Watching Stemline Therapeutics (NASDAQ: $STML) since its IPO has been a great experience, but it begs the crucial question, what is it worth? The company hit a high in October this year with a share price of $47.25 and then dropped below the 20$ mark only two months later. Those that have been following the stock would do well to remember the mid- January rally and subsequent slow decline in share price. The stocks true value may be grossly different at times than the market indicates, but the volatility may be part of the stocks allure in itself. Stemline Therapeutics is not a company to that should be held for a prolonged period of time, as the stock will endure ups and downs quite frequently. Instead, Stemline Therapeutics is a stock to be held momentarily, and followed very closely for quick trends in the market.
Stemline in itself is not a commodity, meaning it is not as volatile as financial instruments in the commodities markets, however, I would not recommend holding it for prolonged periods of time, in this case a few months. Its volatility is a trait that has to be embraced, so holding the stock for long portions of time truly negates the advantages that high volatility can have and exposes the stocks to long term trends, which have clearer effects but are risky. Waiting for announcements on clinical studies and reports on prospects expose Stemline stock to the familiar risks and rewards that small cap pharmaceutical companies have, rising on good news from clinical studies, rallying as a products nears the market, and collapsing when regulatory hurdles, or bad results, harm a product and its potential is curtailed or the entire drug is abandoned. The advantages of trading with Stemline comes not with the traditional market fundamentals that govern similar firms in its position, instead, Stemline is a stock that can best be taken advantage of by a more active investor crowd.
I want to make sure that the message is clear, market fundamentals, and in this case the continuing progress toward marketable products, are key to the success of the company, and news regarding the company's progress should be researched and understood by all investors. However, given how the huge swings in the market in the last few months have occurred with the absence of news, the advantage this stock has for up to date investors is that it allows them to take advantage of huge price swings in a manner of days. As long as the news about the company itself does not change, Stemline will not only mimic trends in the overall stock market, but will also act as an indicator so to speak, rising above market trends when they are feeling bullish and crashing harder when they fell bearish. This is best explained by the rally in pharmaceutical stocks prior to the January 15 rally, and then when STML caught on to the trend its market valuation rose faster than that of its peers and that of the industry without an advancement in their products or an announcement of some new product by Stemline
Now a change in the status quo of the product line could very well negate this indicator effect temporarily, or altogether, but that is more for the concern of medium and long term investors. For active investors trying to time market trends, this stock can be a very valuable asset to take advantage of market trends, though when announcements occur, be ready for a deviation from the indicator effect.
The Stemline stock is not for anyone. For those thinking past short term gain, Stemline has a generally positive outlook on its prospects as a company. For those investors hoping to time the market to best benefit from the ups and downs of investor sentiment, Stemline should be a priority or at least receive a consideration when it comes to an active portfolio. Its volatility has the rare quality that it can be harnessed for financial gain, unlike the great majority of stock where volatility is a symbol of worry or panic. But I am waiting for more signs of a rapid rally, probably more drawn out and less extreme than the spectacular rally of mid-January, but the opportunity to get in will be greatest if the stock were to slump a little bit before rebounding. My advice would be to keep STML in the back of your mind while trading, and maybe even put in a limit trade for it. Should It be purchased and start to rise, keep a very close eye on it, because Stemline's rallies tend to happen quickly and then the share price tends to fall quickly after. Stemline is the stock you should own to keep you on your toes.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: I am receiving no compensation, monetary or otherwise, from any companies or entities for this post. These opinions are my own and solely my own.