Weekly Words of Wisdom
Two pieces of advice this week, one from me and a second from Cameron. The photo is my sister-in-law and son in Paris in 2001.
I’ll go first. Protecting ANZ profits.
The following was written for a Hot Copper poster on the ANZ board who was concerned about a possible falling ANZ share price following an overnight decline in US indexes.
I agree with the sentiments already opined, turn off your screen and relax. If you have concerns over a one day movement in a foreign exchange, DJIA, then you should not be investing directly in shares.
Action you can take if you are worried about ANZ shares trading lower:
- You can sell your existing ANZ shares.
- Take out a CFD as someone on HC suggested. i.e. sell a CFD on ANZ, so you lock in the current price minus associated costs and spread.
- Sell a call option on your shares, 1000 shares = 1 call if you bought $15k worth you sell one call, which would cover most of your shares. While this is not a real hedge, it gives you some more cash lowering your cost price.Here are two you could consider:
ANZQ17 C 27/08/2009 15.5 1.055 1.135 1.180
ANZQL7 C 27/08/2009 16 0.740 0.810 0.770If that looks like gibberish you probably should forget about options, but in short ANZQ17 is a call (you’d be selling someone the right but not obligation to buy at the strike price)with a bid of 1.055 and strike of $15.50. If the right to buy is exercised then your cost basis would be 14.40 and your total sell price would be $15.50 + 1.055 (or slighter higher if you sell it closer to the offer price)
If they don’t exercise the right then you pocket the 1.055 or $1055 (less costs). - Buy a put. That’s you buying the right to sell your shares at a fixed price.
ANZ3P C 30/07/2009 16 0.525 0.575 0.540
i.e. you’d pay $0.575 ($575+costs) for the right to sell at $16. You’d be locking in a minimum profit of 16-0.575-14.40 or around a dollar a share. The upside to this strategy is you are not limiting your upside, if ANZ goes to $17 or &18 you get to pocket that.
The reason I suggested an August Call and a July Put is that in this particular case when you sell an option you want to maximise your income, while when you buy an option you want to reduce your cost. In general I prefer to sell short term options and buy long term options, but in this case I looked at protected ANZ SPP profits and that changed my preferred options.
The danger with the CFDs and options is there could be a scale back. I view this as unlikely, but it is a risk which you should consider. Another risk is taking any advice from some guy on the internet. Do your own research on any of my comments.
Each strategy has a different risk / reward profile. Thinking about them is a worthwhile exercise for all investors.
Next up is Cameron’s advice, which I really liked.
I had this discussion with a hedge fund manager as part of an interview. It was a strange interview, but I explained to him how I typically look for good balance sheets. I explained a specific stock that I liked that had $6 per share in cash. He said, “That’s too bad.” I said, “huh?” He said, “Well if you were investing $5m in a $25 stock with $6 per share in cash, you could buy 20% more shares if they only had $1 per share in cash with the same $5m of capital.” And I said, “but the balance sheet is pretty.” And he said, “well if they’re really generating as much cash as you say they are, then they have no need to have a pretty balance sheet. They’re likely to do something stupid with that cash like overpay for a crappy company that the CEO’s brother owns.”
via TMF: which one would you own? / Deranged Monkey Criticism .
Related posts:
Hey Moreld you just said I talked about CFD’s but I also said Option which are calls or puts. If you want to make a few dollars look at INT good advice for your punters from a professional trader.
Oh yeah Biota old tech if you want the latest tech in flu vaccines look at BDM 2 to 3 week turn around for vaccine not 3 to 4 months from egg cell culture they use cell culture JV with nobilon.
Hi tciboss, thanks for your comments.
Sorry if I missed your comments about options. I read a lot and sometimes skim too fast.
Intermoco is a 2 cent share with a market cap of $31M. I see they recently received some new orders.
Biota doesn’t make vaccines, there is a big difference between vaccines and anti-virals. What is the two to three week turnaround for? No company has ever or is ever likely to get a vaccine to the mass market within three weeks of a flu strain being identified. Testing and manufacture still needs to be done. I forget the details but IIRC CSL already produce vaccines in a few weeks, but it still takes a large well equipped company like them months to get it to market. BDM is another highly speculative share and not something I would recommend, but each to their own. BDM appears to have a market cap of around $5-6M. Here is their 2008 annual report.
While these companies may be fine for professional traders, everyone should tread carefully and beware that those waters are full of sharks.
Quick update on BDM as I’m interested in companies in this space. Their half year report shows NTA falling to 6.71 cents, despite a $1M milestone payment. That NTA is close to their annual burn rate, so if they have one stumble, miss one milestone it’s all over rover, unless of course shareholders pony up. Though it appears form their quarterly filing they may have received another milestone. Just making notes for future digging, this has been a two minute look so I might have a lot wrong
It appears I have been suspended from Hot Copper for posting a link on their site to my blog. I have checked their term of use agreement and can not see how I have violated it. I believe I have only posted a few links to my site and only when it was appropriate to the discussion.
So I bid Hot Copper adieu, though never say never
Dean CSL use egg cultures which takes 12 to 16 weeks to produce a vaccine. BDM use a cell culture which is quicker not only have they signed with WHO, CDC is testing LAIV
The Netherlands, Feb. 23, 2009 – Schering-
Plough Corporation (NYSE: SGP) today announced a license agreement between
Nobilon, Schering-Plough’s human vaccine business unit, and the World Health
Organization (WHO) to provide access to pandemic influenza vaccine manufacturing
technology to developing countries.
LAIV technology is specifically considered attractive for this purpose
because the manufacturing technology process is easier to transfer, capital investment
is lower and yields are higher, as compared to inactivated influenza vaccines.
The WHO Global Vaccine Action Plan seeks to expand influenza vaccine manufacturing
capacity in developing countries and enhance the global supply for pandemic vaccines
Nobilon International BV announced that it has reached an important milestone with the initiation of its first-in-human clinical development program for SCH 900795, a new intranasal Live Attenuated Influenza Vaccine (LAIV) for annual seasonal use. The candidate vaccine is composed of the three attenuated Influenza viruses recommended by the World Health Organization (WHO) for seasonal vaccine, in an intranasal device. The LAIV differs from most existing influenza vaccines, because it has been designed to offer single-dose intranasal delivery, advanced cell culture manufacturing technology and potential earlier and broader protection against infection by influenza viruses
.BioDiem Ltd., Nobilon International BV and U.S. Centers For Disease Control And Prevention (cdc) have agreed to extend the Co-operative Research and Development Agreement associated with the company’s Live Attenuated Influenza Vaccine for pandemic indications for one year. Since initiation of the agreement in August 2006, the research team has made significant progress toward the goal of characterising and evaluating LAIV candidates against influenza A (H5N1) for pandemic preparedness in pre-clinical models. The research team has successfully generated a H5N1 reassortant using the LAIV Master Donor Strains.
What you have to remember is Dean is that a single dose has a sell cost with all royalties of 3 to 4 dollars and it will be given to who for 3rd world countries remember normal vaccines cost 30 dollars and large stock piles of tamil flu and others aren’t needed. without this WHO and CDC are behind this as they realize Cell culture is the quickest way to get a vaccine in a push 2 weeks compared to eggs 12 to 16 weeks this stock sits at 8 to 10 cents they are starting human testing soon. I Know there are many stories out there but with my style be it resources biotech or anything I identify and move even in the worst market year for a long
time I returned 400% on my money with 7 figure returns for the last 10 years I wish you good luck
I should also say dean proffesional traders identify buy and most likely sell before the average punter even hears of the next big thing , Also being able to identify sectors that are hot what punters have to be aware of is one buying not falling in love with stock and taking profits and cutting stock quickly that does not perform. The belief that there are sharks out there is nonsense in small caps there are sharks in all area of the market blue chips are minipulated no differently than small caps. Its a matter being aware of your portfolio
limiting losses and learning to free carry hot stock as most investors hold losers to long and sell out of hot stocks to early.
2 years (based on Hotcopper dialogue) seems like a long time to be holding BDM stock if one is adopting a turtle trend following approach (I assume, which will of course, be wrong, based on the adage of stop loss limiting losses and free riding stock). Given that the stock recently made a 52 week high, it would have beeped on the radar screen of most technical traders, including turtle trend followers.
Anyway, 400% compouding over 10 years with 7 figure returns is absolutely amazing. $1 invested with tcisboss in 1999 would be worth roughly $256,000 ten years later today in 2009. That is a 256,000% gain. Possible if you are 99.9% leveraged to start off. $1 in equity and $999 in debt. You still need about 256% per year. Amazing.
As to BDM, current burn rate is $3m per year. They spend close to $1m per year in admin or other expenses. I do not understand why a biotech need to have offices in swanky Collins Street. It is certainly not for cheaper rent. If I am CEO of a biotech, I would want to be quite near the labs (note CSL and COH). Also do not understand why they use CPU as stock registry provider given their narrow shareholder base. They could be saving quite a bit going with a smaller registry provider.
Still only in Phase 1. $5m in the bank is just a drop in the ocean for impending Phase 2 and Phase 3, unless they find a big sugar daddy.
The only way I will play this is on a portfolio basis, with ten little promising biotech specs. But if you do that, you might as well go deep spelunking with venture capital projects. Australia, IMO, is near perfect for good returns on VC ventures because of poor government support- ref: Ventracor.
Peter if you read properly 400% return this year, Then seven figure returns for the past ten years.
Congratulations and well done. Great result. Error is mine.
Leave your response!
SUBSCRIBE by RSS
or Subscribe by EmailTags
Categories
Archives
Free Spreadsheets
Blog of the Day
Blogroll
Aus/NZ Blogroll
Recent Posts
Most Commented
Quotes