Re: LGND Relative Performance
P2, I like your work, it illustrates how deeply undervalued LGND is relative to the SPX.
Underperformance doesn't imply, ipso facto, undervalue. The only conclusion one can reach from my numbers is this: to the extent one has been in LGND at any point in the last four years, one has missed a significant leg of an historic bull market.
While comparison to the SPX is useful for some purposes, there are those, myself included, who compare LGND's performance to the small and mid-cap biotechs... the Russell 3000 is a much better representation of the overall US market... There are other decisions imbedded in all of this, that being the choices to be invested in stocks in general and in US stocks as represented by the S&P 500 rather than a broader US index such as the R 3000.
Your statements imply that the SPX is a peer to other indicies, such as various forms of the RUT, and that comparative index selection is subjective. I can hardly disagree more. The SPX is the benchmark of performance for money management. The choice not to be in stocks is ridiculed by comparing the cumulative return on 90-day T-bills against the SPX. Money managers live and die by the SPX. Hundreds of billions of dollars are kept in Index (read "SPX Tracking") funds, precisely because many investors have decided to avoid capitalization risk, sector risk, and company risk.
I will grant you that there are many reasons why LGND has lagged the market. Small caps and biotechs have, generally, done poorly in this leg of the bull market. "Why" should not matter one whit to a person who has lost money in a period where a passive index investment returned 70%.
...LGND's performance has been roughly typical of it's peers. On the other hand, I think LGND's business development has been superior to most others within it's fair comparison (peer) group and further supports the undervalued case.
I'll repeat my concession that capitalization and sector risk have aggravated the obvious company risks that being in LGND entails. However, the "peer-performance" thesis you have presented represents a remarkable shift from the "long-term-performance" thesis we keep hearing about on this thread. LGND has had poor long-term performance, and the putative strength of Ligand's business case, while perhaps not retarding the stock, has by no means enhanced it.
A retired Wall Street heavy put it succinctly: "If you're three years early, you're not early. You're wrong."
I sincerely hope you and other LGND holders find RIGHT soon.
Pý |
