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Why We Don't ¨Bet The Farm¨ In Biotech

May 05, 2021 10:08 AM ET6 Comments
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  • In ROTY's live chat, I've shared a number of ¨pound the table¨ names lately where my conviction is quite high (especially for ASCO to 2H 2021 period).
  • Such stocks have the ideal mix of derisking/downside cushion, near term ¨needle moving¨ catalysts, clinical momentum, solid management teams, etc.
  • In these situations, it's highly tempting to go ¨all in¨, invest $$ you need for other purposes, take out a loan, use margin or other unhealthy practices.
  • Investing/trading in biotech should be seen as a business, with rules in place to ensure that the business survives (and thrives) across all market conditions and all eventualities.
  • If you haven't already, write down your guidelines and principles to ensure you follow them. Make changes & improvements along the way as you learn. It's a neverending process!

The above says it all- just something I wanted to put out there ahead of an incredibly exciting ASCO/EHA period for us.

In 13+ years of investing, I've learned the hard way to implement such practices as:

-Having a maximum allowed portfolio weighting (regardless of how bullish I am on a particular stock or situation) 

-Surround myself with bears, skeptics, people who care enough and are willing to play devil's advocate 

-Requiring concrete downside cushion/derisking in each of my holdings (get burned when I forget this)

-Take partial or full profits/risk off the table ahead of binary events (especially those where I lack an edge)

-Run the 5 Minute Portfolio Rundown exercise to objectively determine where my conviction for specific holdings has changed. Each day should be seen as a blank slate, asking oneself ¨why do I own this name and is it the best possible use of my capital?¨ 

While I haven't posted on my blog in a while, you can find my trading guidelines and principles, learnings from winners losers, and other such info as a good place to start.

Cheers and remember the best decision is one that allows you to sleep well at night,



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Disclaimer: Commentary presented is NOT individualized investment advice. Opinions offered here are NOT personalized recommendations. Readers are expected to do their own due diligence or consult an investment professional if needed prior to making trades. Strategies discussed should not be mistaken for recommendations, and past performance may not be indicative of future results. Although I do my best to present factual research, I do not in any way guarantee the accuracy of the information I post. I reserve the right to make investment decisions on behalf of myself and affiliates regarding any security without notification except where it is required by law. Keep in mind that any opinion or position disclosed on this platform is subject to change at any moment as the thesis evolves. Investing in common stock can result in partial or total loss of capital. In other words, readers are expected to form their own trading plan, do their own research and take responsibility for their own actions. If they are not able or willing to do so, better to buy index funds or find a thoroughly vetted fee-only financial advisor to handle your account

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