KO is a great business with a great brand name. Five years may not yet be a long enough holding pattern to realize returns on that hypothetical investment. :-) But I agree that price matters, when one is choosing among a market of opportunities. In each of the last several years, IDPH has been offered at 50% off its peak price, without a concomitant reduction in growth rate. That is when I have added, and I agree that 60 is more than I am presently willing to pay for new shares. But it is less than I am willing to take for old ones. Why? I'm not always right in my evaluation of how high too high is. Consider that, if Rituxan becomes a $3B drug and Zevalin hits 200M in sales, IDPH will have more than 500 million $/year of free cash flow to use to grow the business. You can do a lot of good things with less. One should not underestimate the potential market cap of this company. But, again, I can see why one might want to put new money to work elsewhere.
But if we get the kind of gut-wrenching correction that some of the more persistent and annoying shorts are yapping about, I would personally use that as yet another buying opportunity.
<<It is never too late to buy shares in a good business.>>
I'm not too sure about that in the pure sense of the word. If I had bought KO in June of 1996, I would be underwater right now (not counting dividends). A great business, but it appears $50 a share was too much to pay for it in 1996 if the plan was to hold it long term. So price matters, even in a great business. Of course if you get in before the price accounts for a significant amount of profit growth that that company ends up getting, then yes, you can pay what appears to be a high price and come out well. But if you get in just as the expected profit growth begins to flatten out, then you can sit for a very long time with no gains at all. That is my concern with Idec. The price and market cap are allowing for very good growth for some time to come. But then what, even if Rituxan triples to $3 billion a year and Idec's profit triples and they get a couple of hundred million a year from Zevalin, the PE at the current price will still be significant. I am not saying they can't discover their way into new growth products, I just can't quantify that at this point (future product visibility). They could buy into a product or two, or even buy a biotech that gives them plenty to work on, and that well could happen. But it appears to me that a lot of things have to go well in order to pay $60+ and have a good return over the next few years. They will might do that, but I prefer to pay a cheap price, and I missed my chance to do that. However, the market sometimes gives a guy a second chance. If not, there are other pitches to swing at.
It is never too late to buy shares in a good business. All the original shares of IDPH I owned are long gone due to FIFO accounting and my propensity to lighten up on advances and buy back in on declines to stabilize asset allocation. So the shares I own now here have all been purchased in the last two years. My present cost basis is around $25 per share anyway, since we've had a couple of nasty corrections. I have taken a lot of money off the table along the way, and put it to work elsewhere. Some of it is in IMMU, in fact, as well as a lot of other companies.
A long time ago in a benchmarking exercise I determined my success rate in choosing stocks to buy was between 60 and 65% (on the basis of whether they went up significantly afterwards). I haven't checked recently, but I'd guess that ~ 60% is still about right. On the other hand, my success rate in deciding what stocks to sell was not great, as about 60% of those went up afterwards too! Do you see a pattern here? :-)
So, on average, one wants to be a buyer of the stocks of businesses with good future prospects(here is where that 60% number comes from - one's ability to recognize a business with decent future prospects), keep expenses down, and only build up significant positions in high quality businesses that one understands well. Bottom line is that I keep money at work here because IDEC's employees and management have done very well by it. I look at their approach not as a "single product" approach, but a "focus on the most promising product at a time approach," and there is a big difference between those two things. But I keep the exposure limited and I diversify because biotech is an uncertain and shifting business.
If you like small banks, check out HOMF. It is the main bank in the area of Southern Indiana where I grew up, and they are pretty well run, trading about 2-3 bucks above book value, paying a decent dividend, and just came out with improved earnings. I think there's likely to be 20-30% upside potential there over the next 12-18 months, and one needs these small wins to stay ahead of the market. No guarantees, of course, but I like the odds, and the balancing of risks.
I also still like the long-term odds here as well, but so does the average institutional holder, which is why IDPH is richly valued. In a competition for ownership, sometimes the folks with the deepest pockets win the right to share in the future earnings by paying up for the privilege of ownership, just like a regular auction. An auction is exactly what the market is, so this should not be surprising. Of course, sometimes at an auction there are quality items that do not fetch their proper worth due to a lack of interest as well, and this is where the buyer who does his/her homework can really make out like a bandit. :-)
I like your style Corrchess. I have a small bank holding that I've had since 1988 that I've never sold any of. I bought 2,500 shares before it went public, and the share dividends and one split have grown it to a little over 14,000 shares and the current price is 20% less than what I paid. That is my oldest stock holding.
I started buying the IMMU in 95 and started watching Idec at the same time. Now if I had been buying Idec instead of IMMU in equal shares I would have about $40 million worth of stock right now (ouch).
My problem is that I hardly ever taken small positions in a stock once I've determined I want to own it. That can be good and it certainly can be bad. I've had two of my picks (that I can remember offhand) go bad on me, and they cost me over 50 grand each, and I'll say a lesson is learned when that happens. I'm not sure how much I would learn loosing $500 on a stock, I think I'd just move on without really contemplating what my error was in analyzing that company (or just write it off to timing).
I still follow Idec and have read this board for years, learned a lot from the board and watching the trading of the stock. I think the thing that kept me from buying was that it appeared to be a single product company and I wasn't sure how successful that product would be. IMMU had several products in earlier development, and my feeling was that over time more than one would be successful and increase the odds of success. That still has to play out, but I will say I am thrilled at Rituxan's success and yes, I wish I had put some money on that horse too.
Only counted days when market was open in previous post. My 10-year anniversary of buying my first IDPH is Jan. 24, next week. Long at one level or another every single day since. One day at a time. Here's hoping for another 10 as good as the last!
If you only knew. I do things in the market that scare my wife absolutely to death, and that would make the average reader of Investors Business Daily roll on the floor in laughter. I know, I occasionally get one of those ROFL LMAO responses - it's OK, most (but not all) work out alright. Each is a measured risk, in cases where I judge from my experience that the odds are in my favor over the time frame I am prepared to wait (usually months or years, not days, as the odds of a successful trade increase with holding time). I don't go short; I don't use options; I keep my margin balance at a level at which I am *usually* comfortable. One margin call in 7 years, and that was Fall 1998 when Nobel Laureates (LTCM) were getting their clocks cleaned, so I can't beat myself up too badly on that. Not fun, but not atypical market behavior when one is dealing with small or mid cap stocks, many of which have high betas. But given that my long term average return is 15-18% per year above present margin rates, again that is a case where I have statistics on my side.
The truth is that I am probably more of a trader at heart than a long-term investor. But I have looked at IDPH for about 2500 days in a row and felt like it was worth holding onto at one level or another at least one more day. So I guess that makes me an investor here. Happy to be one still.
As for IMCL, what matters is that management changes are made, credibility is rebuilt, and the results of positive studies get equal play to worst-case possibilities. If that happens, then the market will likely respond positively. If not, I've limited my exposure by my choice of asset allocation (less than 1% of total capital). The market could decide to raise that, but I make about 20-30 calls like this over the course of a year, which is where the return comes from - "volume." :-)
Couldn't do this kind of stuff as an individual investor before we had the internet and $7 trades, but now you can, and without even watching the market every waking minute.
Corrchess, and I thought YOU were the conservitive one : )
It was raw panic, probably true, but if there is a three to five year period between now and possible approval I will be amazed if IMCL can hold onto a billion dollar vaulation near term, and that is assuming that the concensus is that it DOES work.
One of the things that got Imclone it's market cap to such high levels (half of Idec's) was the belief that they would get an accellorated approval using the phase ll trial as the pivital trial, that C-225 was so good that it deserved that treatment. That is gone now. I would imagine that we will see a full blown phase lll trial now.
But the market will do it's thing, including taking down several biotech's because the risk factor has suddenly gone up for drugs in trials. Kind of sad if there really was some hype going on for the sake of driving up the share price. I hope I'm wrong. It would be better for all biotech investors if C-225 had flown through the process.
Now if you had only gotten me in to Idec in 95 when I first started watching it : (
Come on, live a little. Today in IMCL we saw absolute raw panic, get me out at any price selling, over something as silly as a congressional appearance. OOOOH, Congress. Now there's a group that is likely to get to the bottom of these Phase III studies. Put that together with 30 class action lawsuits percolating, and you just have to love the chances that things will turn out just fine!
OK, so I don't have 100% confidence that Erbitux really works, and I have about zero faith in IMCL's management. But it is a lot harder to perpetrate a research fraud than gunslinging, hipshooting fund managers or congressional investigators or day traders would believe. Can it be done? Sure - but it's very unlikely that all of IMCL's research results were cooked the way that ENE's books were. Besides, there has been an awful lot of anecdotal evidence by independent parties about the efficacies of IMCL's treatments in the clinic. So, if anything, we might have here a large case of sloppy science, wishful thinking, and a management that oversold and underdelivered. In that case I lose a little money and move on. But I think the odds favor something other than a worst-case scenario at these valuations. And the upside is significant at these levels if it turns out only to be a delay in the path to acceptance.
That said, I should assure you that I also rebought some of the IMMU that I let go in the low 20's, and am prepared to put more serious $ there than in IMCL. I've also bought some AMGN and BGEN during this sector pullback, and if it keeps going, I'll keep buying here and there across a broad spectrum of biotech companies. If IMCL doesn't come back, many of the others will.
This sorry case again argues for minimizing one's single-company exposure to a level where one can afford the loss of one's entire investment in any single company. Even with the most ethical of managements, the best of business plans, and the greatest of market potentials, that still occasionally happens.
By the way, you NEVER have to apologize for posting a response to me! And if this pullback goes on a little bit more, you may even be able to realize your subliminal dream of being an IDPH shareholder. :-)
Corrchess, my concern with Imclone is that it still has a market cap of 1.5 billion and at this point has an antibody that may or may not help Chemo get a 23% response in patients who may or may not have failed Chemo before. A $1.5 billion market cap would give IMMU a stock price of over $30 a share and they have a drug in phase lll that has so far shown to have a response rate (in phase ll) of 40% to 50% of patients who have failed Rituxan. After that it has an interesting pipeline. If they have to start over with trials, I don't know how they can stay above a $billion valuation.
I know you know all that, but I was bored.
Enough is enough. After hours, in the mid 19's, I had to take a small flyer on IMCL. If they have a significant management change and come clean, it now seems like the potential long-term rewards in taking a position now are getting awfully close to outweighing the risks.
But I am not betting any money I can't afford to lose in total.
Whole sector being hurt by this. IMCL needs to get their act together quickly for everyone's good.