Building long positions gradually in such a stock as BNBN, which could reward the patient investor with stellar returns in the longer-term, seems to represent a wise choice.
The current pattern appears rather positive, given the deceleration and subsequent end to the post-IPO weakness (at least partly a symptom of worries about "Net-stock oversupply"), and the incremental rises on light volumes. It seems that investors are cautiously accruing long positions, attracted by the good valuation and explosive revenue growth(which it will continue to show) but also concerned by its poor beginning and by worries about broader economic trends, such as escalating bond yields.
Yet, anticipating short-term returns remains challenging, particularly for a young issue with little track record and the speed with which the rules of the game seem to be changing.
You don't need a large position to make a substantial profit. BNBN
will be trading at several times today's level in the next 3-5 years, but in the near-term, a renewed dip to 15 cannot be ruled out. When taking a large position all at once in such a stock, one takes the risk that he/she will be forced to liquidate at an adverse price because of day-to-day volatility. Such a capitulation could cost more economically than the mere loss on the trade given that sharp gains seem almost inevitable(not riskless, of course) over the long run for a company underpinned by the fundamental trends surrounding BNBN.
The net stocks do not trade like the "old growth" stocks. The volatility leaps up and down without warning, frustrating attempts to hold a well-balanced portfolio with risk exposures spread evenly across the core holdings.
The investor in such fascinating stocks will do himself/herself a great favor by allowing for much more leeway than originally seems warranted or prudent - basically, go extra light to begin.
Regards,
J. Mintz |
