ruff,
One of my friends, who is professional fund manager, ripped this stock apart...If you have a good response to the comments below, I may re-enter...
On AVAN, a few thoughts: I rarely invest in "development stage" companies anyway, and almost never in anything biotech. That said, AVAN trades at 10x trailing sales. They have to triple or quadruple sales to reach a reasonable number by FA standards (I know their growth rate would be huge then but 200% growth is not sustainable for long).
AVAN is losing money steadily - another strikeout in my book unless the losses are small, price-sales is low and they have substantial book vale assets to make it interesting.
Look at AVAN's cash flow statements and you find a steady $5m per quarter burn from operations. The $26m on hand is five quarters cushion to BK unless they have more revenue locked in. Not immediate danger but over my threshold again.
I think 60m is a huge float for a $1 stock because contrary to popular myth, mutual funds rarely buy $1 stocks. Hedge funds might, but they will flip the first good spike because they are short-term traders. With average volume at 410K per day, it's almost impossible to budge a 60m share float.
That said, a few funds are nibbling here - Carnegie, Grover and Fahnestock. It would be interesting to see if any of these funds have made public comments on AVAN. Their stakes amount to $2-3m each, barely enough to pay a mutual fund company's phone bill for a month. Pocket change.
Related thought on float - when stocks have so many shares outstanding, the odds of them making a significant EPS profit are very low. A 10m stock means a $1m profit is .10 EPS. The 60m stock only makes .016 for the $1m profit.
The insider buying is 10 months old, for trivial amounts, about $75,000 spread over several officers. Insiders own almost no stock at all - unless they have options they don't care where the share price goes.
Those are the general parameters I look at when someone says "what do you think about ABCD?". Remember I am ignorant about biotech, so I will miss the next BIG drug development like I missed the last 456. |
