(79% YTD) Biostar Pharmaceuticals position review

Jan. 09, 2017 10:39 AM ETBSPM1 Comment
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Medium-Term Horizon, Value, Long/Short Equity

Contributor Since 2016

second year student of Economics at the University of Bath, 

Junior analyst at SOBIC (students of bath investment club) 

Collegiate stock market analyst for seeking alpha

As some of you may know, My last position on Biostar pharmaceuticals has been quite a winner.

Back in July last year after a few months of watching the explosion of volatility in this niche Chinese Nanocap, I decided to get into the numbers on the firm to see just what was going on with this apparently sporadic value change. Back then the firm was seemingly on its last legs and bankruptcy for the firm could have been better viewed as euthanasia for the ailing firm, cash flow issues and regulatory nightmares put the firm on deaths door. (To see my analysis of this look for my last blog post!)

Putting in a sell recommendation on the firm on the 12th of July 2016, if you were lucky enough to short it, depending on your timing you could have been in with a 52% short gain on the position at its worst, but as this was a 6 month position focusing on its true value, at closing date, its hit a still remarkable 33.8% gain on the position as of the 6th of January 2017.

prediction ($) 3.5
recommendation short
average period % gain 18.16548463
highest period % gain 52.00945626
average daily close ($) (12/07/16-06/01/2017) 3.4616
close date % gain 33.80614657
length of position (days) 178
annualised % gain 79.0408486

Now by no means was this a riskless position, the variance is in line with other Nanocaps, pretty high, but with a distinct difference in market value and true value from this stocks hysteria last year the direction of the price was easily visible, and if you were to combine this as part of a well structured portfolio, this volatility is easily tamable.

With quite some luck they have pulled through the period in question rather surprisingly, but their environment has changed sufficiently that it will need another updated analysis piece soon.

Stay tuned, you might want to be here from the next big catch.

Supporting Documents

  1. BIostar_report__better_.pptx

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