Closing Zalicus Short Position: A Lesson In Getting The Timing Right

I am closing my recommendation to short Zalicus (ZLCS), which was issued on July 6th, when the stock traded at 2.60. The stock closed at 1.16, -55% from my short recommendation. It's important to annualize your returns when you analyze your returns in trades. This is useful because it reminds you that time from entry to exit is one of the most important (and overlooked) variables in trading. I've worked at funds that tried to make money in 1 day, 1 month and 1 year timeframes. There is no "right" or "wrong" but any experienced investor knows how to calculate IRR. A 55% gain in 4 months annualizes to a 272% gain. In other words, if you exited my Zalicus recommendation and entered into another 4 month 55% gain, and yet another one, you would make 272% in one year, or nearly 4x your money.

I belabor this point because it's vital to compounding money quickly. Sticking with a stock forever is very rarely a great idea, unless it's profoundly undervalued or has a spectacular management team (rare things in our industry!).

Anyway, Zalicus has been pitiful. Synavive is still worthless and Exalgo is generating limited royalty revenues. The company is running out of cash and I am NOT recommending an investment in it. I'm sure it will continue to trend lower, but the risk/reward isn't good enough for me and the return this far has been spectacular.

For those of you who are curious, (short) Mesoblast (MBLTY.PK) is my best idea at the moment. I'm convinced Mesoblast stock will fall 50%+.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.