To All:About Integrity in Journalism;
In the March '97 issue of Individual Investor is an article under "The Contrarian" about North American Vaccine. The article represents one of two things in my opinion . 1) A blatant compromise in integrity in journalism or 2) Just an honest display of complete ignorance about their subject , in this case North American Vaccine,on the part of the writer and the editor of Individual Investor. Unfortunately either way I call it irresponsibility.
As a reader and long time subscriber I fine it is most disturbing . In this case I happen to be extremely familiar with the company and have followed their every move since 1992.
The article IMO is a pitiful attempt by ,and I'll quote this from the article, "one skeptic, who requested that his name not be printed", now that sounds more like a statement taken from a super market tabloid, not an investment advisory type magazine, who is IMO using Individual Investor to assist him in his "short" salvage efforts.
If the intent by Individual Investor was to present a contrarian viewpoint to their readers which may offer an investment type opportunity this represents a major disservice and I'll have more to say about that. It doesn't take a rocket scientist to know that the NVX shorts are in real trouble here. There has been a recommendation on the street to short NVX since it was $8.00 per share with a target of $3.00 per share. Today it closed at $27 1/2.
To be more specific I'll start by addressing the points made in the article .
Paragraph one.
Average daily trading volume last month was down to less than 60,000 share vs. 95,000 shares as stated in the article.
The short interest ratio referred to is even more astronomical and is more like 60 days to cover vs 39.
Important news will not more than likely drive up trading volume exponentially as the article states it would. Here is why IMO. 1) For all practical purposes the float is held by Funds and Institutions who consider NVX a very good long term investment and most of the stock held by individuals is held for the same reason. and 2) ironically, the intelligent investor who is long NVX interprets the extremely high short interest as a very strong contrarian signal that is very much in favor of the NVX stockholder.
The last statement in the paragraph made about short demand is IMO pointless. Fact is there is little stock available to short. The demand better be up with the stock approaching it's old time high if they are going to stand by there position and support the views expressed hear in this piece of jounalism. Other wise they should get in line and try to cover.
Paragraph two and three: Well here Individual Investor makes no quams and recommends that "experienced investors to follow the bearish herd":
and they state "North American Vaccine is wildly over valued"
Then to justify that statement they trash Abbott Labs and Chiron, then they trash Goldman Sachs and UBS Securities ; but conveniently, to support their bias contrarian viewpoint, fail to mention Buchingham Research, Penn Merchants Group, and Montgomery Securities, all of whom have BUYS on NVX.
Paragraph four: This paragraph is a perfect example of trying to make a convincing argument from ignorance and the contributing "skeptic" has taken control. The financials argument presented hear is pure nonsence and is deliberately designed to get one to think that NVX is in near financial trouble. The article states that NVX borrowed $86 million but fails to bring out that it is a convertible bond issue paying 6 1/2%, convertible to common at $25 per share.NVX did get $86 million in cash. Yes the interest payments amount to about 2.5 million every 6 months and the burn rate may be about $9 million a quarter, if you exclude any income.
But NVX has considerable income coming in from royalties, milestone payments, and fees plus revenue from Sweden and Denmark but the article fails to even mention one of these. Does Individual Investors overlook these things for convenience, to support their contrariain viewpoint, or out of ignorance? I call this irresponsibility.
The last Paragraph: One statement in this paragraph sounds all to familiar to anyone who has read what one particular short has been saying; for now I'll except that it is "one skeptic, who requested that his name not be printed"
Here is the statement: "....the company has to contend with such rivals as Lederle and Connaught Laboratories, both of which have already received FDA approval in the U.S. (all the more galling because Lederle filed its FDA application months after NVX did)."
Here is an example of taking a statement out of context for the convenience of adding spin and giving it different meaning to suit the originator's ( in this case we'll say the " skeptic") purpose.
Fact is both Lederle and Connaught only filed to extend the use of their DTaP vaccines that had already been approved. I frankly was surprised that it took them so long.
Well there you have it . This to me is an example of the media doing an injustice to the stockholders , in this particular case North American Vaccine stock holders, but more significant and what I hope would concern this publisher is the injustice that is done to their subscriber
who looks to Individual Investor for guidance and information to make important investment decisions.
It is this style of jounalism that makes the following statement quite realistic: "Fifty percent of what I read may be true, trick is to know which fifty percent. :-} |
