Mike Rabe's  Instablog

 

Once you assimilate the news, be able to separate the significant news from in insignificant. As far as being an investor, insignificant news is any news that will not impact the financial markets. The investor who runs around asking, “What happened, what happened?” is not the investor who creates stock market wealth.

 
2. Watch for major uptrends and downtrends in the market. October 2007 was an example of a major downtrend. Those who spotted it avoided major losses. March 2009 was the beginning of an historic uptrend in the markets. Those who ignored that market shift missed out on historic gains. 

Two recommended services for spotting major shifts in market trends are Comtrex (mysmartrend.com) and VectorVest.com. Both services utilize sophisticated technical analysis and have a solid track record of spotting major uptrend and downtrend shifts in the market. 

Since 75 percent of stocks move in the general direction of the market, in most cases it is recommended to buy on uptrends when the market is projected to rise and sell on major downtrends when the market is projected to decline.

 
3. Become aware of major trends and demographic shifts in our society. Read publications outside your field.   Spend some time with teenagers. Hang out with those who are on the cutting edge in their fields.

4. Watch out for the X factor. The X factor is the unforeseen event that blindsides all of us and has a major impact on our portfolios. September 11, 2001, is a prominent example of this.   This unforeseen event did more to rock the financial markets than almost any other single event in US history. Always ask yourself, “What would I do if an unforeseen disaster rocked the markets?” Could I handle it?   Remember, the unexpected happens quite often. While you cannot predict what the event will be, you should always ask yourself, “What would I do if the market crashed tomorrow?” If you think that is ridiculous, remember – no investor was thinking a thought like that on September 10^th, 2001.

5. Become more of a trader – reconsider long-term buy and hold strategies. This does not mean becoming a day trader – something I absolutely do not recommend. 
 

But reconsider staying in stocks for multiple years without significant gains. Do not fall in love with a stock. Keep an eye on your portfolio on a weekly (if not daily) basis. Do not “put stocks in a drawer” and forget about them. Be willing to pocket profits. 

7. Take Warren Buffet's advice - treat each stock you consider purchasing as if you were buying the entire company.  Do as much due diligence as you can.

 
8. Don’t overdiversify – Warren Buffet does not invest in mutual funds. He prefers to invest in a handful of companies that he believes provide the best risk/reward ratios.   Diversification is important – but overdiversification lowers returns. 
 

We’ve all heard “don’t put all your eggs in one basket.” And that’s good advice. But spreading your eggs into too many different baskets will lower your returns and can become unmanageable. 

 
9. Investment decisions should be made by rational thinking, rather than emotional thinking. Emotions get in the way of logic. As much as possible, try to take emotions out of the equation. Emotional trading does more to ruin portfolios than just about anything else. Brain/neurological research has shown that we humans are consistently prone to thinking traps that can lead to bad investment decisions. And this includes high IQ investors. 

We must control our emotions, especially the two biggies – fear and greed.   Make more rational trading decisions and fewer emotional trading decisions. Become aware of some of these thinking traps that ensnare investors. 

10. Take full responsibility for your portfolio. Even if your money is managed by someone other than yourself, take full responsibility for the performance of your results. Don’t be afraid to fire your broker or money manager.   If the Bernie Madoff scandal taught us anything, it is, take full control of your investment decisions. Do not blindly allow anyone else to do it for you.
 

>>News Update - November 9:  US FDA Grants OMAPRO™ Priority Review.  This will greatly speed up the FDA decision on OMAPRO™ and this makes ChemGenex an even more intriguing opportunity for investors.<<

Back in July, I did a SeekingAlpha article on a little known Australian biotech company, ChemGenex (CXS.AX, CXSPY.PK). ChemGenex is an Australian pharmaceutical company developing personalized oncology medicines. You can read my July article here: http://seekingalpha.com/article/150945-chemgenex-late-stage-pipeline-is-undervalued

 

Since that article, ChemGenex has filed its NDA with the FDA (in September). This was a huge milestone for the Australian biotech.

 

This month, the FDA is expected to make a decision on whether OMAPRO™, ChemGenex’s lead drug, is eligible for Priority Review. Receiving Priority Review can shorten the average amount of time from application to a decision by the FDA by as much as four months. Granting of Priority Review would significantly speed up market launch and expected revenues. 

 

If the FDA approves OMAPRO™ in 1H 2010 (could come as early as March), ChemGenex should begin to see major revenues in mid-2010. 

 

ChemGenex expects to file its MAA with the EMEA (European Medicines Agency) for OMAPRO™ toward the end of the year. The latest buzz in Australian biotech circles is that a partnering deal for the European market could come before Christmas.  ChemGenex will go it alone for the U.S. market, but if ChemGenex secures a deal with a partner for the European market, it would reduce the need for additional capital later next year.

 

The Company expects to have approval and commercial launch for OMAPRO™ in Europe by Q4 2010. By this time next year, ChemGenex could have substantial revenue streams from OMAPRO™ in the two largest pharmaceutical markets in the world. 

 

ChemGenex’s stock on the Australian market has been on a huge run in recent days. However, ChemGenex’s ADR (CXSPY) has been in a slumber the past few weeks. That will not last long and it provides an opportunity for keen investors in the U.S.

 

For those considering a biotech with strong upside potential for 2010, you might want to take a close look at ChemGenex. In terms of risk/reward ratios, I currently give ChemGenex one of my highest ratings.   The Company has a solid management team and 2010 should be a breakout year for the stock.

 

Disclosure: Long ChemGenex

With holiday season right around the corner, countless youngsters are creating their wish list for Santa. For serious investors, it’s a good time to create a shopping list for stocks that will outperform the market in 2010.

 

I present three stocks that have excellent prospects for beating the market in the upcoming year.  All three of these stocks have outstanding risk/reward ratios.

 

>>>> Rambus (RMBS) – Rambus is a memory chip maker that has been embroiled in patent litigation for several years. However, the Company’s scheduled antitrust trial against Samsung Electronics, Hynix Semiconductor, and Micron Technology (MU) in January presents a potentially huge value driver for 2010. 

 

The three defending companies in the lawsuit are accused of colluding against Rambus' computer-memory technology. According to court documents that are available to the public, the “Three Amigos” appear to have incriminating evidence against them.

 

Rambus is seeking $4.3 billion in damages, which could be tripled by a California jury. Given the potentially staggering amount of damages that could be awarded with a court victory, a pre-trial settlement is certainly a possibility.

 

Unless the trial is delayed again (it was originally scheduled to begin in late September), Rambus will be in play in the coming months. With either a settlement or a court victory, RMBS could be a multi-bagger in 2010.

 

>>>> Chemgenex (CXS.AX, CXSPY.PK) – Chemgenex is an Australian pharmaceutical company developing personalized oncology medicines. The Company currently has very limited revenue, but their lead drug, OMAPRO™ (for leukemia patients), has successfully completed clinical trials earlier this year. Chemgenex filed its New Drug Application with the FDA in September. If the FDA approves OMAPRO™, Chemgenex should begin to see major revenues in mid-2010. 

 

Chemgenex expects to file its MAA with the EMEA (European Medicines Agency) for OMAPRO™  toward the end of the year. The Company also anticipates a partnership deal with a big pharma for the European market. By this time next year, Chemgenex could have substantial revenue streams from OMAPRO™ in the two largest pharmaceutical markets in the world. 

 

Given its close proximity to a major market launch, Chemgenex presents a terrific stocking stuffer.

 

For a more in-depth background on Chemgenex, see my July 2009 article:

 

>>>> Bioelectronics (BIEL) – Makes inexpensive, disposable drug-free anti-inflammatory devices.   For penny players, Bioelectronics provides one of the best risk/ reward ratios out there.   BIEL is an extreme trade (it currently trades for around 7 cents per share).  

 

Bioelectronics is currently an FDA play. Bioelectronics CEO, Andrew Whelan, had told me in an email this week that the Company is expecting to hear back from the FDA any day now on its application for 510(k) clearance to market its Allay Menstrual Pain Relief Patch product and OTC clearance for its ActiPatch Therapy products.

 

Bioelectronics  is also expected to announce in November statistically significant study results that compared the effects of its ActiPatch® Therapy product to acetaminophen in the form of Extra Strength Tylenol® for the treatment of delayed onset muscle soreness (DOMS).

 

With three of its five FDA filings completed, Bioelectronics is now focusing on revenue generation. Bioelectronics has made no secret in the fact that it hopes to be acquired by a large industry player down the road.

 

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These three stocks present an outstanding chance to not only beat the Street in 2010, but to beat it soundly. But like all holiday shopping deals, these discount sale prices will not last much longer.

 

Disclosure: Long RMBS, CXSPY, BIEL