Well, here we are, just four more reports to go in the 2022 contest. I’ll try to do most of the wrap-up commentary on the next to last report, so the final one can come out in a jiffy, and charity contributions might go in before the end of the year, if that’s a consideration. (In the same way some scientists make sure that they are available for phone calls from Sweden in the first week in October, perhaps DIEGOSAN and GENEGURU might check the postings an hour or so after the end of the last trading day.)
Don’t forget, only 17 more shopping days until St. Sylvester’s day, aka New Year’s Eve, and your last chance to make choices for next year’s contest. For my cut and paste pleasure it helps if the submissions have separate lines of text for each choice in a format like “BBWT, 10%, The best little biotech in West Texas LLC” . By including a human readable stab at the company name you give a possibility to recover from from a garbled ticker symbol.
If you care to know why this report is late, check out the discussion after the Report.
It was a good week. Heck, I’ll even call it a very good week, if not the best, so there’s lots of good news *cheers and the sound of popping champagne bottles*. The NASDAQ Composite puts on a gain of +2.1%. That’s good. Their Biotech index is almost double that (+4%), even better. And, maybe best of all, the usually pokey S&P Biotech index took the ribbon with a return for the week of +5.8%!
Now, looking at the big mover stocks of the week we see ... GNCA up a lot more than +500%… eh. I wondered if other parts of the Top/Bottom five, less obviously insane than GNCA, are also not worth commenting on. My conclusion is that what we’ve been using, the percentage change “(<this week> - <last week>) / <last week>”, is too prone to emphasize the “wrong” stocks and miss some that we should have caught. For the Contest the goal should be to select the stocks making the largest changes in portfolio value, since at the end that’s what we care about. In dollar terms that is “(< this week> - <last week>)*<number of shares> = (<this week> - <last week>) * ($100K * <fraction> / <purchase price>”. If you assume that all portfolios weight each choice the same (say 10%), then the size of the shift will be proportional to “(<this week> - <last week>)/<initial purchase price>”, a dimensionless number This week the report rates stocks by both measures.
Here is a table showing for this last week which issues are now included or dropped when you use my proposed measure for what is a “significant" change.
Added
|
Dropped
|
Symbol
|
YTD % Change
|
Recent % Change
|
Recent Change / Initial Price
|
Symbol
|
YTD % Change
|
Recent % Change
|
Recent Change / Initial Price
|
ALDX
|
63.00%
|
19.414%
|
26.50%
|
GNCA
|
-99.36%
|
572.727%
|
0.54%
|
BRTX
|
-15.30%
|
30.827%
|
19.96%
|
AFIB
|
-72.43%
|
34.286%
|
7.04%
|
FGEN
|
16.88%
|
18.989%
|
18.65%
|
RNLX
|
-86.86%
|
33.974%
|
3.33%
|
HROW
|
43.29%
|
13.891%
|
17.48%
|
SEEL
|
-33.74%
|
31.148%
|
15.74%
|
BIOA-B.ST
|
118.64%
|
-8.560%
|
-20.47%
|
AMBS
|
-86.88%
|
-25.000%
|
-4.38%
|
OPTN
|
8.02%
|
-6.915%
|
-8.02%
|
NCNA
|
-65.34%
|
-14.948%
|
-6.09%
|
CGEM
|
-21.52%
|
-8.810%
|
-7.58%
|
DYAI
|
-66.81%
|
-11.765%
|
-4.42%
|
With only three stocks in both lists, they are clearly sensitive to different behaviors. GNCA a 570% rise in price only adds 0.54% of the original investment to a portfolio. A 10% position, an initial cash value of $10,000, nets only $54, showing how huge gyrations of GNCA are, in terms of the overall contest, inconsequential, validating the appropriateness of dropping it. In the other direction, ALDX this week improved its contribution by +26.5%, or $2,650 for an initial $10,000 investment, worth paying some attention to. But due to its prior substantial gain, this resulted in only a 19.41% relative improvement and not large enough to make it into the old “top 5”, and missing the recent announcement of positive progress with the FDA in approving one of its drugs. The number two YTD performing stock, BIOA-B.ST, costs its proponents -$205 for a 10% weight, obviously more important than knowing that if you have AMBS then last week your portfolio took a -$44 hit.
In conclusion, unless there is a clamber to continue with the old way, future reports will use this new approach.
In the YTD performance standings of individual stocks, I discovered an error in how CBIO was treated, so instead of being in second place with a +128.85% return, it instead slips to 4th place with +116.63 (*), if you include the value of the extraordinary dividend of $1.43/share. From the stock price alone CBIO’s performance would be a more typical loss of -39.82% YTD. The Ballad of CBIO, after the Report, gives the details.
Like the market generally, and the biotech composite indices, it was a good week for the contest portfolios, up +4.3% for the week on average (+4% for the median). All but 4 portfolios were in the black for this week, though most couldn’t keep up with +5.8% S&P Biotech Composite.
I now report last week’s dollar change to the top ten portfolios' total value. By this measure GENEGURU had a great week, thanks to a 12.5% position in FGEN and 18.8% in GLYC, adding $10K to their portfolio. They are now in second place and become the third portfolio that has had a positive YTD return. (DEW DILIGENCE was also in the black back in September.) The first place portfolio, DIEGOSAN, also had a good, but not as good a, week as GENEGURU, adding $6.7K. GENEGURU’s superior performance closed the gap behind DIEGOSAN to less than $4.5K, so small that the final weeks of the contest are a real horse race. (Third place MOPGCW is behind by $16.3K; still in the running, though a long shot). As for the rest of the top ten, this week produced some reordering in the 5th through 10th places. After only a single week’s absence, ROCKY9 has returned to the list, adding to the twenty one other times he has been in the Top Ten.
And now … The Report.
|
Report Time Ranges
|
|
|
From
|
To
|
Recent
|
11/25/22
|
12/2/2022
|
YTD
|
12/31/2021
|
Index Performance
|
|
Symbol
|
Recent
|
YTD
|
|
^IXIC
|
2.09%
|
-26.74%
|
^NBI
|
3.97%
|
-6.64%
|
^SPSIBI
|
5.77%
|
-23.34%
|
Share Performance
|
Recent
|
YTD
|
Top 5
|
Bottom 5
|
Top 5
|
Bottom 5
|
GNCA
|
572.727%
|
AMBS
|
-25.000%
|
MACK
|
203.84%
|
GNCA
|
-99.36%
|
CABA
|
41.954%
|
XFOR
|
-23.333%
|
BIOA-B.ST
|
118.64%
|
ATHX
|
-97.18%
|
AFIB
|
34.286%
|
NCNA
|
-14.948%
|
FENC
|
118.64%
|
VLON
|
-95.98%
|
RNLX
|
33.974%
|
CDTX
|
-13.799%
|
CBIO(*)
|
116.63%(*)
|
PLXP
|
-95.84%
|
SEEL
|
31.148%
|
DYAI
|
-11.765%
|
PCVX
|
88.78%
|
PTE
|
-95.22%
|
An Alternative Share Performance
|
Recent Change as % of Initial Price
|
|
Top 5
|
Bottom 5
|
CABA
|
38.522%
|
BIOA-B.ST
|
-20.467%
|
ALDX
|
26.500%
|
XFOR
|
-18.341%
|
BRTX
|
19.959%
|
OPTN
|
-8.025%
|
FGEN
|
18.652%
|
CGEM
|
-7.583%
|
HROW
|
17.477%
|
CDTX
|
-7.551%
|
Top Ten Portfolios
|
|
Top 10 Portfolio YTD
|
YTD(Portfolio - SPSIBI)
|
Rec
|
Rec(Port. - SPSIBI)
|
Rec. Change Total Value
|
DIEGOSAN
|
7.21%
|
30.55%
|
6.65%
|
0.882%
|
$6687.39
|
GENEGURU
|
2.78%
|
26.12%
|
10.80%
|
5.029%
|
$10017.34
|
MOPGCW
|
-9.06%
|
14.28%
|
4.89%
|
-0.881%
|
$4238.97
|
TECHNETIUM
|
-15.39%
|
7.94%
|
2.49%
|
-3.275%
|
$2059.37
|
BRENDAN_49
|
-17.95%
|
5.39%
|
8.38%
|
2.607%
|
$6342.41
|
DEW DILIGENCE
|
-22.25%
|
1.09%
|
0.39%
|
-5.385%
|
$298.56
|
A.J. MULLEN
|
-22.37%
|
0.96%
|
6.40%
|
0.630%
|
$4669.41
|
HORSEINALFALFA
|
-22.69%
|
0.64%
|
5.01%
|
-0.756%
|
$3690.75
|
ROCKY9
|
-22.79%
|
0.55%
|
6.51%
|
0.737%
|
$4717.32
|
BIOSCIENTISTSA
|
-23.07%
|
0.27%
|
3.57%
|
-2.203%
|
$2649.37
|
Average and Median Portfolio Performance
|
|
Avg Recent
|
Avg YTD
|
Median Recent
|
Median YTD
|
|
$2,890
|
-32.56%
|
TOMATO
|
$2,588
|
JACK HARTMANN
|
-31.90%
|
4.30%
|
KMASTRA
|
4.011%
|
Post Script:
I apologize for the delay this week, due to the time it to took to learn the correct way to treat this year’s events for Catalyst Biosciences, Inc. (CBIO). Although only held by a single portfolio, CBIO offers some unusual circumstances (and entertaining press releases), and had at least three mentions in these commentaries before now. However, these mentions were far enough apart in time I didn’t connect some pretty important dots and learn that Yahoo Finance had completly misrepresented (and continues to misrepresent) what has happened, until this weekend.
It turns out that CBIO’s story, independent of the contest, is both entertaining, and educational. The following links, mostly to the CBIO corporate site, tell the tale:
See what the CBIO corporate site shows for this year’s stock price history:
Compare Yahoo’s price history with the earlier graph from the company web site.
CBIO Press Release: IP sold for (a lot of) Cash which is what makes the story interesting
CBIO Press release: What the Board wants to do with the Cash but this shadowy entity, JDS1, seems to have other ideas
The CBIO Board of Directors Lays all its cards on the table with a very frank discussion of what JDS1 is trying to do, and why
After vanquishing the JDS1 Dragon, the fruits of victory care distributed but it's the strangest ordering of record, ex dividend, and payment dates that I’ve ever seen.
Besides the official press releases, here’s an outsider's take on what was happening which shines a little more light on JDS1, (spoiler: “a convicted felon who was found guilty of 21 counts of racketeering, money laundering and fraud” seems to be involved.)
Unfortunately, it wasn’t until this weekend that I achieved complete understanding, and able to remove the errors in the spreadsheet, but this took a little time.
What follows is a recap of the evolution in that understanding.
At the start of the year, only a single participant included CBIO in their choices, BIO-TITAN setting an allocation of 10%, or $10,000. Yahoo Financial had CBIO’s closing price on Dec 31, 2021 as $0.914, putting 10940.92 shares of CBIO into BIO-TITAN’s portfolio.
Nothing much happens until the report for 5/27/2022, where CBIO went from $0.38 the previous week to $1.23, all on the Monday. I learn that the previous weekend CBIO had announced that AVTX had purchased certain intellectual property of theirs for $60 million in cash ($1.91/share). Our weekly report called out CBIO’s change of +223% from the previous week, which moved it into second place for the YTD performance, +34.57%. BIO-TITAN’s portfolio was number one for that week, up +24%, though their YTD performance was just below the cut-off to join the top ten . Later on their choice of CBIO makes a large enough contribution to find their name in the list five times in June and July.
Since CBIO was retaining some products described as under development, I naively commented that investors thought of the event as a way for a cash-strapped outfit to continue working on what’s left. I didn’t know that the Board had already announced a plan to cease active development, and monetize all the company’s assets with as much as possible to be returned to shareholders. I might have been tipped off if I read more of CBIO’s press releases and learned that the total headcount was down to six. The increase in share price of only $0.85 priced in just 45% of the $60 million, which was due in no small part from the market’s fear that predatory JDS1 would succeed in its proxy fight to wrest control from the current Directors, which was likely to significantly reduce just how much of the $60 million stockholders would eventually see.
I next noticed CBIO when writing the report up for September 23. CBIO had popped up in the big losers category dropping from $1.91 the previous week to $0.489 at the end of the report week. Yahoo had no news links providing an explanation, but this looked very similar to the way other stocks had when there was a split (or a reverse split). As usual for this situation, I googled “CBIO split”, which I expect to provide a link to a press release from the company announcing the split, its size, and effective date. Not this time. Instead there was a link to a site helpfully named “ splithistory.com”, which included a split on September 22 of 3803 shares for 1000 shares. (I erroneously labeled it a reverse split in the report but that’s not what the site said). I commented in the report what an oddly specific choice this was for the split amount.
I manually updated the spread sheet to reflect the change. Now BIO-TITAN's number of shares of CBIO increased from 10940.92 to 41608.32 shares (I split the “residual” 940.92 shares as well). To keep calculations consistent, I updated the purchase price at the beginning of the contest, and any other pre-split price, in the spreadsheet for CBIO, dividing by 3.803. The corrected purchase price of $0.2403365 gives the correct, increased, number of shares for a 10% fraction of the initial portfolio. The previous week’s price corrected to $0.5022, very little change to that week's close of $0.489, a small variation in the Market Cap. This is to be expected since splits (reverse or otherwise) are neutral when it comes to the market cap. Likewise BIO-TITAN's total return, and their position in the rankings were unchanged.
It was a few months later that I learned about the return of capital for CBIO in an extraordinary dividend of $1.43/share. Since biotechs were considered unlikely to be dividend payers, there was no provision in the rules for handling cash returns like this where the company continues to exist (as opposed to when a company is sold for cash). I frankly rushed my estimation of the impact this dividend had, and convinced myself, erroneously, that there was no significant effect on BIO-TITAN’s portfolio’s performance and could be ignored.
Last week I made a suggestion for a rules change that would provide for tracking such distributions, that is, reinvesting them into the paying stock. When revisiting CBIO’s event as an example, I now correctly saw $1.43/share should have produced $15.6 thousand in cash, not exactly insignificant. I assumed that the “share” in $.43/share referred to shares before their split, plausibly as the announcement of the distribution amount was before the date of split. But then I saw the distribution ex dividend date was the same day as the split! Could the order of the events been first split then distribution? Was it possible that BIO-TITAN’s gain was 3.8 times larger? But trying to understand how this all should have played out in the stock prices, I knew that that the distribution of this size, must have made a huge difference in the market cap, but Yahoo’s stock price history showed hardly a ripple.
Compare Yahoo’s price history with the earlier graph from the company web site.
Qualitatively similar, except at the ex dividend date there is no change to the market cap for Yahoo, but you can clearly see one in the company site graph. Believing the company, I had to conclude that the split is entirely bogus (explaining why CBIO never had a press release announcing it), not withstanding other sites, and Yahoo’s, on line notes and clear back correction to the price history before the “split”. It’s a mystery how/where/why Yahoo and SPLITHISTORY.COM determined that the price change on Sept 22 was a split. (By the way, the page for CBIO in TOTALSHARESOUTSTANDINGHISTORY.COM, from the same guys that did “ SPLITHISTORY.COM” said that before Sept 20, the number of outstanding shares had been 119.7 million shares, the split dropping the number of shares to 31.49 million. This describes a reverse split completely at odds with their reports and Yahoo’s price history.)
To unwind the split effects from the spread sheet, I went back to the original number of SBIO shares for BIO-TITAN, and changed the share prices back to where they had been. Now a change to the market cap occurs with the distribution, and it all makes sense now. I corrected CBIO’s YTD return by adding the capital return per share to the share price. As I note above, this shifts the value slightly compared to the earlier calculations.
In BIO-TITAN’s portfolio I used the cash from the distribution to purchase shares in his other holdings, exactly as if the money had been generated by the sale of CBIO. I needed afterwards to manually return the CBIO number of shares to its previous number, rather than the zero the spread sheet automatically set with a sale. This use of the distribution cash is different than the rule proposed last week for handling ordinary dividends: reinvesting the cash into shares of CBIO at the then current price. That approach doesn’t make any sense when the distribution is part of winding down the company, and turning out the lights.
So what have we learned? Yahoo sometimes makes mistakes, and it's a good idea to double check their take on events with what’s on the corporate web site. Also, stay away from situations that include JDS1, or any of its brethren. Far, far, away.
Until next week. |
