I have received a number of requests via email or comments asking for 'VFC's Take' on numerous stocks that readers of have found. I'll do my best to address as many as I can, as long as everyone keeps in mind a few things:
- I have not thoroughly researched all of the stocks that I'm about to comment on. I've done the initial Due Diligence (DD) but my opinions are mostly based on my first impressions of the stock. I'm merely providing VFC's Take, as requested. Use that as a starting point to do your own DD.
- Don't get testy if I don't like your stock. Remember, this is just my initial impression and I take into consideration some variables that other people don't, that's why VFC's Take is not always the mainstream impression.
- I appreciate all the recent feedback, and keep the stock tips coming; this is a great forum for all investors of all levels to share tips and insights. There's a whole lot of stocks out there, but there's only a few gems. Let's keep trying to find those gems.
VFC's Take on AEZS
Comment from a reader:
Thanks for your article here on AEZS! I decided to sell not too long ago to lock in my profits (eventually I just decided to sell all), and got out in the mid 2s... Now I'm glad I did it.
VFC's Take: As shares of AEZS were cut by 60% on Monday after Phase III results for Cetrorelix were less than stellar, the drop could be a valuable reminder to small investors - or any investor - why it is important to at least take some profits on any run leading up to trial results. Those that didn't, and there are some out there, got burned today - although many who bought for below thirty cents were still able to get out with significant gains.
Maybe even more important a lesson is that today's AEZS price action is a demonstration of why it's better to stay on the sidelines if you've already missed a run than to chase a stock that's on the rise. Those that bought this stock, or chased it, for over two bucks on anticipation of positive results were left hanging on Monday when the stock crashed.
We all make mistakes - I still regret not suggesting investors take some money off the table when INSM ran to over two dollars - but the important thing is that we learn from those mistakes.
That being said, I'm happy to see that the reader who posted the above comment made some big gains on this stock and did the right thing by realizing profits before the bad news was released. Whether or not you leave some money on the table through news is up to each investor and their tolerance for risk - but the important thing is that by selling some after a run guarantees that at least you've made something off your investment.
Just to be clear, I'm not a big fan of 'buy the rumor, sell the news', although it would apply here - because had results been positive, then the stock would have doubled, not been cut in half. I'm a fan of 'protect your investment by selling enough profit on the rumor to satisfy you if the news is bad.'
An example of that strategy is DNDN a couple of months ago; I sold some shares for $7 just before the Phase III IMPACT results came out in order to realize some gains, but had I sold everything on the 'rumor', then I would have missed out on the run to $25.
As for AEZS's Monday drop; Ordinarily I'd suggest looking into buying some 'just in case' shares after a big drop like this one, but in this case I suggest just cutting the cord moving on to another speculative play because of the following reasons:
- the company will now need to raise significant cash to survive,
- Sanofi Aventis (NYSE:SNY) will probably cut the cord themselves, and
- the rest of the pipeline is years away from paying off.
However, if the stock drops to the fifty cent range or below, then it might be worth the risk of holding for the long term based on the remaining pipeline.
Pharmacyclics (NASDAQ:PCYC), for example, was another stock that took a huge dive after a trial failure a couple of years ago, and after some time passed and stock remained low, the remaining pipeline hit the more advanced stages and again became a decent speculative play which I've once again started accumulating.
It could be that AEZS may turn out to be a worthwhile investment again at some point down the road; but for now, cut the cord and stand clear.
But keep it on the watch list and if the price drops low enough to entice you to buy a few 'just in case' shares for the future - then bite, if it suits your investing profile.
Disclosure: No position in AEZS, long PCYC.
MJNA.PK: This stock has been thrown my way by a few readers over the past month or two and I thought it was about time to respond.
VFC's Take: I've been watching shares of Medical Marijuana for a little while now, but have not yet taken the leap into buying shares on the pink sheets because I've been holding back waiting to see if I could take the market potential for the product seriously - let alone the company itself.
However, it's starting to look like MJNA may be worth the risk of buying a few shares now and waiting to see what happens in the long term. Here's my reasons why:
- Marijuana for medicinal use, based on recent televised news segments and recent recognition by Forbes, seems to be gaining acceptance and traction in the market place.
- When compared to currently prescribed and abused narcotics, Marijuana looks tame in comparison, especially after the Michael Jackson situation.
- The politics are playing right; the current Congress wants to tax anything and everything and along with the legalization of on-line gambling in the US, medical marijuana would bring in additional tax revenue.
- If medical marijuana does become a widely accepted treatment, this company - while already growing throughout California and even into Canada - is primed to take full advantage of the market.
- The company is demonstrating commitment to validating itself in the general market place, in part by under taking the necessary efforts to list the stock on the bulletin boards vice the pink sheets. This move is undoubtedly a precursor to a desired listing on a major exchange - although a move like that could still be a long ways off.
Because of the above reasons I consider an investment in MJNA a good risk/reward play for the future, but I wouldn't go crazy buying just yet. While the stars look to be slowly aligning for medicinal marijuana use, there's no guarantee that it will gain traction in the national market and California alone will not be enough to support signficant growth, in my opinion. Remember - there are still a whole lot of puritans in this country that will fight this tooth and nail.
That being said, I'm a fan of buying a few shares now - because this is the ground floor if the company and it's product do gain traction - with the intent of buying on the dips.
You never know which way the wind blows in national politics, and all it will take to send shares of MJNA flying is an indication that medicinal marijuana use is being looked at as the real deal and not just a punch line for some Cheech & Chong jokes.
It could be worth buying a few shares now with the intent of holding for the long term and seeing what happens. The investment could turn into nothing if society decides not to accept marijuana use for medicinal purposes, but on the other hand, this company has the foothold if the idea takes off.
Disclosure: No positions.
NEOL: From Alejandro:
Hello VFC, I don´t want to be annoying, but if you could tell me your thoughts (VFC smell test) about this new share (NEOL) that I have bought, I would be very thankful. I have been watching it for a while and doing my DD, and I think it has a big potential to be a hit.
Thanks in advance! and I wish you had a good time with your family.
VFC's Take: First of all, sharing a stock tip with other potential investors is anything but annoying. Various opinions and insights form the basis of sound investments - even while speculating.
As for the NeoPharm stock, I'll admit that - because of the fact that it trades for a quarter, is loaded with potential and is flying under the radar - it passes the VFC 'smell test' as a worthwhile risk/reward play.
For the cost of a good night out on the town a small investor can purchase a thousand or so shares of this company - which has various cancer-treating products in early stages of development - and be handsomely rewarded if any of the pipeline candidates makes it to late stage trials. On the other hand, if the products fail and you lose the investment - you've only lost a night out but saved a hangover, and maybe a few liver and brain cells that are then free to be destroyed at a later date.
In addition to the cancer-fighting pipeline, the company has early stage products that would treat various brain ailments, pulmonary fibrosis and asthma.
For the risk of a quarter per share, NEOL has the potential to be a winner.
However - while the risk/reward looks good with this one, it's also important to keep a sceptical eye. It's still a speculative play and the company has been around for some time without producing results as of yet.
Go play, but make sure you spread your investments around - don't put all the eggs in the NEOL basket.
Disclosure: No position.