Tex,
If you really want to get sick, look at Millennium's chart. Back in early September, you could have bought the stock for around $13. And its bounced off against 21-22 several times and can't get through.
Much like Ligand, Millennium began its move well in advance of the announcement, which likewise was an anti-climax. Guilford, the beneficiary of Amgen's largess, has seen its valuation cut by a third since that announcement. Guilford's trajectory was a little more abrupt, but that probably suggests fewer people were involved and/or the deal was hatched rather quickly.
BTW, there's nothing wrong with your logic. The major problem development stage bios face is they "eat like a snake". That's a hopefully comical way of saying they live from one deal (or press release) to the next. After they've "eaten", skepticism sets in and there seems to be a period where they shrink back down to an equilibrium size (price).
I'm afraid these characteristics comes with the territory. IMO, we can not possibly compete with those institutional folks, whose performance is measured on a quarter-to-quarter basis, on an information basis. As much as we think we are "in the know", the truth is we're closer to the end of the information chain, at least relative to business factors. If you think about it seriously, who on the thread could call Susan Atkins and ask for a private lunch with David Robinson "to discuss business". We would get a polite but firm rejoinder that his schedule does not permit. Let one of the fund managers from Fidelity, the largest institutional holder, make a similar request, and the answer becomes "when can you work lunch into your schedule". This isn't bad or good. It's simply the realty of investing in this sector.
The real value of the thread has more to do with Henry and his considerable and patient efforts to reduce truly complex science to understandable proportions. But anyone that thinks these observations will move the stock to the next level is dreaming . Science doesn't move stocks; predictable earnings do. And the closer and more certain a company is to actually counting the cash, the better the stock acts. But the available appreciation is likewise limited because the potential results are "obvious".
Our best hope is to buy and hold for the long-term based on a realistic and considered judgment of the underlying science. This implies riding out some gut-wrenching dips and then waiting for an eternity for the price to recover as our institutional friends move in and out of the stock several times. But I strongly feel that's the right way to play this sector. Some people are very adroit traders. (Tex, your recent "sin" suggests you understand more about that side than I do.) But many others put their brokers in yachts and end with broken dreams for their efforts.
Sorry to be waxing so philosophical. The action the last several days has been quite sobering, even though I went through '72-74 and '87. At times like this, I think its important to focus on why we are making these investment and what a realistic time horizon should be.
Ted |
