swrdfsh and the rest,
I've read this and Yahoo's thread since the "event" on Thursday, and I have to join in with BOTH the Econ 101 and the Bio 101 crowd here. While this is a great science breakthrough, in humans, it is old news in regards to other species. They've had ES cells for like 17 years now in other animals. They just aren't easy to find. But, putting together Pharma and Biotech deals doesn't happen in a week, they take a long, long time. The lawyers and bus devo pros see to that. It isn't like GERN is hurting for cash and needs to rush a deal thorough, they are thinking long term, not next week. And, if GERN mgmt is smart (which they sure seem to be), they haven't pre-negotiated this deal with A pharma, they will let this go to a bidding war with ALL pharmas, this will take time, probably on the order of months.
Thus, based on Econ 101, this sucker is a great short and will drop this week and probably for the next couple of weeks. I don't think it will go to its preannouncement price of mid-$7s, (unless the macro market tanks ala August through October, and then all bets are off) but probably in the high single digits to low teens.
Oh, yeah, note that this research announcement came out on the wires not ONLY after the close on Thursday when the main press release from the company and the other news services came out, but PRIOR TO THE CLOSE MIDDAY during trading hours Thursday by a news organization that goes by AFP (not sure who they are?) and was posted on Yahoo at 2:04 PM EST Thursday. Looking at a chart, I figure the AFP release came out at about 12:50 PM EST Thursday when the the runup began from about $7.80 to $9 7/8 with a high of $10.50 on about 4M shares trading, almost all of which traded after 12:50 PM EST. Never saw this AFP release posted here until probably a day later. For once the yahoos at Yahoo beat SI for information!!! Here's a link to the Yahoo post:
messages.yahoo.com@m2.yahoo.com
Now, the real killing IMHO will be made by those who bought Thursday PM, sold and then shorted Friday AM, to ride back down to reasonable levels and then cover the shorts and buy long for the next news run up when a deal is struck some time down the road.
Myself, I am not playing this with cash, (I don't have a short agreement in place on my brokerage account, I play biotechs long with real money) but I am playing it short on paper in our Model Biotech Portfolio over on the VD's Model Portfolio & Discussion Thread here at SI, where I shorted 2000 shares at $19 just a bit too early on Friday about 10 minutes after the open (this one fooled me with its double peak almost shorted more in the $23 range). Here's a link to the short for SI members:
Message 6314606
And here's a link to the same stuff for you non-member lurkers:
Message 6314606
We started this Model Portfolio in spring of 1997 and post the results daily, and always love to hear fellow bio investors suggestions.
From an Econ 101 standpoint, I think that a short is the way to play this to make money NOW. It will surely fall back to earth as the 41M share per day momentum trading levels are unsustainable as the last 5 1/2 hours of Fridays chart shows. Although I could see another gap up at the open Monday as the uninformed put in market orders before the open based on reading stuff this weekend and the market makers take advantage of them. It might also be a good time to short more shares. There could also be another spike this week when the issues of PNAS, Science, Nature and the like actually reach their audience in the mail and the real science moles stick their noses out of their labs thinking BIO 101 long enough to buy in time to learn lessons in Econ 101 in the next few days.
Now as far as Bio 101 goes, this is great stuff. It has great LONG TERM potential. But, the momentum players are not going to support this stock price waiting for it and the deals to happen, they will have moved on to the next HOT story. GERN will come down to earth in the meantime, just like earlier this year and last year too after those HOT stories. History will repeat itself. However, after the dust settles, if you are a long term investor in biotech, it will be a good one to buy and hold long term, not just for the long term, but because history will repeat itself and I figure GERN will get some more of those great news driven spikes again in the next year where you can dump and short again, only to buy back long after it settles back. Just look at a two year chart to see the trends.
Yes my friends this is both a great long term bio investor stock and a great trader play. Friday and for a few days, I've a trader mentality (although for bookkeeping purposes on the Model Portfolio, I won't be churning all day and driving my partner who keeps the books crazy, but just shorting and covering soon). For the long term on GERN, I definitely plan to buy a long position for the Model and hold it for more of these events and for the long term prospects.
Oh, and for a point of reference, I'm a bioentrepreneur with an MS in Zoology (Molecular Biology) and have been in the operations of early stage biotech businesses since 1985. I also understand the macro and micro market forces at work here as I study these stocks. For those of you who bought in at the peak, unless you've got real patience and nerves of steel, IMHO get out early Monday or you will be underwater for a long, long time waiting for the Bio 101 effect to kick in. For you playing on the Econ 101 side, may the forces be with us, as I am sure they will be. The stock market has no real respect for science over the long term.....just $$$$.
For those interested in Biotech investing, come see us on the VD Model thread:
Subject 14492
or non SI members can lurk at:
Subject 14492
The main rule is be polite. We don't like to put up with the short versus long body slamming. We do love contrarian viewpoints. And humor and discussion is always welcome (within reason).
The best to you all!
Rocketman
PS: Go 49ers!!! |
