attempting to be correct goes anywhere near 0 for 10 on something like this.
Is this unethical? Yes, of course it is. Will this continue? Yes. How can it be stopped? Via multiple measures.
(1) The impacted companies are just now starting to speak out well in response to these attacks. This trend must continue and strengthen. Generally, they should not be silent regarding any unfair criticisms that largely affect the stock price, even if the affect on the stock price is temporary. Also, if when a legitimate, significant question is raised that the company has not answered or answered well enough before, they should always answer the question publically. (A criticism can, potentially, be valid.)
(2) The companies should always consider legal action as a potential course of responsive action. They should not consider this based solely upon the possibility of winning an injunction or settlement, or the possibility that the actual or potential time and/or legal costs involved will deter a short-side attacker(s). They should factor in the communication and corporate image aspects as well. It looks bad when a company is unfairly short-side attacked and, maybe, subsequently investigated by law firms and/or sued, and it takes no legal action. It creates the appearance that the company may be guilty, but the short-side attacker may only be mistaken. The companies should factor in the costs associated with a damaged corporate image, e.g., decreased revenue or increased financing costs—whether via a stock offering or loan. This decreased revenue is occurring to CEU now, and a great number of these companies have already gotten a very poor deal on a stock offering per-share price(s).
(3) U.S. regulatory authorities need to address the situation. It is embarrassing that we have done nothing regarding the grave mistreatment of the companies in this stock sector. It is also rather humorous, in the context of all the unfounded or exaggerated claims about how relatively untrustworthy these companies are because they are Chinese. It appears that they can’t trust us, not the other way around.
(4) The more-reputable, and supposedly more-reputable, U.S. news sources should stop covering this story in what appears to be a biased and/or unprofessional manner. Barron’s and CNBC seem unlikely to do this. All of us who are knowledgeable regarding the news realm know that, often, what passes for news may simply be a part of someone’s and/or some institution’s agenda. It is clear that, for the time being at least, some people at these institutions may want to get us to invest in U.S. companies, even though these investments are relatively much less attractive.
In their August 28, 2010 article Beware This Chinese Export, Barron’s used Muddy Waters as if they were a credible source, when they already had sufficient evidence to strongly suspect that they were not. To quote Barron’s (see here):
The Hong Kong-based analysts, whose firm is Muddy Waters Research, said in their report that they visited Orient Paper’s factory in January and found it idle and dilapidated. They calculated that the company’s SEC filings overstated the value of its assets some ten-fold. Revenues were overstated 40-fold…
For just one, to quote ONP from their July 1, 2010 response to Muddy Waters:
Muddy Waters has no apparent history of providing credible independent research or any research for that matter as they state this was their ‘inaugural report’... When this team visited the Company's facility in Baoding, they offered to write a paid-for research report on Orient Paper; but the Company declined their offer.
This is far from the only way in which the Barron’s article was apparently biased and unprofessional. Expectations are higher for places like Bloomberg and The Wall Street Journal; yet Bloomberg recently published an article on Waldo Mushman without doing proper investigation. If they had investigated properly, they would have readily seen that the Mushman, as is standard for short proponents in this stock space, is regularly inaccurate in his criticisms and does not issue retractions.
In fact, they would have found things like this (see here):
The management of China Sky One Medical reminded investors that Waldo Mushman was misleading investors by counterfeiting SAIC documents and posting them on its website and other blogs.
I hereby challenge the U.S. and other business news services to do unbiased, high-quality investigative journalism regarding the point-by-point accuracy and integrity of the short proponents in this space. If and when they do, the results will be shockingly (to many people) unflattering. Am I the only person who has noticed this problem and is issuing this challenge? Certainly not. Here is another instance.
(5) The many well-known and reputable individuals and institutions in this space as long-side investors should be more involved. It may be too difficult or time-consuming for a news service like Bloomberg to go through all of the more-recent major SEC filings, visit locations in China, et cetera, related to a company(s) that has been unfairly criticized. These bigger investors have already strongly vetted these investments. They are a resource via which the many unfair short-side contentions can be more-readily debunked. They should also consider legal action as a potential course of responsive action.
(6) The bigger, more-renowned brokerages, et cetera, should initiate coverage on some of these stocks—and not simply for newer issues for which they may have helped with the financing and/or listing. Some of them are far better investments than the vast majority of stocks that are currently covered.
Disclosure: I am long YONG, HRBN, NIV.
Zab, the link I posted takes me to an article posted earlier this week in which a fellow named Kurt Shrout does what to me is a credible job of defending most Chinese stocks listed in the US and discrediting some of their critics, including Muddy Waters. Why the link takes you to a different page, I don't know, but I'd like to hear someone address some of the points he made in the article.
Zab, what do you think of what this guy is saying? Anyone else have any input?
http://seekingalpha.com/#article/252522-u-s-listed-chinese-stocks-mistreated-and-undervalued-part-1/
Canny, Do you know where all your marbles are?
No problem. I was mainly just looking for a chance to see if I could follow Newly's directions for posting a chart...
This will be an opportunity to see whether its business as usual, or the dawning of a new day...
http://www.geron.com/media/pressview.aspx?id=1254
News Release
Geron to Present at 13th Annual BIO CEO & Investor Conference
MENLO PARK, Calif., February 14, 2011 - Geron Corporation (Nasdaq: GERN) today announced that David L. Greenwood, president and chief executive officer, will present an update of the company at 11:30 a.m. ET on Tuesday, February 15, 2011, at the 13th Annual BIO CEO & Investor Conference in New York City.
The webcast for the live audio and slide presentation will be available at http://www.veracast.com/webcasts/bio/ceoinvestor2011/84208505.cfm. The presentation will be archived for replay and available at the same address one hour after conclusion of the live event for a period of 30 days.
In this market, a pullback lasts an hour, maybe a crash will last a few days? Longer term investors will be fine, traders who play it correctly will be fine... Don't fight the FED... If the economy is actually on the cusp of a long, steady expansion comparable to the recession that we just had, people who are too nervous (bearish) to take part in the market will be the poorer for it...
I would not be surprised if most retail buy-and-hold investors are quite pleased with their returns over the next several years. Reversion to the mean and all that. Of course, for those among us who like to trade, the time frames are different, and a correction is overdue and likely to create buying opportunities at any moment. On the other hand, the last pullback lasted 45 minutes, remember?
But, Canny, not all trends are long in the tooth from the first moment that they are recognized... Perhaps there are several (or many) more years to go before your implication comes true...
On the other hand, Doctor Okarma no doubt was a guiding influence in bringing Geron to where it is today. Apparently he was a scientist first and a businessman second. Now the science is developed to the point that Geron wants and needs a businessman first to reward the investors who financed their efforts and allowed them to reach this point. Very interesting to see where the PPS is a year from now.
You must share the potential returns with the partner(s), which is another form of "dilution". Still, I think that the new direction of the company is an improvement over the past. Perhaps progress will accelerate.
I see the potential of what you guys are doing... But I have been anticipating a big pop in GERN's price for many years. If I had bought calls regularly during that time period, by now I would have a fortune frittered away on calls. GERN always takes years to do what we wish would take months... When the timing is right, those calls might be the investment of a lifetime. But I cannot tell when the time is right, so I'll settle for the stock.
No, I already own a lot of the stock and have for years. If I understand how puts and calls work, selling calls would only eliminate most of my potential profit if the stock does what I hope. But I find it interesting that a group of investors who a probably mostly fairly sophisticated doubt that GERN will pop more than a dollar or two over the next year or two, and that's what these numbers suggest to me. Please correct me if I am wrong.
Edit: Or perhaps they figure that a sure $1.20 or $1.68 in their pocket is a smarter way to play the stock than to hope for a big return which may not come for years and years...
What's the premium on a call like that?
Everything I'm watching for a buying opportunity has bounced so fast that now I feel like I would be chasing already. Look at FFIV, for example... Sitting on my hands...
How about 10:15...
OK, if you say so. If your opinion is widespread, this should be good for the share price going forward...
I wouldn't call a move of less than one percent a very meaningful move... I agree that it is a promising sign, since the price didn't tank, that the market might view it as positive longer term. It couldn't happen soon enough to suit me...
Why do you say that? What is your definition of "least trustworthy"?
Here's a link that will get you to an archive of the conference call.
http://phx.corporate-ir.net/phoenix.zhtml?c=67323&dc=&p=irol-Guestbook&UniqueId=3737650&EventId=3737650&mp=IROL-EventDetails&rdu=&mpdp=EventId~3737650!WebCastId~1089938!StreamId~1631600&pp=IROL-BasicWebCast&ppdp=EventId~3737650!WebCastId~1089938!StreamId~1631600&pph=339&ppw=270&upv=&econf&ee=
Lee, when I pull up a 20 year weekly chart of the Nasdaq composite, the recent time period looks very similar to many other periods on the chart, with several moves that are longer, or steeper, or both. What do you see that makes this market unique?
Why? Why not just take advantage of the fact that we rarely do lately?
Gosh, Zab, that sure is a different position than your usual cautious, conservative, when in doubt, sit on your hands asset-preservation approach. Why the sudden change?
So what does the "d" in "200d weekly" stand for?
Hey Canny, are you talking about the 50 day simple moving average? On my charts the 50d looks to be at about 2250, while 2010 seems to line up with the 250 day moving average? Maybe you're looking at the 50 period average on a weekly chart?
I think that you have defined both ends of the scale, but that few people live at either end of that scale. Nearly everyone is somewhere along the scale, some to the left, some to the right, some in the center. Each is doing what they can to get through life, acting in what they see as their own best interests. Some are smarter, some are not, some are luckier, some have bad luck. Some get through without falling down, some do not. To vilify the ones who do not seems wrong, in most cases. IMO.
There's always some of that, but most people don't spend money they don't have.
My wife and I were out shopping over the weekend in central North Carolina. Everywhere we went, including two different regional malls, was wall to wall shoppers, no place to park, as busy as any Christmas shopping season I have seen. I don't know where people are getting their money, but if things are like this everywhere, the market is only seeing the tip of the iceberg at this point, IMO.
http://seekingalpha.com/article/249488-just-one-stock-the-biopharma-veteran-facing-a-landmark-stem-cell-trial?source=yahoo
If you could only hold one stock position in your portfolio (long or short), what would it be?
Long, Geron Corp. (GERN).
Tell us more about the company behind the stock.
Geron is a small-cap (currently around $500 million) biotech with two primary focuses: oncology and Human Embryonic Stem Cell (HESC)-based therapies.
In oncology, Geron has a broad IP portfolio which include a large number of patents targeting what may prove to be a worthy area of pursuit in the fight against cancer: telomerase. Telomerase was discovered by two early Geron collaborators who were awarded the Nobel Prize for medicine in 2009 for their discovery. Geron currently holds over 300 domestic and international patents related to telomerase as a potential cancer target.
Geron's other, slightly less crowded, and certainly more controversial focus relates to Human Embryonic Stem Cells (HESCs) as a potential remedy for a myriad of maladies, from Alzheimer's to paralysis. They have first mover advantage in the field and the benefit of being unreliant on the federal government for research dollars toward their pursuit, thereby sidestepping to some degree the controversy surrounding federal funds supporting this research.
In 2010, the FDA allowed Geron to proceed with the first ever clinical trials of HESCs in humans. I can't possibly overemphasize the importance of this historic trial. The primary endpoint of the Phase I is safety, although the secondary endpoint will be to determine efficacy. If safety is demonstrated along with even a modicum of efficacy? In my view, it will be considered one of the biggest scientific breakthroughs in the history of medicine.
How does your choice reflect your fund's investment approach?
We are a long/short hedge fund focusing primarily on domestic equities in all range of capitalization and sectors. We try to isolate situations where there is likely to be a relatively near-term catalyst to propel the shares in either direction.
I prefer to invest on the long side in companies with strong balance sheets, first mover advantage and/or dominant positions among their peers, and management I'm comfortable with. In the case of Geron, it's a $5 stock with a strong cash position, no debt, and are in the midst of a very high-profile clinical testing phase.
How much is your selection based on Geron's industry, as opposed to a pure bottom-up pick?
The biotech field, as you probably know, is littered with the wreckage of considerably more failures than successes. For every Dendreon (DNDN) or HGSI there are infinitely more Medivations (MDVN) or deCODE genetics. The potential to cure illnesses or alleviate suffering, coupled with the resulting "blockbuster" revenue streams accompanying such a success, can be quite seductive.
What I like about Geron is they have a very broad and deep IP/patent portfolio, strong cash position and, as excruciatingly slow as it has been waiting for results, I believe they are in the home stretch, at least regarding the HESC component of their business. If successful? I think the long-term upside is incalculable.
How is Geron positioned with regard to competitors?
Geron has been referred to - in a really fascinating 60 Minutes piece which I encourage any potential investor to watch - as "the Microsoft (MSFT) of the stem cell industry."
They are the 600-pound gorilla in the space, for now, conducting the first in-man, very high profile clinical trial. It's really somewhat of a binary event for the science, in my view. They will likely succeed or fail in a very big way, and advance or set back the science of HESCs forever.
The good news, from an investment standpoint, is that in the event the HESC side of their business fails spectacularly, they still have a formidable oncology department.
How does the stock's valuation compare to its competitors?
The market cap is around $500 million, nearly half of which is cash, with zero debt. Their burn rate is around $50 million a year, so they are pretty well funded for the near term, having recently completed a $100 million secondary.
The stock has largely been dead money for the past 12 months, with a tight trading range between roughly $4.50 & $6.50/share. I expect that range will end this year, somewhat dramatically.
In terms of other peers in the area, what do you think about competition from bigger companies like Cephalon (CEPH) - which like GERN does oncology work along with recent agreements to develop stem-cell therapeutics? Or smaller StemCells Inc. (STEM)? Is it about first-mover advantage in this area?
I think with regard to HESCs, they are peerless due to their IP and first-mover advantage in the field. Remember, they have been at this since the beginning and were early to finance and capture IP rights.
Regarding oncology... they are no match for deeper pocketed big pharma but, again, their telomerase focus, if successful, separates them from the pack, due to their broad patent portfolio associated with it.
Does your view differ from the consensus sentiment on GERN?
Geron has no shortage of critics, myself occasionally included among them. Investors and the few analysts who do cover the stock seem to be (understandably) frustrated.
The company recently completed a secondary priced well below the market at the time. I must confess I was gobsmacked by both the timing and pricing of the offering, but the old adage in the biotech space is "raise money when you can, not when you need to." Overall, I think most investors are frustrated with the arguably "glacial" pace of Geron's journey from lab to clinic to market.
Worth noting, however: It was only in 1998 that stem cells were first discovered. Today they are being tested in humans with "Patient A" receiving an injection in October. In the broader view of time, a few quarters or years is insignificant in light of the larger backdrop of history and what is at stake.
Simply put: Imagine if a previously hopelessly paralyzed individual has any mobility restored? In addition to providing hope to millions, I believe it will go a long way toward silencing the critics of this controversial endeavor. Regardless of where you sit on the political or ethical debate, it's hard to argue with someone confined to a wheelchair for life that HESCs which were previously destined for a dumpster shouldn't be used to restore their mobility because of the Bible.
Separately, regarding analyst coverage: Thanks to the Internet and the laws of the land, huge quantities of information are easily accessible to anyone who seeks it and are in no way proprietary to the landscape of Wall Street anymore. Point being? In my view, the vast majority of "Wall Street Analysts" are worthless at best and dangerous at worst. The stock is largely uncovered - for now - and that's fine by me. My experience has been that the analysts usually pile on well after the smart money has taken a position (or exited).
Does the company's management play a role in your selection?
Always. I'm comforted by the fact that the CEO of Geron, Dr. Thomas Okarma, holds both an M.D. & a Ph.D. from Stanford and is a graduate of the executive program of the Stanford Graduate School of Business. He appears to be a scientist first and a businessman second. I'm fine with that. Even the company's director of investor relations has a Ph.D. in the field.
What catalysts, near-term or long-term, could move the stock significantly?
As discussed, the first ever in-man HESC trial is likely to be a closely watched major catalyst for the shares. If there have been no major safety issues along with even a minor improvement? The stock should move both abruptly and significantly.
What could go wrong with your pick?
If safety issues arise leading to a halting of the trial? The stock will likely get clobbered, at least initially. If it shows negligible efficacy but is generally well tolerated? I think the stock gets clipped pretty hard there as well.
The same is true if their oncology pursuit fails miserably (safety issues) or simply shows no efficacy, but this is likely years away and they have a pretty deep bench in that regard.
Frankly, I think the company is likely be acquired long before any phase IIIs are completed. I consider the risk/reward at around $5/share to be roughly 2 points downside vs. 5 to 10 points upside. I'll take those odds any day of the week.
This patience issue seems to be a key one for Geron. It's come under fire in the past for heavily diluting shareholders on positive results; what's the risk that continues even in the case of a successful trial - since that would bear heavily on the stock price?
Dilution has been frustrating but I'm still in the "raise money when you can, not when you need to" camp. The bottom line is: If they produce substantive results in the clinics? The stock goes much higher and they are welcome to come back to us for further R&D funding (and therefore dilution).
Failing that? They better not come back, hat in hand, anytime soon or I'd view that as troubling.
Thanks, Robert, for sharing your choice with us.
Thank you.
Disclosure: Long GERN.
Stopped out of everything, most for a profit. Hope you're correct about a big dive... Starting now...
What are you saying? Is that the extent of the next market correction, your guess about where we open tomorrow, the message that futures are communicating...? Please explain.
The story abut the fake factory sounds to me like propaganda or manipulation. If you went to the trouble and expense to set up a working factory to convince someone that you were doing something, in order to be convincing you would have to actually be doing what you said you were doing. At that point, you already have a working factory, why not use it for what it was designed to do?
We haven't made much progress for a week or two. A gap up is just what we needed, and right on schedule.
Haven't you been saying that for weeks, if not months?
Investor Conferences
January 10-12, 2011
29th Annual J.P. Morgan Healthcare Conference, San Francisco, CA
Probably won't say anything monumental, but you never know...
You hear that, Fabian? Maybe you should hit on her...
Just trying to make a better mousetrap...
PS Why don't you like Fabian?
I can't make much sense of chart indicators (arent they all lagging?) and I am always unsure. So what I've done over the years is program my ideas into my computer and backtest them, then define a mechanical system that uses the most profitable parameters. So I have clearly defined entry and exit points, and clearly defined lists of stocks which meet my criteria. This system has kept me in the game for almost twenty years. But if I could just pick out the stocks which are going to make the larger moves and hold them for more of that move, without holding the ones that are going to reduce my return if I hold them, I would, as they say, be on a tropical beach somewhere, if that is where I chose to be. But then, I guess that that is what everyone here is trying to do...