Cross Portfolio ends 2001 up 11.25%! Not bad, but…
Since I have not provided an update since May, let me refresh everyone as to what this portfolio is about. The portfolio is based on the premise that cross-ownership among biotechs may represent unrecognized value and, therefore, contribute to undervaluation in the market. It is an unmanaged portfolio, based on a snapshot taken on 12/29/00 (see the tabulation below).
Cross started 2001 strongly with a 20% gain by the end of January, but promptly dived along with the sector to a negative 25-30% in March. It got back into the green by the end of May and returned to + 20% on the back of STEM during the stem cell circus. Of course the portfolio sank to –20% at the end of September before it was saved by a BTRN pop, followed by a strong end-of-year finish.
It's not at all clear that the cross-ownership theme of the portfolio explains the positive results. For example, the biggest gainer TRPS (ARNA) was up 75.6% while ARNA was actually down by 22%. Perpetually cash starved STEM might have been helped by the liquidation of its interest in Modex. However, completion of sales early in the year were at firesale prices and had no impact on valuation. STEM obviously benefited from the stem cell excitement in 2001, finishing at +39.6%.
Then there is BTRN/SCS. Twice in the past I have rolled pops in the stem cell sector into BTRN – only to see BTRN sit there like a rock. Finally recognized in the media as a stem cell co earlier this year, the market still appears to credit 0 value for the BTRN/SCS connection.
NBSC/DGI was up 19.9%…don’t know how much of this Rick might attribute to DGI. To be candid, I don’t follow most of the companies in the portfolio...comments are welcome.
Here is the original 12/29/00 cross-ownership table;
Primary / Sub MC/MC % owned $ owned
NBSC / DGI 28 / xx 84% xxx
BTRN / SCS 102 / xx 25% xxx
CEGE / ABGX 778 / 4828 10.5% 507
STEM / Modex 52 / 180 9.0% 16.4
MCDE / Iconix 47 / xxx 31.6% xxx
RZYM / Atugen AG 220 / xxx 29% xxx
TXB / Revotar Bio. AG 352 / xxx 55.2% xxx
KDUS / Axiom 9.5 / 15 (est.) 20% 3.0
TRPS / ARNA 77 / 352 8.8% 31.2
AVM / CYTO 17.8/ 178 1.58% 2.8
AXPH / DPII 209 / 289 31% 90
/ Akkadix / xxx 23% xxx
/ DNA Sciences / xxx 5% xxx
And the portfolio link in which the the CRA takeover of AXPH and the MCDE merge into ETRX have been accounted for.
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