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Trading/Investing Secrets: Your Pendulum Profits

Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

As you know, the most lucrative investments are in the biotech sector.

Just as I wrote in the prior blog, biotech outperformed all the benchmarks for the past 5-years.

But how do you capture the most outsized profits?

As you can see, one of the ways is to buy certain rallying stocks.

Contrary to conventional wisdom, a rallying stock will rally further.

Powering the rally are various catalysts brewing in the pipeline.

These include upcoming drug approval and data release.

In rare situations, that also means a buyout or an acquisition.

Though it doesn't occur often, you can see that plenty of IBI stocks getting bought out.

Some examples include Tesaro(TSRO), Corium International (CORI), Kite Pharma(KITE), Juno Therapeutics (JUNO), Sparks Therapeutics (ONCE), Aimmune Therapeutics (AIMT), etc ...

That aside, there is another secret: you buy into a stock at a special time to reap the maximized profits.

Here's what I meant ...

Imagine the share price of a stock is driven by market sentiment.

And sentiment swings like a pendulum.


In other words, sentiment will swing from extreme pessimism to extreme optimism. 

During extreme pessimism, your stock valuation is depressed way beyond the company's true worth (i.e., intrinsic value).

This may occur due to some approval delay. Market misunderstanding or fear of the stock also causes a pendulum shift in the negative direction.

Like a storm that eventually clears up, you can bet that market sentiment will move toward neutral, optimism, and ultimately extreme optimism. 

Given that the share price is tied to sentiment, the best time for you to pick up shares is during periods of extreme pessimism.

But you have to make sure that it's only a temporary difficulty.

Think back to March this year when the Coronavirus pandemic first hit. Most stocks dropped like falling knives. 

That's when I recommended you to bring out your fire powder to make big purchases.

In just a month later, you'd banked multiple folds had you pick up shares during that time.

Source: Yahoo Finance, adapted by IBI

The other example is Lipocine (LPCN) ...

As you know LPCN gained "tentative" approval of Tlando today.

The tricky part is that LPCN has to wait until March 27 2022 for Clarus' Jatenzo exclusivity to launch Tlando.

Like a jackhammer that hit investors, the market sentiment swung all the way to extreme pessimism.

As such, the stock tumbled by over 21% and another 6.8% in the after-hours.

Nowadays, investors/traders want profits immediately. If they don't get it, they'll sell.

That's the society that we live in nowadays. And you can use it to your advantage.

Though LPCN can continue to trade lower, I believe it'll rebound strongly in a year. 

If you can wait, you have a huge advantage over the rest of the market.

In my view, you can expect this stock rally robustly months into approval (i.e., late 2021).

That's when the sentimental pendulum will swing near extreme optimism.

All that being said, you can make big money in biotech, not knowing these secrets. But if you know these secrets and act accordingly, you can make a lot of money.

With uber profits, you can buy that yacht or Ferrari that you wanted. 


Now, the LPCN story also reinforces the need to be patient.

Moreover, no matter how good you are, you will experience periodic and temporary paper losses.

Of the 10 IBI stocks that you buy, you can expect 2 to become multi-baggers, 3 to perform above average, 3 average, and 2 losers.

Right now, LPCN is that losers.

With time, the sentimental pendulum swings in the opposite direction to make it a winner.

If you want in-depth/timely coverage, community interaction, higher-level & more profitable research, check out IBI.

I do a lot of stock research and recommendations inside IBI. And I help you become the newer and better you. Some of our big winners include CRISPR Therapeutics (CRSP), CryoPort (CYRX), Intra-Cellular Therapies (ITCI), Axsome Therapeutics (AXSM), etc ...

At IBI: Everyone is getting smarter. Everyone is respected. You don't feel like a fool. And you’re a part of something bigger than yourself.

Inside IBI, we stay ahead of the market.

I'm so confident in the value of my service that I'm giving you a 2-week FREE trial, money-back guarantee.


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

As a medical doctor/market expert, I'm not a registered investment advisor. Despite that I strive to provide the most accurate information, I neither guarantee the accuracy nor timeliness. Past performance does NOT guarantee future results. I reserve the right to make any investment decision for myself and my affiliates pertaining to any security without notification except where it is required by law. I'm also NOT responsible for the action of my affiliates. The thesis that I presented may change anytime due to the changing nature of information itself. Investing in stocks and options can result in a loss of capital. The information presented should NOT be construed as recommendations to buy or sell any form of security. My articles are best utilized as educational and informational materials to assist investors in your own due diligence process. That said, you are expected to perform your own due diligence and take responsibility for your action. You should also consult with your own financial advisor for specific guidance, as financial circumstance are individualized.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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