Momenta Pharmaceuticals, Inc. (MNTA)

[tinkershaw]

Also, no matter how pretty the risk/reward may seem you need to understand and be able to live with the worst case scenario if it were to happen.

And we usually materially underestimate the worst case scenario.

Fortunatley, if you have invested in a great company, at a good price, time is often on your side, even in the worse case scenario. Time is the great "protective stop" as protective stops usually only make sure you end up selling at the bottom. But time provides you some margin of safety.

History is littered with such worse case scenarios and said shares recovering again within the next year or two or three. For every Elan there is a DNDN when it comes to biotech. Just had to keep holding with DNDN, while with ELN, no matter how hard I tried to dice the data, I could not get any insight, at all, that the alzheimer drug was working. I made a ton on tysabri (twice) and I was not holding (for various reasons mostly involving luck) when the alzheimers results destroyed the stock - although I tried very hard to find a reason to hold it). With DNDN, the small fortune I lost I would have made back in the next 2 years if I just continued to hold (but my investment in DNDN violated my rules for biotech investing - and I did make the money back, but at a large opportunity cost, and in a more difficult manner in retrospect).

Point being, stick with what you know, stay within yourself investing wise, don't fool yourself with gross speculation and lottery ticket dollar symbols, diversify sufficient for your age and place in life (5-10 mathematically should be enough for most (but if your nearing retirement that is a different matter), while allowing manageability and the potential for market killing returns), invest for the long-term while keeping in mind the long-term is perception and can change on a dime, but only sell when there is a compelling reason to do so and be patient when you buy, and have patience that can last 2-3 years at a time some time, and you will do better than most I think. Fretting kills your returns, but complacency will bankrupt you (you need to find a good median between the two).

This all said, I've probably said too much. Since it is difficult to articulate, it must be part art and part science, so no one can tell you what is quite right for you, other than the worse case scenario is often worse than you can imagine, and that time can heal losses if you own great companies at good prices. History has bore this out many times, it is the euphoric bubbles that kill even this strategy, so bubble recognition is important as well.

Tinker