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Marc Gerstein

 
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  • A Triple Play Income Strategy [View article]
    Right; there was another comment above that also referred to using options. I'm not especially experienced with that sort of thing, but it does seem to be a worthwhile part of an income-seeker's arsenal. With market rates and yields as low as they are, having more strategic alternatives is definitely preferable to having fewer.
    Feb 7 10:52 AM | 6 Likes Like |Link to Comment
  • Just One Stock: The Biopharma Veteran Facing a Landmark Stem Cell Trial [View article]
    The tone of a lot of this discussion on both sides is a bit disappointing because here, unlike so many other situations that provoke message-board arguments, the issues here are so interesting. As I said in some of my earlier posts here, GERN intrigues me even though it’s not the sort of stock I’d fiddle with on my day job and I’ve been giving it a lot of consideration. In other posts, I took issue with LVI in the framework he presented and suggested it is perfectly legitimate to apply different analytic contexts to different kinds of companies.

    Interestingly, though, the more I’ve been looking, the more closely my view is moving to that of LVI. Let me see if I can rephrase the essence, or at least one important aspect of, his case without the too-bad-profits-are-passe type rhetoric.

    Suppose a business is starting up and ultimately, it will need about $500 million in capital to get off the ground (plant construction, R&D, etc. and allow for a reasonable return to those who contribute the capital). Suppose, too, it decides to get the money from the public markets. (That alone is highly debatable: a lot of companies go public before they are ready, at times when they should be relying on angel investors and venture capitalists, but to keep this thread going, let’s table that point).

    They raise $500 million and spend it. And lo and behold, they’re not yet off the ground. They raise another $200 million. They go through that and are still not off the ground. Time passes, the time to get going gets pushed further and further back into the future, and they keep raising capital to keep alive.

    Finally, the great day arrives. Everything is in place and they burst onto the scene and start generating revenues and profits; big revenues and big profits. The profits they earn were far more than originally expected. Not only can they provide a reasonable return on $500 million of capital, it turns out they can provide a reasonable return on $1.5 billion of capital!

    Sounds great. :-)

    One problem: To get going, it turned out that had to raise $4 billion of capital. :-(

    The business is great. It’s much better than expected. The company is the toast of the scientific community. And the shareholders got hammered.

    This, I think, is the scenario LVI has been suggesting. It’s pretty extreme. After all, the story I just presented is fiction. But in the case of GERN, the fiction does appear at least somewhat relevant. 15 years is a long time, an incredibly long time, to get up and running and during that time, the capital invested has been rising and there’s no reason yet to believe the process has finished.

    So to me, the key questions for GERN are (1) the size of the eventual business opportunities (I don’t yet have a clue), (2) the amount of capital that will likely have been accumulated by the time GERN is ready to go commercial (considering where GERN is now, I expect it will be a lot more than the company now has), and (3) whether or not we can expect that the business opportunity and capital base will be reasonably aligned (I have no clue).

    I completely understand that not everything can be quantified reliably. (Back when I was at Reuters, we were working on a subscription product unlike anything in the market. A manager asked me what revenues would be in year five. I suggested he ask again in five years at which time I’d be able to tell him. He was not pleased.) I get the vision thing. I’m into it and willing to speculate off the day job if the story intrigues me.

    But GERN, having been in the public markets for about 15 years and having already accumulated about $500 million of market cap seems to have gone beyond the point of being able to give the sort of answer I gave. I at least had a pretty good idea of how long it would take to get the product off the ground, an idea of how much money it would require, and good reason to believe the product would at least provide a reasonable return on that. The question was about upside potential beyond the minimum. I think a bullish case for GERN needs to be supported by at least that.
    Feb 6 10:23 AM | Likes Like |Link to Comment
  • A Triple Play Income Strategy [View article]
    I'm scratching my head, here, over the user who clicked on the thumbs-down icon to wobble186's comment. What's the problem? I'm really curious. The forward-looking assessment seems pretty reasonable to me. Ditto the last paragraph. The back-testing platform I use is not conducive to accommodating ongoing contributions (it's built to help one assess whether or not a strategy has potential, rather than to serve as a financial planning vehicle). But people certain can and have built assets quite nicely as described in the last paragraph.
    Feb 5 11:06 AM | 5 Likes Like |Link to Comment
  • A Triple Play Income Strategy [View article]
    The period since last summer has been particularly strong and often friendly toward the higher-end of the risk spectrum. And you definitely should take a bow for great timing on catching some early surges with real estate exposures. But you may want to stay flexible, because the conditions from which you benefited are not the sort likely to persist indefinitely.
    Feb 5 11:00 AM | 3 Likes Like |Link to Comment
  • The Trend Has No Friend: Today's ETF Pullback Choices [View article]
    If I were approaching any of these names as a fundamental investment, which I typically do, I would be thinking of those things. But this is a purely technical, sentiment-based strategy that gets rebalanced every week. So in this particular context, I don't fear high valuation. At times in this series, I muse about the possibility I might find some of these ETFs interesting outside this model; i.e. as part of a regular portfolio. EWF is not in that category.
    Feb 5 10:52 AM | Likes Like |Link to Comment
  • A Triple Play Income Strategy [View article]
    I would if I could .The best I can do at this time is the out-of-sample performance; the screen shots from my brokerage account (which do include distributions).
    Feb 4 10:18 AM | 1 Like Like |Link to Comment
  • A Triple Play Income Strategy [View article]
    Yield pig? Did you see this and other related material: "So be careful about being a yield hog. That approach is risky . . . for real!"
    Feb 4 10:17 AM | 7 Likes Like |Link to Comment
  • A Triple Play Income Strategy [View article]
    I'm not sure what leads you to assume I advocate chasing yield for yields sake. Recall this from the article: "So be careful about being a yield hog. That approach is risky . . . for real!"
    Feb 4 10:16 AM | 6 Likes Like |Link to Comment
  • A Triple Play Income Strategy [View article]
    Yes, price only is not the ideal presentation basis. That's why I included the real-time screen shots from my brokerage account performance. Those do include the impact of dividends.
    Feb 4 10:14 AM | 2 Likes Like |Link to Comment
  • Just One Stock: The Biopharma Veteran Facing a Landmark Stem Cell Trial [View article]
    Thank you for your thoughts. Obviously, you've looked quite a bit into GERN.

    As you may have guessed, my inquiry now is focused on that 15-year span mainly to assess overall credibility: to figure out what was going on over such a prolonged time period while equity issuance was building market cap up to $500 mill. or so.

    I probably will dig a bit now into the primary documents from the past. I appreciated the roadmap you've supplied.

    Assuming I come to agree that efforts in the 15 year period were legitimate, my remaining question (and here I'm starting to circle closer to LVI's issues) is the revenue potential of the drugs now being tested. I like visionary stories, by I am wondering about the NYC co-op conversion analogy: where the buyer winds up paying several thousand a month in maintenance, not for the upkeep of a beautiful building but to meet a set of completely unrelated obligations the sponsor piled on via mega-mortgage before as he took the cash and ran. I don't mind dilution if its essential that the company have the capital they need to engage in the activity that attracts me. But I'd hate to have to cope with all that other capital if it has no relation at all to the ongoing business.
    Feb 4 07:31 AM | 1 Like Like |Link to Comment
  • Just One Stock: The Biopharma Veteran Facing a Landmark Stem Cell Trial [View article]
    Thank you for the reply.

    I get the point on the stem cells taking so long. As to Telomerase, if I read the article correctly, that was a recent discovery.

    Was the company working on other things in the past. This company does seem to have a long history as an R&D shop. Have there been a lot of failures in the past?

    And despite all the years of R&D that produced, it seems, no meaningful revenue, they have,in fact, built up quite a market cap by being able to issue shares. What is it that's been grabbing the Street's attention for so long? Is it all stem-cell expectation? I guess I'm asking if oncology has always been a sideshow with investors waiting for something to happen in stem cells? Is that the case?
    Feb 3 08:01 PM | Likes Like |Link to Comment
  • China Education Alliance: A Fantastic Investment Opportunity Courtesy of Short Sellers [View article]
    I looked closely at this stock and wound up backing off. A lot of what was said in opposition to the Kerrisdale report satisfied me (I'm OK with the prepaid card payment method; Chinese school children don't typically have credit cards and don't seemlikely to buy things via electronic bank transfer), and I am deeply troubled by a hedge fund having worked so hard to bash a tiny stock in which it had a short position.

    That said, I was bothered by two of my own discoveries involving the web site.

    First I could find absolutely no traffic information at all on compete.com, which has such information on all the other on-line China education companies, even those that are smaller than CEU's site. This differs from the tracking site mentioned by management in the call. The latter is point in time. The former has historical info.

    Second, I got from management the trial user id and password and surfed around the site, as per the invitation they offered on the conference call. I did so with my 15-year old niece who just moved here from China (a member of CEU's target market) standing next to me explaining what I was seeing. Most of it seemed legit (assuming the site was, actually, operational before the recent controversy). But on the home page there was a conspicuous personals area featuring photos of college age women in what seemed to be a party mood. I don't know more because my niece did not feel comfortable translating that part to English.

    I raised both issues with the company. They didn't respond.

    Another issue is plain-vanilla business prospects: My niece confirmed the tests I downloaded were good for the sort of practice for which they were intended. But on line isn't the only way to get them. Besides free downloads (there is the question of quality comparison), a lot of kids get practice tests the old fashioned way. They buy them in book form, just like kids in the U.S. do (Barnes & Noble sells lots of exam practice books). We're not dealing with high-powered Shanghai professionals; we're dealing with ordinary kids throughout the country who don't have their own bank accounts, charge card, or debit cards.

    Maybe CEU is fine. I don't know. But there are lots of other tiny companies, including tiny Chinese companies, whose stocks have at least as much upside potential and aren't clouded by issues such as those that surround this one.
    Feb 3 01:16 PM | 2 Likes Like |Link to Comment
  • Just One Stock: The Biopharma Veteran Facing a Landmark Stem Cell Trial [View article]
    Actually, I haven't written a paper on GERN, and I never said I'm bullish. I'm trying to make up my mind.

    Your remarks in other comments about GERN's failure to accomplish much or anything in 15 years raise a very serious concern. This, rather than reference to valuation etc., is a big problem in the framework I see as suitable for assessing a company like GERN. I'm willing to step outside my comfort zone and look at a story stock, but would still want to know if the story is credible.

    So I'd like to pose a question for those who are bullish on GERN: What changed between the 15-year history and the present that gives more credibility to the here-and-now prospects? I'm not presently for GERN. I'm not presently against GERN. (Although when I thinking in terms of real money stakes, a stalemate means I say out, which, so far is the case with GERN.) I'm just trying to gather ideas, and beyond GERN, possibly learn something about how to approach biotech, which is not an area usually deal with.
    Feb 3 10:29 AM | Likes Like |Link to Comment
  • A Triple Play Income Strategy [View article]
    Price return only. So the graph is understated. The FolioInvesting charts are total return.
    Feb 2 05:40 PM | 2 Likes Like |Link to Comment
  • A Triple Play Income Strategy [View article]
    I hear you.

    The junk bond component is the easiest component to swap for something else. I presume you've been cautious about the REITs pending more comfort on their prospects and dividend-paying capability, but MLPs seem like a good vehicle.
    Feb 2 05:36 PM | 6 Likes Like |Link to Comment
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