Replies to post #726 on Mining Sector Ideas

[gfp927z]

Bigworld, That's a big position, but the stock does have 'homerun' potential for intrepid investors who can handle the risks. My approach with biotech was based on Andy Grove's philosophy that 'Only the Paranoid Survive', which fits with the unpredictable nature of the bio sector.

Fwiw, I only bet big once on a bio stock - Dendreon, and it was only for a few days. I managed to get a $40 K profit, but it could have easily been a disaster. Selling the day before would have yielded an 80 K profit, but selling a day later and the entire gain would have evaporated into a big loss. So it turned out OK, but I dodged a bullet, and never did that again.

One strategy we used back then was to take a position during the lead up period to a 'binary event', ie a key clinical trial data release, FDA approval decision, etc. You would get in for the 'pre-event' run up period, where the stock usually rises in anticipation of the event, but then you grab the profits prior to the actual event. This was a much lower risk strategy than sitting long through a binary event, which is mega risky. Riding the 'pre-event run up period' can have good odds of producing a nice gain.

But you can still get burned, since sometimes the binary event (usually clinical data) is announced ahead of schedule, since companies are required to release such critical news quickly. So staying long over a weekend is risky, and bad clinical results often are released on a Friday after the close. I remember having a sizable bet, and the data was supposed to be released the next week. Most of the guys were staying long, but I luckily decided to bail right before the close on Friday. Sure enough, the trial had failed, and the press release came out right after the market close on Friday, and on Monday the stock got murdered. So dodged a bullet.

Anyway, my conclusion ---> 'Only the Paranoid Survive' :o) But far better to just avoid this activity altogether - it's just gambling, and in the end you will lose. 3X, bio stocks, these are for losers, imo.




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[gfp927z]

Bigworld, The market buoyancy continues, and it looks like the S+P 500 might continue to run up to the July high (4600) before we get a significant pullback / consolidation. Just a guess, but I decided to move back up to 10% with the stock allocation. I'd like to keep it there as a core LT position, but once we reach 4600 the chart will be undeniably overbought, so will probably be time to take profits again. But 10% seems like a reasonable stock allocation for a nervous nellie like me, lol. I had it down to 5% with the idea of returning to 10% after a pullback, but looks like we may not be getting that pullback just yet.

Based on the chart and overall vibe, it looks like 4600 is clearly in the crosshairs. I figure a lot of pent up money has been on the sidelines waiting for the 'green light' to re-enter stocks. The green light has flashed (maybe), and in addition there appears to be a considerable amount of Fed juicing, as we've been discussing recently. Anyway, the current chart says that some additional upside is likely in this move. Geopolitical factors should have nixed this entire move, but the Fed, media, and 'powers that be' are colluding to keep things buoyant. So for now, 'don't fight the tape / Fed' seems to make sense.




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[gfp927z]

Bigworld, With Acurx, I upped the position to 300 shares today, so that will be the max $ at risk (approx $1100). I'm going to try the old 'pre-event run up' strategy, as outlined in the previous post (ie selling before the actual binary event occurs, and thus avoiding the mega risk it entails).. Looking at the timeline as projected by the CEO Luci in the recent conference call, there will be 3 stages to this extended 'binary event' (not counting the March end of phase 2 meeting with FDA) -

Event 1 -- Dec ------------ Sustained Clinical Cure data
Event 2 -- Dec or Jan --- Extended Clinical Cure data up to 94 days
Event 3 -- Jan or Feb --- Impact on Microbiome data

March --------- End of Phase 2 meeting with FDA


So in the first stage in Dec, the sustained data will be released (Event 1), and the second stage will be the extended 94 day data, coming in either Dec or Jan. I'm going to assume that these will be two separate events, and won't be bundled together into one press release. In the conf call, Luci said they will be releasing the data rapidly, as they get it.

Based on what we know about Ibez (spares the microbiome), I'm figuring that Event 1 will be the riskiest, with the risk level decreasing as we go to Event 2, and then to Event 3, which has the least risk. The fact that Ibez is already known to spare the broader microbiome means that time should be a friend to Ibez, and an enemy to Vancomycin.

Another factor that makes Event 1 the riskiest is that we don't know exactly how they will be handling that one treatment failure in the Ibez arm (compared to Vancomycin's 100% success rate). Will it be included, will there be two sets of numbers, one counting it and one not counting it (?) The fact that Ibez already had a treatment failure, while Vanc didn't -- this makes Event 1 a real nail biter imo. I'd much rather they release the data for Event 1,2,3 all together, so if Event 1 doesn't look so hot, it won't matter much since Events 2 and 3 are favorable (and it's likely they will be, especially Event 3). But if only the microbiome data looks good (Event 3), that won't help if Event 2 is bad (94 day data). since who cares about an improved microbiome if it hasn't translated into an improved clinical outcome?

Anyway, I'm hoping the stock runs up at least into the mid 4s during this pre- Event 1 period, and that's when I'll probably take profits. One risk with this strategy is that we don't know the exact date of the Event 1 press release. Luci's only guidance was that it should be in Dec. Wait too long to take profits (assuming there are some to take) and you risk being blind sided by the press release, disappointing data, and a crashing stock price (as happened on Nov 2 after the Phase 2b press release revealed the failed patient in the Ibez arm, and perfect 100% success in the Vanc arm). Nothing like a 50% haircut to ruin your whole day. Hence the appeal of this 'pre-event runup' strategy. But in gambling there is no perfect system, so there's a lot to be said for buying the S+P 500 index and just holding it forever :o)




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[gfp927z]

Bigworld, Here's a variation on the strategy outlined in the previous post (ie 'pre-event runup period' or PERP). I remember back in the day, an approach that many used was to have a core buy/hold position, plus a trading position. Using only PERP, the risk is a lot less, but so is the potential upside. So supplementing PERP with an additional buy/hold component is another way to go.

I figure Ibez has a good chance of ultimately being successful and reaching the market, but the ride could be very bumpy. The near term scenario I worry about most would be a repeat of the big Nov 2 drop. This time, the first durability data readout (Event 1) looks inconclusive or outright poor, so the stock gets clobbered, but then has a big run up once the Event 2 and 3 data comes out.

In this case, using PERP for Event 1 produces a modest profit, and you sidestep the big drop from the Event 1 perceived failure. Then you have a perfect re-entry point to reload ahead of Event 2 and 3, which should have a much higher likelihood of success.

Anyway, there are numerous variations, so we'll see what happens. With biotech I learned to be extremely cautious, since the odds of an early stage drug ultimately reaching the market are very slim. It's fun to develop strategies, etc, but as Buffett says, Rule #1 is -- Don't lose money :o)




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