Port24 update - back to 18% annualized

Last Friday was options expiration day for February. I made a good choice on selling the CLDA calls for $35 instead of $30, as it rocketed at the end of the week to $33.90. Similarly with NBIX, selling the $7.50 Febs was excellent as the stock closed Friday at $7.45.

So while that makes me happy, I'm even happier on seeing that I'm back to a 18.2% annualized return, approaching my third full year of this blog and the Portfolio24. Obviously I'd like to be able to point to a 24%+ return, but I've pointed out in past entries the two major things that have prevented that: A very large position in Elan that I continually refused to sell calls against (and that eventually went bad) and two fairly long periods of time (several months each time!) where I did no trading at all in the Port. I do not intend on repeating either of those mistakes!

Some housekeeping: I will be "transferring" the Port24 from a ficticious Scottrade account to a ficticious Zecco account later this week. Although I like Scottrade, and still have one IRA there, I have moved most of my accounts to Zecco. Although they have a $30/year fee for IRAs, the commisions there are $4.50 for stock and 4.50+ 0.50/contract for options, as opposed to Scottrade's $7 and $7+1.25/ commisions. The exercise/assignment fee is only $4.50 instead of $17. There are no account minimum or inactivity fees. Best of all, for accounts of $25,000 or more (or if you perform 25 trades per month), you get ten free trades a month. With the Port at $150K+, this will kill most commission costs and keep it as real as I can.

I will have to research a little to determine how much it would cost to transfer the actual positions from Scottrade to Zecco and I will hit my cash for that amount. As a reminder, I am keeping this portfolio as close to real life as I can. Before posting any trades, I actually look at the current bid/ask for whatever position I am trading and use those listed for the sale or buy. My real accounts tend to be slightly better on the executions because I can set a limit order and end up a nickel or dime better per option trade. That may not sound like much, but with an average 1,000 share lot covering ten contracts, a nickel difference ends up being $50.

I've been asked about my favorite stocks for 2011 and I have to say that basing anything on a calendar year is pretty silly. That said, I do have some stocks that I am in, and feel will do quite well over the next 3 months to a year time frame.

Celsion CLSN at $2.60 is something I have been buying hand over fist recently. I harbor no illusions that their interim look for summer-ish will halt the trial and allow early submission to the FDA (although it IS a chance), but they should easily run up to $5 or more before the summer in anticipation of the chance.

Neurocrine NBIX at $7.50 may be up and down a couple bucks either way in the next three months but I feel will enter 2012 in the double digits.

Delcath DCTH at $11.30 should hear from the FDA within a week or so, accepting their NDA. That may or may not move the stock, but I am certain that by the end of June they will get approval and be in the high teens, if not more.

Paramount Gold PZG at $3.90 (although not a biotech) is something I have had in my real money port since early 2009 around $1.25. I think they are the real deal, and will be double digits by fall.

Good luck to all. Thanks for reading!
Regards,
Trond

Port 24 update and new buys (Celsion)

Let's attend to the Port24 first... some activity today. I had $28K available and did not want to stall on my recent gains.

CLDA got approval and is at the $30 mark. I chose to keep the shares and sell Feb $35 calls for $1. I also sold Feb $7.50 calls on NBIX for $0.20 - the stock itself is at $7.50 right now.
Finally, I sold ONTY May $4 calls since it will be awhile since we get any news. With the stock at $3.06, it gives a 1% per month "dividend" while still allowing the sale at $4 if we do get any bonus news.

I bought 5000 shares of CLSN and 2000 shares of MITI. I have not yet sold calls since I think each will move upwards short term and allow better premium or better strikes than exist right now.

The Port now stands at $146,634.38, with $4,064.38 in cash and the positions and (calls) shown below-- a 46% overall gain and a 17% annualized gain. This compares, over the same period, to a -0.5% annualized gain in the S&P (SPY) and a 7.1% gain in the Nasdaq (QQQQ).

2600 CLDX (26)
600 CLDA (6)
400 DNDN
2000 NBIX (10)
7000 NNVC
7000 ONTY (70)
1000 DCTH (10)
600 DCTH
3600 PZG
5000 CLSN
2000 MITI

Real money wise, I have been buying CLSN hand over fist. They should have news this week of Japan restarting enrollment in the HEAT trial, after a planned halt and safety review.
Nanoviricides (NNVC) also gets some new cash, as they are involved in a dengue conference next week.
DCTH should get formal acceptance of their NDA very soon. I am holding this in real accounts as well, and will sell shorter term calls once it gets a spike around $12.

Regards,
Trond

CLDA and Port24 update (after options expiration)

Congrats to the CLDA shareholders who stuck through the approval process. Oh wait, the Port was one of those! :-)

I bought back the calls a week or so ago and so am holding the stock long in the Port - from a $15ish close of Friday, we got approval and a pre-market $25 price tag this morning.

Dendreon and Oncothyreon calls expired on me (a good thing - we keep the premium AND the stock) and my Elan and Sangamo were exercised (also a good thing, we got the premium and netted cash out at the strike price).

I now have another $27K to buy with. I'll keep you posted!

Regards,
Trond

MNKD, Port24, and real money update

MNKD received a CRL yesterday for Afrezza. I was almost all out here, but was truly hoping for and expecting an approval. Fortunately it appears that most of what the FDA is asking for can be provided within the next year or so. The stock price was only knocked down to the $5 in today's trading which I consider fair for the moment. I would expect it to come down some more in the couple months, and if it does go into the $3s or $4s I would be a buyer again.

I bought 3,600 PZG at $3.12 in the Port today; no options offered here but the price is simply too low for what is expected in their resource report sometime in Q1 2011. Hence this is only a trade, with a defined time limit of about 3 months.

In my real money accounts, I bought PZG and CLSN today. CLSN at $2.78 is simply irresistable, and is now my largest holding.

Regards,
Trond

Careful does it! And a Port24 update

I am hearing from all the various economists, bloggers, and folks I respect (market-wise) that we are due for a correction. I asked a month or so ago if you had your chair ready for when the music stops. I think you need to ask yourself that question again.


I put on one of my volatility plays last week: took TZA (bearish x3 small cap ETF, was at $15.04 at the time) and bought an equal number of Apr11 $15 puts and calls. I don't care what direction we go, as long as we move at least 4% in either direction in the base (~11-12% in the x3).
Though honestly, if we move up (down in the ETF, since this is bearish) I will probably sell the puts if they near a double. I'd hold on to the calls, as they will go up if we do get the correction I fear.

In the Port 24, I bought 2,600 Celldex (CLDX) this morning at $3.88 and sold the May $4 calls for $0.55 against the whole position. CLDX could well continue falling here, but May gives me a while to be right.

With this morning's prices, I'm currently at a 14.2 annualized return and still have $14,160 in cash to initiate another position.

In real money accounts, I'm very interested in PZG, DCTH and NBIX here.

Regards,
Trond

Port update - LXRX successful trial results

I sold all 7,000 shares of LXRX in the port this morning at $1.94. Also divested almost all of my real money shares too. Having bought exactly one month ago at $1.39, this is almost a 50% return.

PR shown below...

http://finance.yahoo.com/news/Lexicon-Announces-Positive-prnews-4130937110.html?x=0&.v=1

In real money, I am currently interested in DCTH, NBIX, and NNVC.

Regards,
Trond

Port24 update

I bought 2,000 NBIX just now for the Port, at $7.30. I am going to wait to sell calls here until it bounces back somewhat. The Feb $7.50s were attractive at $0.55, equivalent to a 7.5% return for 1.5 months, but I think I can do better.

I also bought back the CLDA calls to close, since the stock has dropped. As we approach the 1/22/11 PDUFA date I expect the price to rise back to where I bought it.

Port is now 11.1% annualized return, with $9,292 in cash still and the stocks (calls) shown below.

600 CLDA (0)
400 DNDN (4)
1600 ELN (16)
7000 LXRX (0)
2000 NBIX (0)
7000 NNVC (0)
7000 ONTY (70)
2500 SGMO (25)
1600 DCTH (10)

Port 24 addition

I bought 1600 Delcath (DCTH) for the Port this morning at $10.21. I turned around and sold 10 March 2011 $11 calls against them for $1 each. That leaves me 600 extra shares to sell calls later. I suspect once the FDA formally accepts their recent NDA the share price will tack on an extra $1 or two, and I will sell calls against those extra 600 shares at that time.

I still have $24,363.91 in cash so I'm still looking up and down the aisles right now. Although I have some stocks in mind nothing is terribly cheap in my mind right now, so I'll try to be patient.

Happy New Year!
Regards,
Trond

Port24 update and Happy Holidays!

December options expiration was last Friday, and based on the closing prices, I had ALTH and NBIX called away from me.

I now have something like $39K available to buy more stock – look for a post next week to utilize these funds.

Merry Christmas and happy holidays to all!

Regards,
Trond

Macro thoughts - Denninger on profit margins

Karl Denninger writes a blog called the Market Ticker. He is quite a bear recently on the economy as-a-whole, as well as a believer in "The Bezzle" - a theory where he says the government is basically lying its butt off regarding how bad off things are, in order to 1) keep peace and 2) keep things the way they are. Without delving too much in the bezzle, I'll simply say he pulls in some good data to support his positions; he's a muckraker in the style of ZeroHedge.

This post quite convincingly argues that profit margins in Q4 will NOT be as good as projected.


http://market-ticker.org/akcs-www?post=174922

...
The two "gotchas" in here are gasoline, which has had gross sales down even though gas prices are up, and dining and drinking, which were down despite the holiday season during the Black Friday weekend when they should have been up due to all the people shopping.

The problem remains cost-push. I've noted that restaurants have been sneakily-increasing prices. They're pulling add-ons into ala-carte (e.g. sides that used to be included with the main course) and ratcheting up prices a bit. Gasoline has been on a tear comparatively, yet gross spend on gasoline is down. This strongly implies that we've reached the point where price influences behavior.

The PPI was also out this morning and confirmed:

The Producer Price Index for Finished Goods rose 0.8 percent in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This increase followed a 0.4-percent advance in both October and September. At the earlier stages of processing, prices received by manufacturers of intermediate goods climbed 1.1 percent in November, and the crude goods index moved up 0.6 percent.

Great. More than 9% annualized. But there is no inflation, right?

And where is it? Food and energy, as I've been talking about.


...[graph]

That's nice. Now extend that 1% monthly change in foods out a year. More-importantly, look at the prices in energy - straight up since August. That's all about The Fed and it's BS QE2 games.
Worse is the crude goods price change less food and energy - core:


...[graph]

These changes are ridiculous on a 12-month basis. Ex-food and energy they're even worse, as there have been some substantial negative numbers there. I have discussed the problem with these input costs extensively - there is no pricing power to pass them through the chain of production, as is shown by the much lower escalation in intermediate goods.
This means margin collapse folks.

Betting that it won't show up in final profit numbers is flat-out insane.

These costs have to show up somewhere. If you can't pass through costs to the consumer then you have to eat it, and ultimately this results in margin - and profit - collapse.

Musical Chairs in your Portfolio

I think everyone should think long and hard about what they will do in their accounts if we do see a nasty market downturn. And keep in mind, it may not necessarily be "sell and wait it out" OR "hold everything and wait it out".

Remember that most of the stocks I'm into here are VERY high beta. That means whatever the "normal" market return is, my returns are at a higher multiple. If and when the markets are doing well, say a 1% return on the day, I may see a 1.5 to a 2% return. However, when the market goes down 15%, what is the Portfolio 24 going to do?

I personally have to really think about this because I do not have any new cash going into my accounts. When I want to buy something, I have to sell something else first. And when everything is "on sale" (i.e. going to crap) everything I want to sell has already gone down, too.

I am looking at the general market .... shrugging off everything from wars to state secret leaks, to Mastercard getting hacked and hedge funds liquidating, to tax breaks being maintained in the face of nearly unsurmountable deficits, to North Korea making waves, to Christmas spending being crazy in the light of our unemployment.... and ask "when the music is going to stop"?

Make sure you have a chair, is all I'm saying.

Regards,
Trond

Port 24 overhaul

Well, just like you need to monitor a mutual fund for "style drift", I am looking at the Port 24 with a hard eye today.

Not only have I drifted from my intended methodology (buy and sell covered calls for income) but I have neglected the actual portfolio quite shockingly in the last two years. I still have nearly a 10% annualized return (vs.4.3% on the Nasdaq and -3.3% on the S&P) but that is nowhere near what I intend.

So, I have sold CLSN, VICL, PZG, and MNKD today at 2.70, 1.80, 1.80, and 6.55 respectively. Either they are too low for decent covered call premium (VICL), or are too close or too far from their PDUFA dates (MNKD, CLSN), or don't offer options (PZG).

I bought 600 CLDA at $17.78 and sold 6 Jan11 $17.50s for $2.10 each.
Also, 2500 ALTH at $4, selling the December $4s for $0.20.
Bought 7000 each of NNVC and LXRX at $1.34 and $1.39 respectively. This is slightly a style drift in that they do not offer options, but at these values I want some, akin to my PZG buy, which worked out quite nicely.
I also sold options on the following:
DNDN, 4 Jan11 $41s at $1.01
ELN, 16 Jan 11 $6 at $0.25
20 NBIX Dec10 $8s at $0.20
25 SGMO Jan11 $6s at $0.30
and 70 ONTY, Jan11 $4 at $0.25.

This leads me to the following Port (still with $13,761.42 in cash)

2000 NBIX (20)
1600 ELN (16)
400 DNDN (4)
2500 SGMO (25)
600 CLDA (6)
7000 NNVC (0)
7000 LXRX (0)
2500 ALTH (25)
7000 ONTY (70)

With the cash raised from the covered calls, this brings me to a 30.5% return, or 11.9% annualized.

Regards,
Trond

Port update

Had a little more time this morning (finally) and was able to update the Port with the ARNA sell last week. It's all timing, sometimes... the one point I was able to log on to look at the actual price (something I do for every Port transaction - whatever time I look, that is the price I use at the bid or ask) ARNA was at just about it's lowest point of the day - $1.48. It was up more than 10% within an hour after that!

Today I sold 200 AMAG (getting tired of waiting for Feraheme sales and safety issues to die down) and 2000 AOB (China pharma hit the skids). I turned around and bought 6000 CLSN at $3.09.

Port now looks like:
2000 NBIX
1600 ELN
400 DNDN
6000 CLSN
2500 SGMO
7000 ONTY
3500 VICL
7000 PZG
2000 MNKD

It's worth just under $125K, which means I've reverted to the mean - I have about a 10% annual return in about 2.5 years. Now, the S&P has returned around -5% and the Nasdaq is 2.8% over that same period, so I can't be too sad but it's absolutely NOT where I want to be (neglecting the Port for 3-5 months at a time doesn't help)! I intend to be back to at least a 13-15% return by the end of the year.

Regards,
Trond

ARNA

I sold all the Port's ARNA this morning at $1.48. I am quite anoyed at myself for not correcting the Port immediately; I have meant to actually post this immediately after the Advisory Committee meeting and could have sold it for around $2 if I had not delayed.

Just a quick notification post; I expect the FDA to deliver a Conditional Response Letter later today.

Regards,
Trond

ARNA and VVUS

Well, the day is nearly at hand for Vivus.

No, not the FDA PDUFA date, but the Advisory Committee meeting about its drug Qnexa. The briefing docs (http://www.fda.gov/downloads/AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/EndocrinologicandMetabolicDrugsAdvisoryCommittee/UCM218824.pdf) were released this morning in preparation for the meeting on Thursday. Investors were expecting an easy efficacy review and a searching safety evalaution. They got what they expected and therefore VVUS is up today. Arena is trailing along, up slightly in sympathy.

I do not know much about VVUS. I want to emphasize I've been following ARNA and not VVUS, so the data I know is imcomplete. However, being me, a couple comments are always in order.

I looked at the safety review summary on pages 3-6 and although it most headlines seem to indicate a relatively benign safety review, it looks bad. Suicidal thoughts, birth defect potential, and this (regarding topiramate, one of the two drugs Qnexa is comprised of):

"associated, in a dose-related manner, with an increased incidence of cognitive-associated adverse events including confusion, psychomotor slowing, difficulty with concentration/attention, and difficulty with memory, speech or language problems, particularly word-finding difficulties."

Hmmm, one less plate of pasta, or fumbling for the right word?

It will certainly be black-boxed for pregnant women, and have strong language for those who may become pregnant.

I think ARNA will get approval by itself, but this market seems to favor VVUS right now. I am considering buying puts on VVUS, as the AC meeting is right before options expiration. They carry quite a premium, so I have no specific strike price in mind - just something to think about.

Regards,
Trond

Dendreon helped the Port24...

Well, the Port is "ta-da!" back where it should be. That is, back to 24% returns, annualized.

Dendreon was the prime mover, of course, and I yesterday sold 500 of the 900 shares the Port held. With the proceeds I bought 2,000 MannKind (MNKD) at $6.93 and sold 20 June $8 calls against them for $55 each.

I promised a brief writeup on MannKind but am lacking in time today. So suffice it to say MNKD is another stock I'm buying in my real-money IRA - selling some calls and holding most long through the summer.

Regards,
Trond

Greek Bailout - Mauldin letter

John Mauldin's latest letter (click on the header of my blog entry to access it) starts out in a very interesting way:

---
It now looks like almost 30% of the Greek financing will come from the IMF, rather than just a small portion. And since 40% of the IMF is funded by US taxpayers, and that debt will be JUNIOR to current bond holders (if the rumors are true) I can't tell you how outraged that makes me.
What that means is that US (and Canadian and British, etc.) tax payers will be giving money to Greece who will use a lot of it to roll over old bonds, letting European banks and funds reduce their exposure to Greece while tax-payers all over the world who fund the IMF assume that risk. And does anyone really think that Greece will pay that debt back? IMF debt should be senior and no bank should be allowed to roll over debt and reduce their exposure to Greek debt on the back of foreign tax-payers.

---

Regardless of the seniority of the bonds, this is pretty outrageous. Anyone feel like contacting their Congressional delegates?

Regards,
Trond

Watchlists

I recommend that everyone who is interested in individual stocks maintain one or more watchlists.

This is simply a list of companies that you are interested in. Most brokerages allow you to maintain a list, or Yahoo Finance! does quite nicely. If you get into the habit of checking in every day, you'll see a few benefits.

For one, you will hear news about your stocks very quickly. Of course, most people don't live and breathe the market, and conventional wisdom has it that one should not do this as it leads to that most evil practice of all - day trading. Ha!
Of course, conventional wisdom also counsels one to place your long term dollars in mutual funds and let the experts do their thing. As you are reading this, gentle reader, I assume you probably had an internal "Ha!" go off yourself.
It's usually not necessary to know news of a stock that is important to you immediately; very few things will be life and death to a corporation. Biotech may be the exception - trial news can kill or revive those very quickly, of course. But being aware of something at least gives you the power of choice. Here's an example: Oncothyreon (ONTY) received the unwelcome news a couple months ago that Stimuvax trials were being halted on safety concerns. It dropped immediately, of course, but kept dropping some more over the next few days. If this news spooked you, you at least had the chance the next day to sell at a higher price than the succeeding days would have allowed you.
Immersing yourself in the news also mean you are more in tune with your choices. You see earnings announcements, insider buys or sells, product information and the like; and hopefully you begin to understand the company somewhat better over time.

The other main benefit of a watchlist is that you begin to have an appreciation for the daily swings in price. I am not endorsing very active trading (although not disparaging it either) - but knowing that a stock you are strongly interested in is at a low point for the year, with no appreciable bad news or other information, may give you the slight extra nudge to become a shareholder. Entry price does matter - even in the long term, buying a stock at $9 instead of $10.50 will mean several extra percentage points of gain, or allow you to buy more shares than you could otherwise have done. And over the course of months, a swing of a couple dollars in price WILL happen.

I desperately need to update my blog watchlist: JAV is being bought out at $2.19 (a nice gain from my rec about 16 months ago at $1-ish), SGMO probably won't see sub $5 again, and Dendreon almost certainly will never be available at my latest upgrade of under $30.

My additions will include MannKind, Oncothyreon, Paramount Gold, Lexicon, and Opexa. I hope to talk of some of these soon in future posts. MannKind, Oncothyreon, and Paramount are probably the most timely buys; Arena and Elan would be next.

On a final note: I sold some small amounts of Dendreon over the last couple days but intend on holding the majority for the absolutely long haul. The guy who sold Microsoft for 3 or 4 times his stake looked really smart in the short term, but I believe this puppy has legs. :-)

Regards,
Trond

Dendreon's conference call

Yesterday at 11:30 PDT, Dendreon hosted a conference call to discuss Provenge's approval. You can access a replay at www.Dendreon.com, and I urge you to listen if you want to continue holding your shares long term, as I intend to do with a majority of mine.

Dendreon now has to morph from an R&D company to a commercial enterprise. They seem to have a good start and an extremely capable management staff. A few highlights frm the call:

Pricing: They announced an infusion will be $31,000. That means a standard regimen of treatment will be $93,000, to the high side of previously assumed guidance.

No Rest-Of-World partnership: they truly intend to go it alone. While this has the potential for pitfalls, in the long term if they avoid a buyout they truly could be the "next Amgen" of biotech.

People will probably comment on the 2,000 patients they said can treat i the next twelve months, but how many will have caught the very optimistic comment that following all three plants coming on line at 100%, they "can meet demand"?

All in all, a great call. Sell some if you must, but hold on to some. I think there are great things in store for this not-so-little company.

Regards,
Trond

Provenge Approved!!!!

Trading halted - Reuters and CNBC saying approved.

What a long, long road.

Regards,
Trond

William Black on Lehman Brother

This guy for Fed chief and Markopoulos for SEC Chair!

Unbelievable stuff....

Port 24, ONTY, and ARNA

Well, Oncothyreon (ONTY) had a nice little run today, so I sold the August $5 calls in the Portfolio 24. All 3000 shares are now covered; 30 AUG $5 contracts sold for $0.60 per share.

I really should be selling Elan calls here, as they also have gone up quite nicely, recently, but I think it will hold $8 and the $9s do not have enough premium yet.

The Port now stands at $134,743, with $2,538 in cash. That gives me an annualized return of 18.1%.

I bought ARNA in both my IRA and my brokerage accounts today; the low $3s are a very good entry point. Honestly, the brokerage shares will probably be sold on any kind of bump, but the IRA shares are longer term; the FDA date is 10/22/10 and there should be some appreciation as that date gets closer.

Regards,
Trond

Port 24 update and other news

First some news ...

I have not decided exactly how or when, but I am going to switch out my Port24 (fake money, albeit serious thought) holdings for one of my real life IRAs. It is getting to be too much of a headache to actually manage another portfolio that does not immediately affect my new worth.

This is sad for one specific reason: this was the one portfolio where I tried to focus as exclusively on covered calls as possible. I see that as "safe", even with the priority on pre-earnings biotechs. On the plus side, you'll get to see exactly how I think and react on stocks I own and am thinking about. I do not think I will go to the lengths of posting every move before actually trading; it is my real money and sometimes I will want to make the trade ASAP. I will think more about this over a few weeks and let you know. Feedback is ALWAYS welcome.

Dendreon announced another BIG hiring this morning. Varun Nanda has joined the management team as SVP of Global Commercial Operations. Mr. Nanda comes from Roche/Genentech, where he brought Avastin into commercialization.
I do not see a Rest Of World partnership for Dendreon anymore... with Mr. Nanda and Hans Bishop on board they look ready to market Provenge themselves, worldwide. May 1, and probable Provenge approval, is less than a month away!

Port24:

A fair amount of movement this morning!
I sold 1500 ALTH ($$8.36) and 1000 MELA ($7.32), while buying 500 more Dendreon ($39.11), 7000 PZG ($1.44), and 3500 VICL ($3.45). I sold 29 $5 Jul calls against ARNA, and 5 Apr $40s against the DNDN.

Allos had a nice couple days this week, adding almost $1. It is time to take the gains. I *think* they will have great news in Q2, from an ongoing trial, but in biotech, you take some off the table when you get some gains. I had bought these at $6.68 in October 2009, and sold some calls against them, so I definitely had a winner here.

MELA is the opposite, although I sold so many calls that the loss is not as bad. The FDA delayed their application by 180 days recently, and it fell 20%. I may just get back in, later, but I see this as "dead money" for 3 months.

The 500 Dendreon is just a 8 day play for the almost 3% of option premium. I'd LOVE for Dendreon to close on 4/16 under $40 so I can keep the shares, though!

ARNA will have it's FDA PDUFA date on October 22. The July calls net me a little premium (6% for less than 4 months) while I wait. And heck, with the stock at $3.16, if I "lose" them at $5 I will not be crying!

The two new buys are VICL and PZG.
PZG (Paramount Mining) is a black sheep here, being neither a biotech, nor optionable. A gold exploration company, it is strictly a 2-5 month buy for straight-up capital appreciation. I will talk about this one more later, suffice it to say I have some in my real money IRA as well.
VICL (Vical) has a great pipeline and should have some news in the summer/fall that will allow me to sell some $5 or even $7.50 calls later in the year for some juicy premiums.

That makes the Port now worth $130,206, or a 30% return. Annualized, it is only 15.9%, well shy of my target. On the plus side, the S&P and Nasdaq indices have annualized returns over the same period of -6.75% and 9.5% respectively, so I am beating them. In a month and a week, the Port turns 2!

Regards,
Trond

Port Update

Sold the 4000 GNVC, as planned yesterday, and at $2.88. It is higher today, and it killed me to do it, but I really do want stocks that can have calls sold against them, in the Port. I mostly want to make money here, so if I see something enticing enough, I will buy non-optionable stocks, but the ground rules are there for a reason!

I looked at the other holdings of the Port this morning and nothing appeals to me in terms of selling calls. I have a bunch of cash, and Oncothyreon (ONTY) happens to be a watchlist stock that had bad news this morning. I bought 3,000 shares at $3.41 (and 1k in my real-world IRA at $3.45, earlier) - I'll let the share price shake out a little and then sell calls against them.

So now the Port is comprised of

2000 AOB
2000 NBIX
1600 ELN
400 DNDN
4900 ARNA
2500 SGMO
1000 MELA
200 AMAG
1500 ALTH
3000 ONTY
with $21,585 of cash.

I'm at a 30.8% return in nearly two years, a 16.6% annualized rate. The S&P 500 over that time has returned -7.3% and the Nasdaq has returned 9.3%.

Regards,
Trond

Port update - options expiration

Quick summary of the Port, along with GenVec update:

On Friday, the Port had all 2000 ProGenics (PGNX) called away at $5, and the Elan calls expired worthless, allowing me to keep the premium and the shares. We're back to above 17% annualized return, still well shy of the 24 I am aiming for. I still feel it is doable, if I just put some time back into this Port. I have only been selling calls on 1 to 3 holdings a month, where I should be turning 100% of the holdings. I'll be selling the Genvec this coming week, since it does not offer options and I'm up over 10% already, having been in it for only a month. Time to take that profit and buy something I can sell calls against!

GenVec should be announcing the interim PACT trial results within 4 weeks now. On January 15th they said 10 to 12 weeks, and Friday 3/19/10 was exactly 9 weeks. While they may announce this coming week, both their annual earnings call and the recent Roth presentation suggested it could spill over into April so I would put more faith into it happening right around the first week of April.

In my real money IRA, I have an insane amount tied up in both Dendreon and Genvec - something like 85% of the total value. It has served me well, as the majority of Dendreon was bought under $6 (now $35) and my Genvec average basis is around $1.25 (now $2.80). I am however, finally at the point where I'll be selling at least a third of my GNVC over the next week or so, and may even dent my DNDN by 10% or so. I am far more confident that Dendreon will get approval, but at this price (mid 30s) I just do not see the return that I saw at the mid $20s we were at only a couple months ago. Genvec, at a little below $3, is also a MUCH different creature risk/return wise, than it was at the $0.77 I started buying at. The upcoming data release is a short term make-or-break event; it could go down (I honestly don't see it going below $1.50) on so-so data, but it could spike as much as another $7-10 on statistically significant data. There is a "reasonable" chance of stat-sig results - say 20-30% - but I am not risking 40+% of my net worth on a 20-30% chance of a home run. Please note that everyone's personal sense of risk vs. reward is vastly different - I AM in effect saying I'm okay with risking ~25% of my net worth!

This is because I already have a two bagger on Genvec - the most likely worse case scenario brings me back to a only slight average gain. I contrast this to the results, if excellent, and it makes sense for me to hold about 2/3 of what I have now, through the data release. For someone buying in now, it would be a greatly different risk/reward calculation.

Please also note that IF GenVec does drop, it very likely could be because the market is disappointed in the data not being excellent, and NOT because the data is bad. At the 92nd event - the first interim look) the hazard ratio was already .753 - the lower from 1.0 the better. This would have been a very good result, but investors were spooked because at 24 months, there was no apparent drug benefit. Missed was the fact that only three patients were still alive and uncensored, and one of those was in the placebo arm. Thus the placebo curve matched the drug-arm curve. As this interim look, at 184 deaths, most of those censored patients will have died, which will "normalize" the placebo curve and probably lower the hazard ratio even further. ANYTHING that relieves the worry about the 24 month death rate and shows improving hazard ratio beyond the .753 already seen, will vastly increase the chances of statistical significance at the final trial calculation. If the data is like this, but Mr. Market is disappointed, this could be the buy of a lifetime - with only a 18-24 month holding period until fruition. Heck - I went through this with Dendreon already from 2007 - 2009, and was rewarded with a $4 stock going to $25 (and currently $35, with a probable $40-45 in May).

Next post: more buy candidates, with the cash I now have in hand!

Regards,
Trond

Port 24

Well, I'm back to my old bad habits, and only posting about the Port. I do have a writeup from the Dendreon conference call last night, that I will post tomorrow.

Portfolio 24
300 Dendreon and 1000 RMTI were called away from me last Friday. I bought 4000 GNVC today, at $2.42. Cash on hand now $10,058, and the Port is worth 125,144.

I am now as excited about GenVec as I was about Dendreon. In my real life IRA, I am about 50/50 in these two, with just a few others in small amounts. Both will have large events in the next 5 to 9 weeks.

GNVC may not, and probably will not, have a statistically significant result from the upcoming interim look. However, it should let us see how it will pan out. Having an entry even here in the $2s will look really good in 2 years, if you have that kind of a time horizon. I'm going to go out on a limb here and say that before results are announced, we'll see $3.25 or $3.50 in this stock, giving you a 33 to 50% return in a month. I bought 1000 shares in my Roth today, in fact, at $2.41, with such an aim in mind.

Regards,
Trond

Port 24 and assorted biotech news

Port 24 update:
The only January options I had sold were 10 MELA $10 calls, and they were exercised, with the stock at $11.05 last Friday.

With that cash, I bought 300 more Dendreon shares today, and sold 3 Feb $32 calls against them for $0.89 per share.
I am living by my resolution to be a little more active in the Port! I also sold the following calls today:
16 ELN March $9s for $0.30
15 SGMO Feb $7.50s for $0.25
10 MELA Feb $12.50s for $0.20
2 AMAG Feb $55s for $0.50

I almost sold calls against ALTH - but I feel there is a little more room beneath the stock before selling calls. AOB needs to climb closer to $5 to make it worth selling calls, and NBIX at $2.50 is not satisfactory to sell the $2.50s, and the $5s are not worth anything yet.

The Port 24 thus has the following stocks (covered calls in parentheses)
1500 ALTH
200 AMAG (2)
2000 AOB
4900 ARNA (24)
700 DNDN (3)
1600 ELN (16)
1000 MELA (10)
2000 NBIX
2000 PGNX (20)
1000 RMTI (10)
2500 SGMO (15)
.. with cash of $2,680. This gives me a port value of about $132,500 and a 19.3% annualized return. I'm getting closer to my 24% return, again!

Stocks:
Genvec released a PR that they have licensed their hearing loss pre-clinical work to Novartis, for $5M plus milestones and royalties. They also hit the 184 death interim trigger in the PACT trial on Friday, and will have data in 10 to 12 weeks. I'm nearly as excited about Genvec as I was about Dendreon, but caution that the risk/reward is much slighter here at $2 than at $0.76 when I first mentioned it here a few months ago. I was still buying in my real-world IRA at $1.70, but am probably done for now.

Dendreon had an interview published in the Xconomy online magazine with the new COO Hans Bishop. It is a MUST READ, here: http://www.xconomy.com/seattle/2010/01/19/dendreons-new-operations-man-hans-bishop-aims-to-keep-provenge-trains-running-on-time/

Sangamo had good results (albeit from one patient, in a Phase I trial) here: http://finance.yahoo.com/news/Sangamo-BioSciences-Announces-prnews-1693198508.html?x=0&.v=1

Regards,
Trond

Port 24 update, Dendreon, and GenVec

I neglected to mention yesterday that I bought 1000 shares of Rockwell Medical Technologies (RMTI) at $7.73 in the Port24. I turned and sold February $7.50 calls for $0.85 each.

I wanted to clarify in my end-of-year post that although my annualized rate of return in the Port24 is only 13%, the gross return was about 25% - we've gone from $100,000 to $125K in 19 months. I took the time to see what benchmarks might be like: the S&P in the same time frame had a -10.5% annualized return (including dividends) and the Nasdaq was 8.1%.

GenVec and Dendreon both received an opening nod and a "buy" recommendation from Roth Capital Partners this morning. Further upgrades will probably be coming shortly.

GenVec in particular is nice to see at $1.60+ this morning as it officially constitutes a double from my initial rec back in October ($0.76 was my first buy in my real-world IRA). For the record, I was still buying yesterday at $1.37. With the rise and my further buys, it is now actually my second largest holding (after Dendreon) and at this rate might be the largest in a couple days... :-)

Regards,
Trond

Stock market vs. the economy

It used to be that if the economic climate was good, the stock market would do well also. Conversely, with the release of bad economic data, the market would have a "correction".

I believe that the correlation between the two is much weaker now. I think there are two main reasons why this is so.

More money
There is simply too much money sloshing around the system right now. The advent on 401(k) plans and discount brokerages in the last 20 years has meant an explosion in the amount of money being invested. Something like 40% of workers now have some sort of directed stake in the market - where it used to be around 6%. Add to that the burgeoning number of private and even sovereign equity funds...
That money has to find a home. With more money chasing stocks, the general price level will rise, even with no rise in the value of the underlying companies.

Trading mentality
I am not talking day trading here! But the automated rebalancing of 401(k) plans, ETFs that get moved around every day, a general populace that is more comfortable staying in stocks during "bad" times, and a growing number of individual investors who arewilling to buy dips in the market, all contribute to flattening out some of the more violent swings we have seen previously.

Are there any lessons here? Perhaps not - just a general reminder that over the last 10 months as the market has gone up, please understand that the economy itself may not follow suit immediately. Make sure you rebalance, if that is your choice, as your allocations have certainly swung dramatically from a year ago. Do you have an emergency fund? Are you pre-paying your mortgage? Paying more than the minimum on your credit cards?

I am not convinced that the "green shoots" will truly take root in 2010. Please make sure your family is living below your means, saving (and investing) money, and adequately insured.

Regards,
Trond

Happy New Year

Thanks to all who read this - I have not been good about keeping up posting, or even the Port 24. I shall strive to do better in the new year, as I want to bring my returns back up to the 24% level.

I am closing out the year with a few calls being sold in the Port. 24 Arena Feb $4s, 10 Electro-Optical Jan $10s, and 20 Progenics Feb $5s ... all with a monthly return of about 4%.
I will be ending 2009 with an annualized rate of return of about 13% - good, but far short of my target. I do take comfort in the fact that I ignored the Port for long stretches of time and would have made a few more percentage points on the calls I neglected to sell.

My worst move this year was to not sell ARNA on the spikes. That cost me around $20,000. Of course I would not have sold at exactly the high point, but I really should have lightened up. On the plus side, I did exactly that with BioCryst - buying low, selling high, and selling a lot of calls in the interim. Dendreon was the clear winner this year - going from around $5 to the current $26.

Next year should see Dendreon achieve FDA approval for Provenge, Electro-Optical gain approval for MelaFund, partnerships for Arena and Neurocrine, and significant appreciation for Elan, Amag, and Allos. I find myself hoping that GenVec starts trading options as I would love to have some GNVC in the Port.

May everyone have a fun and safe New Year!

Regards,
Trond

Biotech trees and investment forests

FezHenry has a very interesting comment about my last post (valuing biotechs). I like (and agree with) several of his points - I have taken the liberty of copying the majority of it below, as I want to highlight the parts I agree with, and show why I think differently on others.

>>Thank you for taking the time to post such an in-depth response. The reason why I asked initially is because all of those biotech stocks you've mentioned have had zero positive free cash flow over the past ten years. This rate of cash burn has always been a reason why I have never personally invested in bio-tech's, because in my opinion, the majority of them just end up as giant cash-sucking research machines in the long run.

Yes, that giant sucking sound was not just jobs moving to Mexico - it is also biotechs (and nearly all early corporations) siphoning cash out of investors and giving them back lottery tickets. And you know what typically happens with lotteries...

I like how you've analyzed these stocks in such great detail, and you've obviously done some interesting modeling as well, but I'm somewhat concerned that you may be missing the investment forest for the bio-tech tree. For a company to be a proper investment, it needs to be able to generate more than just positive earnings...it has to be able to generate free cash flow.

Free cash flow (FCF) - or ANY kind of cash flow - is an attribute of a good company. And I agree FCF is something a typical investor will be looking for. Let's explore WHY that is.
Once a company is making more than it spends, on a real earnings basis, there are typically four things they can do with it. They can (i) pay a dividend (ii) retain earnings and reinvest in the company (usually better equipment to manufacture more quickly or more cheaply), (iii) reinvest in R&D for new or better products) or (iv) acquire other companies, with which they hope to make more or better products than it costs to acquire them.

But please note something about these choices:
Option i is perhaps the best from the investor's point of view (I can certainly spend extra money better than my favorite company can!) but note that the company then does not grow.
Option ii is wonderful up to a point, but you can make only so many widgets at a lesser price that people are willing to buy at any price.
Options iii and iv act just like what the company did when they themselves were the ones raising capital, through issuing more shares or debt. The difference of course is that they can pay for it as a going concern, but a couple products that don't make it from the lab to the shelf, or bad acquisitions, and that money is still sucked away.
My point is NOT to slam products, or making money via them. It is that companies making these profits will eventually have to revisit risk and invention. They have a far firmer foothold than pre-earnings corporations, but still have to allocate their capital in an intelligent way.

I think you may need to pay more heed towards how these companies are financing their revenues, and the impact on their profitability in the long term, otherwise you are just gambling that one of them will discover the next big thing.

Ah, but here's the thing. Even the next big thing is not a guarantee of a great company that is a good investment.
As example #1, I will pick on Tivo. I had a roommate who literally was probably one of the first 100 people to buy one. And the next day, he went and bought another (the larger storage one) for a second room. He LOVED A-V equipment and was a technophile. And he was right - everyone loved it. The problem is that the company made some poor choices with marketing and has been a dog for several years. Someone who waited for the sales to begin, measured them for a few quarters, projected them into the future, and was finally confident enough to buy, was the person who finally capitulated several years later for a loss.
Example #2 will be your choice of the financials over 2006 and 2007. Maybe Bear Stearns? Profitability up the yin-yang, darling of Wall Street, sweet credit ratings, and at the height amazing earnings that were projected to increase at astronomical multiples. Even though they did not make widgets, making deals can be just as profitable. But we all know how that ended up.
I am NOT dissing a company making actual profits. Many companies make great marketing decisions, and do not go charging into bubbles, as these two examples show. But simply having real FCF is not the only answer either.

I hope you don't think that I'm trying to rain on your parade, so to speak. I know that you have superior analytical skills from working with you @ CNB all of those years, but I just think you need to maybe take more of a fundamental view on some of these companies so you can properly estimate your risk. From a fundamental perspective, I personally wouldn't invest in any of these companies until they can at the very least, generate positive free cash flow and be able to stand on their own without financing their operations via shareholder dilution, or excessive leveraging...

Pre-earnings biotechs, as a category, are far riskier, as FezHenry notes, because to raise the funds necessary to maintain operation, they have to leverage debt, or sell more shares.
Note that I do not worry too much about the dilutative nature of issuing more shares (to a point!) - I may own 1.05 millionth of a company instead of 1 millionth but those existing shares then have $0.00001 more cash per share. And if I trust management enough to use that cash, I do not care if they raised it in a secondary or by achieving FCF.

Now here is the real difference, I believe, in the investing styles. I view fundamentals as more than just the metrics of cash per share, earnings per share, current ratios, and debt/equity. To me the fundamentals are "is what the company is doing, advancing its potential?" and "do I trust the management?"

... but I follow Warren Buffett's first two rules of investing:
1. Never lose money.
2. Never forget rule #1.

I think FezHenry and I are actually closer to each other than apart. I am a huge Buffett fan (I just finished Alice Schroeder's Snowball: Warren Buffett and the Business of Life and it is a fantastic telling of Buffett's life) but what you actually get out of it is that Buffett the investor is inhuman. I do not have the investing resources nor the time horizon of Buffett the investor. He can buy entire companies which gives him pricing power. He can sit on Coca Cola for 30 years. I freely admit I cannot.
But - there are a couple things I like to emulate him on. You do your research (due diligence), you talk to people, you fanatically find out every scrap of information you can, and when you get your fat pitch, you buy. Buffet talks of a punch card where you only make 20 investing decisions over your whole life. If you use 1/20 of your lifetime buys on Sangamo, you will want to make sure it is a great opportunity.
The other quality I have learned from Buffett, through Ben Graham, is that Mr. Market truly is insane. You can buy the same company for $20 a share one day and for $19 a share the next day. It is NOT 95% as good a company the second day, it is simply a function of fear, greed, reaction, hope, and maybe a little bit of the weather in New York. So if after my research I am in a company and I am convinced it is overvalued for the moment, I can sell some of my position without freaking out that I am breaking "Buffett's rules". The key for me from this second point is that you enter a position into a company you like with a core position, and can also trade around that position.

Please check out this post for an idea of what I am speaking of: http://www.fwallstreet.com/blog/31.htm

Done! And a good example of what you are leery of. However, I will point out that as a company, it may not be making money, but some investors had an amazing ride. Investing is a zero sum game - every share that gets bought means someone else has sold. The company really isn't more or less valuable - it is simply the relative pressure of the fear versus the greed.

I hope I haven't gone down too many rabbit holes and you are still with me. To close, my argument really boils down to my biotechs simply haven't started selling products yet. Once they do, the metrics you want to use (fundamentals) will either bear out the story, or they won't. You have different information available to you with the Buffetesque companies you choose to follow - actual sales information. I have to model out the potential sales before they happen with the companies I choose to follow. I do have to make the leap of faith that I have the next best thing, but you are making the implicit leap of faith that your competitors won't come out with the next, next, best thing.

As always, thanks for the thought provoking comments.

Regards,
Trond

Valuing biotechs

FezHenry asks how I come up with the valuations for the biotechs I suggested. That is a fair question, and not an easy one to answer.

When you have companies that make products, have revenue, and (gasp) actual profits, then the task can be a bit easier. There are a number of metrics such as price-to-earnings (P/E), or price-to-sales, that you can use to compare a company against another within the industry and see which is a better deal. I am suspicious of these metrics, by the way, on the whole, because earnings are massaged quite a bit, and even sales can be "managed" from quarter to quarter. But at least there are real numbers to work with!

Biotechs that have no products available for sale yet are much trickier. Look at BioCryst (BCRX) which today announced its first order for the IV version of its swine flu drug peramivir. The pricing was MUCH more aggressive than the Street expected and the stock responded with a 15% gain on the day! At this point, forecasting more sales really depends on how much more the government will stockpile, whether doctors start prescribing it off its emergency-use label, if and when the other countries that have negotiated with the company (Israel, China, e.g.) start ordering, and perhaps most immediately important - whether Japan gives its emergency use authorization and they get an order for 500,00 to 1M doses. That would be a $1B order minimum, or $200M at its Shionogi royalty rate - one order alone that is half its market cap! Can you say hello $20s or $30s, from it's $11.39 today? (and yes, I have a little BCRX in my IRA - not a lot but I think this one, too, will do well in the next year)

Back to the actual question though.
Let's take Dendreon for an example, simply because I can do these numbers in my sleep. Provenge is not approved yet, so we have no real metrics. We don't even have a good price point on them - Dr. Gold has stated the one plant they have now, at full capacity, can produce $500M to $1B of sales. It however, is only 25% built out presently... and to complicate matters, they are planning two new plants, each of which will produce 3/4 of the NJ facility.
Now, you probably should also look at the number of patients a year who will get prostate cancer, at the phase at which this will be prescribed (post-androgen therapy) and make an estimate of the market penetration, and then figure the number of patients who actually get the drug multiplied by the cost per treatment. Suffice it to say I believe within 5 years, these three plants will all be at full capacity. (1+3/4+3/4) plants at $500M to $1B gives you a range of revenue of $1.25B to $2.5B ( you can usually also figure in modest price increases per year, but I'm ignoring that, for now). You can use the midpoint, but I like to assume the low point as a reality check. So $1.25B of sales is our first checkpoint.

Now you can apply some other metrics. Five-to-seven times sales is one rule of thumb for projected market cap. So using 5 * 1.25 gives us a $6.25B market cap, 5 years out. Our market cap now is about $3.2B so it's nearly a double - call it $55 from today's $27.78.
But wait!

We now need to discount back to the present, adjusting for risk. I have assumed approval and I have assumed revenues into the future (they will not be making $1.25B next year). At least I assumed the lower levels for the other choices! We can say there is a 10% risk that Provenge is not approved, or has a delay. There may be a 15% discount per year into the future revenue stream. All told that $55 in the future may only be worth $32 or so today. Still a nice 10 to 15% discount to today's price! And please note if I use the midpoints of revenue and times sales, we would arrive at a market cap of $11.25B - or a share price of $90 or so. Discounted that would be $60ish, compared to today's $27.78 - nice! I like to be conservative but I also like to see what might be in store.

You can also use the P/E ratio, once you estimate sales, to arrive at a price. At $1.25B (again, the low point in assumptions) in sales, the margins should be around 25% so there would be $312M in profit. I am going to assume they will issue more shares within 5 years and there will be 150M shares outstanding. That would be over $2 per share in earnings, and with an assumed x25 earnings multiple, we arrive at $50 per share - slightly less than my $55 from the times-sales estimate.

Note all these example all estimate ONLY United States revenue. Dendreon is actively seeking a rest-of-world partner - where they will collect a royalty on ex-US sales. These royalties will have an effect on the bottom line, perhaps as much as 20-25% of the US revenue.

They also have other immunotherapeutics in their pipeline that will follow Provenge, all based off the same method of action. They have learned HOW to construct trials for cancer vaccines, and their agents for breast, ovarian, kidney, colon, and lung cancers should move along more quickly through trials than Provenge did. This will become a growth stock once investors realize cancer may become a manageable disease through these immunotherapeutics.

Whew - lecture on Dendreon is now over. The take away from this lesson should be that there are a HUGE number of assumptions that go into any kind of estimate like this. Patient count, adoption rate, pricing, earnings, competition, production capacity - any of these could be off by factors of 50% or more! My usual method is to try to use the low points of most ranges to come up with a basement level price, and then start tweaking numbers, as not ALL categories will be at the lowest possible point. If the basement price looks attractive compared to today's price, though, you just may have a winner.

Too, the companies do not have to succeed in the end, for the stock to move in the next year or so. Each of these are "story stocks", where there is news coming out in a specific time frame. I actually think my 50-100% price rise will be accomplished BEFORE the actual news. I want to buy in to companies where there is some reason to believe the drugs work, let the pre-announcement excitement build, and then sell some-to-most of the position before the actual news. If GNVC hits $1.50 next spring, I will sell about half of my holdings and then let the rest ride into the interim results.

I have a lot more work to do on some of these models, but I will say that GNVC and SGMO look incredibly mispriced right now, based on potential sales. GNVC could be worth $30+, from today's $0.93 - but the trial itself still may go for 2 years, with a year plus from then for approval, and ramp up. Are you willing to buy $1,000 now, for $30,000 in seven years? SGMO could be a paradigm changer - where every company that wants to modify a single gene has to pay a royalty to Sangamo. In ten years, they may have 1,000 contracts for $10K to $50K each, as a yearly income stream along with their own drug sales from the trials they are running now.

Biotechs may be pie-in-the-sky, but several will pan out, into gold. There WILL be the next Amgen, the next Genentech... I think a couple of the names I've thrown out there may just be those companies.

Regards,
Trond

Watchlist

I desperately need to update my watchlist - I hope to have some time this weekend to do so.

I am very bullish on several stocks at this point - I'd have looked like a genius if I'd pointed out Sangamo yesterday ($6.30, up 16% today...) but there are a number of others too. SGMO, by the way, IS a watchlist stock and I will have an updated "buy under" price this weekend. I think it may give some back tomorrow, so I wouldn't just grab some today.

Allos (ALTH, $5.88 today) is one stock that I expect to be at or over $10 in the next 6 months or so. They have an approved drug, aggressive pricing, and a low number of shares outstanding (relatively). The worst case would be a buyout at a 10-20% premium.

Neurocrine (NBIX, $2.16 today) is another that SHOULD have news in the next 6 months that will propel it to at least a double and perhaps more. Several trials will yield news and a partnership awaits. I unfortunately have thought this for a few months now and have been buying steadily all the way down. Time will tell but this is rapidly becoming one of my larger stakes, just from the risk/reward.

GenVec (GNVC, $0.93 today) is the final one I will toss out - again, interim trial data expected within 6 months and the data should be really nice. Not good enough to file with the FDA immediately, but good enough to attract partners and/or suitors.

All of these (SGMO, ALTH, NBIX, and GNVC) should be 50% or higher in the next 6 months. I will make a note to revisit this post in May 2010 - I invite you to do some research on these companies and ask any questions you wish.

Regards,
Trond

Personal Finance - Credit

I'm taking a break from my stock market portfolio to talk about credit this morning.

The banks seem to be on a mission to raise credit card rates, close accounts, and generally, make as much money off folks as they can.

Now, I love the concept of capitalism so I do not argue against their right to do this. However, you need to protect yourself as you can, and in this day and age, that also means protecting your credit score. Let me give you an example.

My wife has had a Bank of America credit card for nearly 20 years now. Due to our particular circumstances, this card rarely was used - we considered it primarily an emergency card - a very temporary place to throw charges on in case of major car repairs or family news requiring travel, for example. We have not used it for over a year, and last week she tried putting a small charge on it, simply to have used it. Imagine her surprise when she was declined, and found out BoA had cancelled the card, without informing us.

The company would not reinstate the account, although of course they asked if she wanted to apply for a new card. This was hurtful to our credit for two reasons.
First, she has had this account for a very long time - longer than any of my accounts! Part of your score is determined by the duration of your credit relationships. Closing this account probably shaved 10 to 30 points off our score.
Second, closing the account lowered the amount of credit we have available by $18,000. Our ratio of debt to debt capacity got raised - which will also lower our score.

Recent signs have the economy improving in the short term, but there are still some issues in the banking system that need to be worked out. Lending standards may be tight for years in the future - and your credit score is solely responsible for if you can get a loan, and if so, how much, and at what rate that loan will be for. Here are a couple tips:

1. Use each of your cards at least once a year.
2. If you are going to close an account, all else being equal, first close the account that you have had for the shortest amount of time.
3. Make sure you pay your cards on time. One late payment on ONE card can kick off mandatory rate increases on ALL your cards.
4. Check your credit history at least once a year, for free, at http://www.annualcreditreport.com/. There are three credit bureaus, and you can check each once per year for free. Make sure you go to the site listed above, as others may charge you for accessing a credit report. Each of the three may have slightly different information, so it is worthwhile to check all three, but consider staggering them throughout the year, maybe one each four months. (for most people, checking all three may not be necessary - unless you have been informed any of your personal information has been stolen)
5. Open your "junk mail" - make sure it is not something from your existing accounts, changing your account terms. Many banks are raising interest rates (for an interesting video about BoA raising a lady's rate from 13 to 30%, and her reaction, see http://www.youtube.com/watch?v=jGC1mCS4OVo) and you do have an option. If you do not need the account, you have the right to close the account and keep the existing rate until you pay it off under the original terms. Be aware this may affect your credit score, however, as it will change your debt ratios...

If you have questions, please leave a comment. I'll do my best to reply to all.

Regards,
Trond

Port 24 update and real-world trades

Well I did not get a chance to post yesterday but I made some changes in the Port.

I sold the last 400 BCRX, bought 2000 PGNX and 1500 ALTH, and sold 10 MELA calls (Nov $10s, for $0.40).

BioCryst is close to either getting an Emergency Use Approval or not. I would miss the price spike, but I also will miss the cratering if it does not get it. This Port is not for extreme trading -- I will definitely focus on biotechs (simply because that is what I follow for the most part) but the covered call strategy works perfectly by buying into biotechs, selling calls against the premium generated by trial or approval hype, and then selling BEFORE the actual date.

In my real-world IRA, I have been buying NBIX ($2.74), PZG ($1.27) and MNKD ($5.13). All of these are, in my estimation, good for a double or more in the next 12 months.

The Port stands as follows:
2000 AOB
2000 NBIX
1600 ELN
400 DNDN
4900 ARNA
2500 SGMO
2000 MELA (10)
2000 PGNX
200 AMAG
1500 ALTH
Cash: $5,231.55

Regards,
Trond

Port 24 update

Options expiration was yesterday and I was only exercised on 600 Dendreon shares. Elan, Sangamo, American Oriental, Arena, and Electro-Optical calls all expired with the premium as 100% profit.

Dendreon was a little disappointing, as I hate to see any shares of this company go, even in a ficticious portfolio. I had sold the $35s at $0.84, and then bought them back at a profit ($0.20), and then sold the $28s. It closed at $29.51 and so they were called away from me; I now have only 400 shares left (just under 10% of the Port).

I have to say I am a little surprised at Dendreon's strength. The addition of two new Board members (one, Ian Clark, the upcoming CEO of Genentech North America) certainly fueled speculation about the Rest-Of-World partner for Provenge being Genentech.

For me, the only real news of interest coming up is the amended BLA scheduled for mid-November. And the aBLA itself really is not newsworthy as they announced it a month ago. But - the sensitivity analysis should be included and hopefully made public. This sensitivity analysis is important to me because it will show the continued strength of Provenge over time. In April, the final results of the IMPACT trial showed a statistically significant reduction of risk of death of 22.5% over the placebo group. This 8+ month (results were released in April but the results were based off data cut off in January) should show an improving hazard ratio over and above the 22.5% aleready seen. I would like to see 26%+.

Elan will be having their quarterly earnings call on 10/21, but will be upstaged slightly on the 20th when Biogen releases Tysabri numbers for Q3. I expect to see continuing, although not blowout, growth in the patient count. However, I also expect Elan to announce they will swing to profitability in either Q4 or Q1 2010. We should see real growth in revenue from the EDT branch, and unfortunately we probably will not hear any real news of the Alzheimers platform on this call.

In my real money IRA, I have been buying GenVec (GNVC) and MannKind (MKND) for the first time and more Elan (ELN) and Sangamo (SGMO). I am very excited for GNVC but the move started earlier than I thought it would: I started buying at $0.76 per share and it already touched $1 this last week.

I'll be adding a couple watchlist stocks, mentioning now only that Allos (ALTH), AMAG Pharma (AMAG), and MannKind (MKND) should deliver 50-100% returns in the next 12-24 months.

Regards,
Trond

Various stocks and two Port24 trades

One of the nice things about selling covered calls is that when a stock goes down, you can buy back the calls you sold, at a profit.

That is exactly what I did today for the Port; I had sold 6 Oct $35 DNDN contracts for $84 each and bought them back today for $20 each -- $350 profit after commissions.
Then I turned around and sold 6 Oct $28s for $100 each.

Do not get me wrong, Dendreon is still a stock I want to own. But I do not believe it will be above $28 in the middle of October. They announced yesterday that the amended BLA will not be filed until the middle of November, and so I just don't see any real gains through then. If we see a spike downwards, I very well may simply buy these back too...

I also bought (for the Port) 2000 AOB at $4.83 and sold the Oct $5s for $20 each. [disclosure: I also did this today in my real IRA with 1000 shares...]

I did well in selling ALTH - they did get approval, as I thought, but revenue and profits are going to be a few months away and so the market did not treat Allos very well today. As a 6 month stock, I think buying today would be a good thing, but it is not quite right for the Port today.

ARNA is also a screaming buy today. Note it could well drop some more in the next week but at $4.60 a share there is too much upside to ignore it. I have a sizeable stake in the Port already, so will not be buying, but it could make readers very happy one month (Obesity conference at the end of October) and one year (FDA approval) out.

Regards,
Trond

More Port24 calls...

Busy day at lunch.

I sold the remaining 800 ALTH shares at $8.50. The decision date is tomorrow and while I believe they will get approved, the Port wants a steady 2% a month return, not the uncertainty of FDA politics. This is up from the $7.99 purchase price (as well as the premiums on the September calls) so I am ahead of the game.

I also bought 1000 more MELA. The FDA date is 12/7, so the Oct and Nov calls are going to be free money while we wait.

I sold the following calls:
DNDN - 6 Oct $35s for $0.84 (2.8% return)
ELN - 10 Oct $8s for $0.15 (2%)
MELA - 10 Nov $10s for $1.20 (12%, or 6% monthly)
ARNA - 29 Oct $5s for $0.40 (7.5%)
SGMO - 15 Oct $10s for $0.25 (2.8%)

I think the MELA and ARNA calls are the best play of all right now. The stocks may go down slightly but you keep the premium and the stock should recover before the expiration. And of course, if the stock stays where it's at, the premium is pure profit. 6 and 7% a month is nothing to sneeze at!

The Port is now at $138,700 -- a 28.4% annualized return. I have $12,653 in cash and the following positions:

Stock (calls written)
2000 NBIX
1600 ELN (10)
1000 DNDN (6)
2500 SGMO (15)
400 BCRX
4900 ARNA (29)
200 AMAG
2000 MELA (10)

Regards,
Trond

ARNA and the Port24

ARNA had an exciting day. The BLOSSOM results were not quite as good as I hoped - but they will still file an NDA by the end of the year, and should get lorcaserin approval for weight loss.
I expect the shares will be volatile in the next couple months, but should creep upwards to ~$6 or $7 by this time next month.

The Port 24, after options expiration today, is on track.
I was exercised out of the ALTH $7.50 calls, but still have 800 shares that I had sold covered calls against at $10. The $7.50s were very good to me, as I bought the shares at $7.99 and sold the $7.5 strike for $1.65. That is a nice, 14% one month return!
ARNA $6 calls and MELA $10 calls expired, so I was able to keep the full premium (each at around 4%).

The Port is now worth $136,232.09, at a annualized return of 26.8%.

2000 NBIX
1600 ELN
1000 DNDN
2500 SGMO
400 BCRX
1000 MELA
4900 ARNA
200 AMAG
800 ALTH
Cash = $12,550

Dendreon and the Port24

Pete, selling is ALWAYS the hard thing to call.

One of the best things I think you can do is keep a trading journal, and when you buy something, write down what you expect and why you would sell.

I freely admit I have blinders on when it comes to Dendreon (and Elan). However, I have called DNDN the "safest one year stock" for a reason - within a year I see a fairly easy double. If I went into revenue projections and P/E or P/S ratios I could easily show how Dendreon could be worth $100 in 2 years, or way more than that beyond because of the pipeline. This is a retirement stock - akin to folks who bought Amgen two decades ago. (how's that for a pump!)

I have to say with today's volume and price, there may be news coming this weekend. At this point, if you would LIKE to have some Dendreon in your portfolio, I do not think I would sell.

---

I also want to mention that as of today, the Port 24 has a 34% return, or on an annualized basis, 25%. I have (finally) achieved the 24%+ returns I have been aiming for. In the coming months I will be much more aggressive on the covered calls and NOT simply waiting for price appreciation of the underlying shares.

Regards,
Trond

Dendreon target

Pete asked about a price target for Dendreon (DNDN).

I hate the concept of targets, because people will always have different time frames and objectives.
If Dendreon hits $32.17 intraday, but closes at $31.81, and I have a $32 target, is that a "hit"? If it does that tomorrow but my target is a end-of-year 2009 $33 and it never quite breaks $33, is that a miss?

Not picking on you, Pete - just need to know where you are coming from in terms of why you want a price target. Now let's say you bought a mess of shares a couple days ago when the stock price went up 15% and you want a short term trade that gets you out with some chance of profit and safely, protecting your principal. THAT is a legitimate reason, and answerable (although of course, only in my opinion).

So here we go!
First, realize there have been a bunch of biotech conferences recently, and Dendreon has scheduled an Analyst Day in NY on 9/24. So word is getting out about Provenge, and there is always the chance of a blockbuster partnership agreement, or further trial info. So it's not surprising it's been "frothy" lately.
The company has basically promised that they will be reviewing commercialization plans at the presentation. I hope they will give more color on pricing and production quantity per quarter. Armd with more information, the expectation is that the analysts will be blown away with the amount of revenue Dendreon may make even as quickly as next summer, and raise their price targets -- which may make more funds and institutions buy in.

I actually expected us to stay under $25 through this Friday (option expiration) and would not be surprised at all to see us dip down there again. But, we should stay between $24 and $28 up through the Analyst Day presentation.

IF the company announces by 10/1 that they have submitted the amended BLA to the FDA for Provenge, then I would think we'll stay at $25 as a floor, and we make hit the $30s through the fall.

But -- allow me to stop speculating on a monthly basis: by June 30, 2010 Provenge will be approved and we should have a Rest-of-World partnership agreement. Those two events should lift us safely out of the $30s - I expect in one year (9/16/2010) the share price will be around $45-50 - nearly a double from here. Note there could easily be spikes, bringing us much higher than that for a day or two.

I would hold on to any shares you have - if they are earmarked longer-term. If you bought some purely to make some short term profit - I'd lock in gains now. Analyst expectations are always hard to read -- you may leave $2 on the table but we could easily sink $2 for the next couple months also.

Regards,
Trond

Port24 update

Well, I had my AOB and MELA called away from me last Friday in the Port. I am sad at losing MELA as I expect it to gain quite a bit over the next couple months - it started Wednesday with a couple dollar spike. I ended up buying some back and selling the $10 strikes. Again, too early, as it is up over $10 today.

On Wednesday I sold 29 ARNA $6 Sept calls at $0.20. They have announced that the BLOSSOM trial results will come out in late September and I halfway expect these will be called away. If it is still under $6 in mid-Sept I will not be crying as I expect at least a 50% stock move on the results soon thereafter.

Yesterday I bought my MELA back at $9.50 and sold the Sept $10s for $0.45. The FDA will rule on MelaFind by December so these should be good for trading until the November series.

Finally, I also bought 1600 ALTH at $7.99... selling 8 Sept $7.50 calls and the other 8 Sept $10 calls. Allos has an advisory committee meeting on Sept 2 so the price should either be above $10 or back in the $6s.

So the Port now has the following holdings: (# calls sold against holding)
2000 NBIX
1600 ELN
1000 DNDN
2500 SGMO
400 BCRX
1000 MELA (10)
4900 ARNA (29)
200 AMAG
1600 ALTH (16)
Cash = $6,567...
... for a total worth of about $125,000. This is a 19.46 annualized return... still below my target of 24% but well above the market returns over a similar period (S&P and NASDAQ).
Note that I actually do not think either the S&P nor the NASDAQ is a correct index to compare the Port against, as I think of this as an absolute return fund. If I am not positive, I don't care if I beat the market by 100%.

Current favorites:
Look for ALTH to return ~30-50% in the next week.
ARNA is one of the best September covered call plays ever at the $5 strike. 10%+ return for less than a month with a large margin of safety.

Regards,
Trond

Karl Denninger

Market-Ticker.org is one of my daily stops.
One of yesterday's posts, rendered to its core, is that overdraft fees, especially levied AT the ATM -- where the bank can obviously simply compare the amount being taken out versus the account balance and not allow the transaction -- are an intentional and unconscienable outrage.

Today may be a little over the top theatrically, but the outrage is genuine. I strongly urge the 3 or 4 minutes it might take to read it.

http://market-ticker.org/archives/1317-DAMNIT,-STOP-THE-LOOTING-NOW!.html

Regards,
Trond

Marketocracy - top 100!

To those who don't know, Marketocracy com allows you to "manage" a mutual fund, having to follow strict diversification and cash management rules.

In the period ending June 30, 2009, I finally cracked the top 100 for the first time. In over two years, I have beaten the S&P 500 by 78%.

http://www.marketocracy.com/cgi-bin/WebObjects/Portfolio.woa/ps/FundPublicPage/source=CmOhHbFfEfOmLoNbMaKiAbDf

Yay me!

Regards,
Trond

Port 24, Sangamo, and Elan

Made one trade today in the Port -- sold 4 Aug $12.50 calls against my BioCryst. 4 BIUHV at $0.75.

With the MELA, BCRX, and SGMO spikes, the Port is now at an 18.3% annualized return. I'm getting close to my projected 24%!

Sangamo has had a surprising few days of strength. I think unless there is news it'll fall back somewhat -- anything under $5.10 ($5.76 today) would be a very good buy.

Elan will hear soon about palperidone palmitate -- JNJ's schizo drug that the EDT division re-formulated and which is now in front of the FDA. An approval here will mean some significant royalties in the future, and I expect a nice 2-5% bump on that news.

Regards,
Trond

More Port 24 updates

Did a bunch at lunch today.
Sold the 6000 JAV for a 1 month 43% profit. It very well may keep going but I'm taking it off the table.
Bought 1800 AOB at $5 and sold the Aug $5 calls for $0.25. Around a 4% profit if over $5 in a month...
Sold 4 Aug $24 Dendreon calls for $0.90.
Bought 200 AMAG. Have not sold calls yet as I think it will go up in a couple weeks.

This is the current Port:
1800 AOB (18)
2000 NBIX
1600 ELN
1000 DNDN (4)
4900 ARNA (29)
2500 SGMO
400 BCRX
2000 MELA (20)
200 AMAG
$1980.36 cash
ann. = 10.62%

In my real IRA I also bought some AMAG today. I'll have to update my Favorite stocks!

Regards,
Trond

...and two more call positions... Port 24

Sold 4 Jul $27s of Dendreon at $0.64 each and 6 Jul $9s of Elan at $0.15.

Note the Elan calls are selling at 2% and if exercised would yield 27%+. This is EXACTLY the risk I'm looking for - getting my 2% a month with huge upside. The $8 calls are $0.30 which is a 4% monthly return, and probably are a smarter play. I actually do NOT want to lose my Elan shares which is why I elected to only sell 6 calls at the $9 strike.

Regards,
Trond

New buys in the Port 24

Bought 2000 MELA at $7.26, sold 20 AUG $7.50s for $0.70.
Bought 2900 ARNA at $4.70, sold 29 AUG $6 for $0.40.

Cash = $1,208.86 and positions are:

1600 AOB (16) (=calls written against)
2000 NBIX ()
1600 ELN ()
1000 DNDN ()
2500 SGMO ()
400 BCRX ()
2000 MELA (20)
6000 JAV ()
4900 ARNA (29)

ARNA, by the way, may be the safest 3 month play ever.

Regards,
Trond

Port 24 update

Friday the 19th was June options expiration... and I lost 1000 Dendreon and 1000 BioCryst shares.

So the Port is now worth $109,753 (8.8% annualized return), with over $34,000 in cash. This is a good time to have loads of cash on hand, as I truly believe we will have another nasty market correction within a few months. My trick is now to find a couple SAFE places to invest this, earn a couple percent on covered calls, and be able to still have the principal ready when such correction occurs.

My first thought is oil -- I think we will see oil go to at least $90 a barrel by late July. So the exchange-traded fund USL is a possibility. It does not trade options, however, so if I want to get some covered calls I will need to go with USO (currently ~ $38/share). That works for me: selling the July $40s at about $0.90 (2%+) is probably the best play. We'll see what happens on Monday!

Regards,
Trond

Dendreon - title character at Deep Capture

"Then, on April 28, at 11:22 am — just hours before Dendreon’s triumph in Chicago – an anonymous message board author on Yahoo! Finance posted this message: “HIGH PROBABILITY OF MASSIVE BEAR RAID…DNDN [Dendreon] could easily drop 50% on a massive bear raid…its coming today@12:30 pm central.”
Just minutes before 12:30 pm central, Dendreon’s stock price began to fall. It didn’t just fall–it nosedived from $24 to under $8 … in 75 seconds. That’s correct, during a period of 75 seconds, more than 4,000 trades were placed, totaling 3 million shares, or about 50% of Dendreon’s (spectacularly high) average daily volume. Given that the message board poster knew what was coming, it is a safe bet that this was a coordinated, illegal naked short selling attack. And just in case you still didn’t get this – it caused Dendreon’s share price to lose more than 65% of its value – in just 75 seconds flat."
http://www.deepcapture.com/michael-milken-60000-deaths-and-the-story-of-dendreon-chapter-1-of-15/

Wow is all I can say. I know almost all of this from following the stock in the last 2 1/2 years, but it is an amazing story.

Regards,
Trond

Dendreon: "Riskless"?

When Dendreon received the FDA's Complete Response Letter in May 2007, there were two things that were said to be the reason for the non-approval of Provenge.

One was that they needed more clinical trial data; and the at-the-time ongoing IMPACT trial was going to fulfill that need.
The second was a Form 483 from the CMC section. Basically, something in the manufacturing part wasn't up to snuff.

In April we learned that the IMPACT trial succeeded, and wildly so. Unfortunately, the company was never very forthright on exactly what caused the Form 483. They said it was something that could be corrected; but as investors in Discovery Labs (DSCO) know, that is cold comfort: DSCO has now received THREE 483s and is still not approved.

Yesterday Deutche Bank upgraded Dendreon, saying their research indicated the 483 was for two main reasons: barcoding and documentation issues. If this is true, then these truly are easily fixed things and there would be NO remaining regulatory risks for Dendreon.

Regards,
Trond

Deutche:
We believe CMC issues will likely not delay FDA approval. There is some concern remaining CMC issues related to Provenge could delay approval. One investor concern is that there is risk to the Provenge manufacturing process, which could translate into a delay in FDA approval. This concern stems from the FDA’s 2007 complete response letter, in which additional information with respect to the chemistry manufacturing and controls (CMC) section of the BLA was requested.
Management believes it has addressed the issues brought up in the 483. While Dendreon expects it will have another inspection, the company does believe it has addressed the issues raised in the original 483 issued following a PAI (pre-approval inspection) in 2007. It has stated that it has kept the manufacturing facility in Morris Plains, NJ “PAI validated”, meaning that the company has been running it at lower levels so that it remains a validated class 100 space and meets a number of specifications. The company has also stated that it has had preliminary discussions with the agency on most of the 483 issues. Key issues described in the 483 related to bar-coding samples & documenting rules In our view, the issues raised in the 483 from the inspection that took place from February 12 to February 17 appear very mild. We believe the most important comment on the 483 was related to the request for more data on the handling of multiple samples in the same room as well as quality control steps used for maintaining the identity of the samples (i.e. bar codes).
The rest of the issues relate primarily to Standard Operating Procedure (SOP) documents that
basically describe various rules for certain procedures (the inspectors believed certain additions needed to be made in the documents). We believe that the issues raised in the 483 were likely easily addressed by the company, as in various conversations with management it has discussed using a bar-code system. A detailed list of issues raised in the 483 is available in the figure on the next page. In our opinion, there is likely little risk to manufacturing process for BLA approval
The manufacturing process and control systems for Provenge have been in place for many years and have been utilized during the clinical trial (over 1000 patient samples have been made in clinical trials). We believe the company has likely addressed any outstanding issues the FDA had in the original 483 because it has had time to do so and because the issues seem relatively easy to fix. Dendreon has had the advantage of having the FDA review its CMC section before and has had two years to implement any issues raised. What else gives us confidence? Many steps of the process are not unique to Provenge. The FDA has had experience managing patient-specific products such as diagnostic tests that have quality control measures in place that are similar to those for Provenge. The leukapheresis process is also well known by the FDA and many centers conduct the process on a daily basis for other procedures. Diagnostic testing frequently uses bar coding and quality assurance procedures to keep samples from getting mixed up. Finally, the antigen activation steps that take place at the NJ facility are not that complex, in our view. We believe the greatest challenge will be scaling up the process in time for launch and getting more physicians set up with infusion ability (to be discussed in a later section) Given patient awareness and lack of other therapies, we believe many patients will want Provenge. In addition to the ~30,000 new patients with metastatic disease every year, there are approximately ~70,000 existing metastatic patients who may want therapy. We believe the current plant will only provide for ~10,000 patients at peak and may only be able to supply ~2500 patients in the first 6-9 months of launch.

Port 24 update

Well that was quick.

I am back in the black ... BioCryst is on a tear and just about made up my shortfall all by its lonesome. I sold 5 more DNDN Jun $24 calls this morning, as well as selling all 3000 shares of my ARQL. Still love the stock, but it was up nearly 100% and the price is just too low under $5 to get significant option premium.
I turned around and bought 1600 AOB (at 4.72), and sold 16 Jul $5 for $0.35 which is 7% for a month and a half.

The port is now at $100,286 and my positions are:

1600 AOB (16)
2000 NBIX ()
1600 ELN ()
2000 DNDN (10)
2000 ARNA ()
2500 SGMO ()
1400 BCRX (14)

Regards,
Trond

Port 24 and two picks

Sold 5 June $25 covered calls at $0.40 against Dendreon, and 4 June $5s at $0.25 against BioCryst.

I have two stock picks right now. One is safe, and one is for some bang.

Dendreon (I can't believe I am saying this!) is my safe pick. At $21 right now, it may go as low as $18 or so over the next couple months, but in terms of a one year time span, it will have a floor under it AND have significant upside. The chances of a partnership agreement, new trials, analyst day this summer, a Q4 filing of the Provenge BLA, and ultimately an approval next spring all will keep some excitement going and each of these should give the stock a boost.

Sangamo is the bang-for-the-buck stock. It has been drifting lower for a month now and is currently in the high $3s. They will be getting trial soon and are a constant threat to compile new partnership agreements at any time. Each of these may be for small dollar amounts (relatively) but at some point some analyst is going to say, "Wow, 20 or 30 $5-10M agreements really add up!" I want to be there for that lightening strike.

Regards,
Trond

Port 24 update

Well, it has been exactly one year since I started the Portfolio 24.

It is a model portfolio starting with $100,000.00. I had expectations of making 2% a month, utilizing a covered call strategy. For the year, I fell well short of that, with the Port being worth $89,560 with today's prices. That is an actual 10.5% loss, or 34.5% below my desired return.

While I could use the overall miserable performace of the market (for example, the Nasdaq was down 32 percent and the S&P500 was negative 35% for that one-year period) as an excuse, I prefer to view this as an absolute return portfolio, not a relative. In other words, I do not want to simply beat the market returns, I want to ALSO always make money.

Three things hampered me.

1) Elan absolutely killed me; I bought 800 shares right before the disastrous duo of the ICAD presentation/PML cases. That is a $21,000 mistake at this moment, which would put me at a 10% gain on the year if I had not done that one purchase.

2) I neglected the Portfolio all fall and through the spring. I would have made "some" option premium if I'd been paying attention and selling some out-of-the-money calls. In no way would I have clawed back to even, but I probably left a minimum of $4,000 on the table.

3) I went away from the original strategy somewhat by stocking up on Elan and Dendreon. It worked quite well in Dendreon's case and not so well in Elan's. And it wasn't even the fact I was adding those two names in bulk; I refused to sell calls against them because I didn't want to be called away from perceived large gains.

I bought 1400 shares of BioCryst Pharma today at $2.47, and sold 10 June $2.50 calls for $0.50 -- a nice 20% premium for one month! I also sold 20 $22.50 May calls against Dendreon -- they expire tomorrow and with the stock at $20.90 I think it free money. Granted, the contracts were only $8 each but it came to $130 after commissions.

So right now, the Port stands at $89,566, with the following holdings:

3000 ARQL, 2000 NBIX, 1600 ELN, 2000 DNDN, 2000 ARNA, 2500 SGMO, and 1400 BCRX; $614 in cash. I have 20 Dendreon May calls sold and 10 BioCryst June calls sold. Next week after options expiration I will be more active!

Regards,
Trond

Dendreon wins! SEC loses...

I cannot wait until I can retire with enough cash stored under my mattress.

But first! Dendreon presented the IMPACT data yesterday and it pretty much validated everything they said about Provenge. Longer survival. In a patient population where the average placebo life expectancy was 21.7 months, Provenge conferred an extra 4.1 months... nearly 20% longer life. And at the 3 year mark, 38% of Provenge patients were still alive versus only 21% of placebo.

In the 93 seconds before trading was halted before the data presentation, the share price was manipulated down from $25 to $7.50, closing before halt at $11 something! A lot of short-sellers managed to cover at a good price. Investing primarily in micro and small cap biotechs as I do, I wish I could say this was extra-ordinary but ... it isn't. The SEC needs to do it's job and stop this crap from happening.

It's a great day for prostate cancer patients. Congratulations to Dendreon!

Regards,
Trond

Inflation?

Thanks to Ming, who basically asked, "If the Fed is printing all this money and buying $300B of t-bonds, then why don't we see inflation?"

Also thanks to the John Mauldin blog, which I read religiously at http://www.2000wave.com/gateway.asp. He tackled this same idea a week or so again and I am going to use the equation MV = PQ, which he reminded me of, to explain the answer.

M is the supply of money
V is the velocity of money [the speed at which it moves through the economy]
P is the price level [this is what we consider inflation or deflation as it moves up or down]
Q is basically GDP, or gross domestic product -- the quantity of what we produce

All else being equal, an increase in M should either decrease V, or increase either P or Q. The increase in P is usually what we encounter, as Q is hard to change short term and V isn't necessarily something affected by Fed actions.

In our case however, all else is NOT equal. V has slowed down dramatically -- banks aren't lending as much, either retail or commercial. Q has also dropped significantly -- cars and houses aren't being built, suppliers are afraid to make too much, etc.

Therefore, the increase in M is being more than offset by decreases in V and Q. So much so, in fact, that we'd have quite a severe case of deflation if the Fed had not taken action -- Mauldin argues that he expects to see much MORE Fed action just to keep us where we're at.

Regards,
Trond

Volatility, Dendreon, and Elan

Well let's tackle the day.

On my QQQQ volatility play a couple posts ago, I had bought 2 April $30 calls for $310 total and sold 3 April $31 puts for $350. Yesterday the calls would have been sold for $660, while the puts were worthless, and held for today in case the market tanks (which does not look like it will happen). So this play was an exact net gain of zero, taking commissions into account.

A couple notes on this. The 2x3 nature is an odd play. If it doubles to the calls, it may or may not be profitable. If it doubled to the puts, I would have had an easy 25% or more return. I only gave myself two weeks on this one, and typically I'd go for the "month out" expiration rather than the upcoming one. Finally, playing the QQQQ is probably a mistake, as there is QID and QLD; exchange traded funds which double the percentage returns of the QQQQ. So utilizing options, a double is more easily found.

Dendreon:
They will be presenting the IMPACT Provenge results at the American Urological Association meeting on April 28th. The CEO has said the results are "robust" and "unambiguous", so I have no doubt they easily cleared the 22% HR needed for statistical significance.

Elan:
Biogen announced earnings last night and said Tysabri growth was in line with expectations -- neither bad nor great. They now have about 39,800 patients worldwide -- if they are going to hit 100K patients by the end of 2010 then we really need a kickstart in the next couple quarters -- but it probably will not happen. Who cares? Slow and steady growth is fine for me -- and we are past the "blockbuster" status of $1B in sales now. Bring on 75K patients!

Regards,
Trond

Dendreon passes with flying colors

Dendreon's IMPACT trial met "unambiguous" statistical significance.

That's enough for me... lots of details out there remain to be shown at the AUA meeting on 4/28, but they passed. They will resubmit the BLA in the fourth quarter - no other real news.

Congratulations to Dendreon, and to cancer patients. Bring on the pipeline!

Regards,
Trond