Random Thoughts on Wasted Mental Energy
I started posting the following on the Biota Hot Copper (B-HC) board, then realised that it was unlikely to be of benefit to anyone there so I decided to post here. It’s possibly not going to be of benefit to anyone here, but c’est la vie.
I post this now not to purposefully annoy anyone, though many may find it annoying, but to offer some advice that perhaps even just one person can intelligently consider whether there is any merit in it. As always, I also post in the hope that people will give intelligent feedback.
My investing approach changed about 12 years ago when an accomplished investor asked me how often I checked the prices of my holding. I thought he was joking and replied with a half laugh that I checked prices at least once per day. He then asked how often I thought the fundamental story behind my investments changed. As he walked away a dim light flickered in my head. That light now burns bright and despite still checking my quotes too often, I am happy to walk away from the market for weeks on end and largely only check prices when they are around my target prices. Don’t sweat the wiggles. If you’re going to be a lifelong investors then worrying about daily prices moves will grind you down.
Should bots be behind bars?
A bad workman blames his tools. Most readers probably aren’t aware that 90% of the posts on the B-HC board seem to be about bot trading, that is trading by computerised algorithms. In particular posters are sure that bots are manipulating the share price and apparently screwing us retail investors. I’m still not sure how anyone can be sure about anything, let alone something as complicated as the trading patterns of shares. Though let’s throw reason aside and assume bots can manipulate share prices over extended periods of time and have forced the share price of Biota lower. Unless you’re carrying high margin while speculating on volatile shares (namely a complete smeghead) I’d suggest bots forcing the price lower is good news to those retail investors who believe Biota is undervalued, as it provides an opportunity to buy more shares at greater discounts. Any retail investor hould hang up their spurs right away and opt for index fund if they sell based solely on prevailing share prices.
Whether or not the bots are helping or hindering is largely irrelevant and unknowable. What individual investors can do is focus on what they can control. Focus on their investment strategy and implementation, their research and their own investment decisions. Focus on what you can control and drink from the cup of introspection, rather than looking to blame mysterious forces beyond your control.
Other Biota investors are counting on the Japanese approval of LANI to skyrocket Biota’s price higher. While I don’t think the market is totally efficient it is certainly efficient enough to have priced in such an occurrence. At the very least investors should consider the possibility that LANI approval is already priced in. It’s better to be pleasantly surprised based on conservative assumptions, than having your assumptions make an ass of you (I couldn’t work the me in there, but rest assure I am often an ass or arse as us real English speakers say.) It’s also better to be prepared, what would happen to the share price if LANI unexpectedly gets rejected?
Investors should look for sound logical reasons why Biota’s or any other companies’ share price is where it is. If they believe they have some differential insight, fine, write it down and invest based on that belief. My feeling is most of posters on the B-HC board should really be blaming themselves for having got greedy and failing to sell when the share price was above $3, it’s now 88 cents, not blaming bots. I too failed to sell, despite going on record that Biota was overvalued when it was around $3.30. Yes, I have looked at what I can learn from the situation, though sadly I didn’t come up with any fresh insights. Just the same old anchoring issue I always struggle with.
For those interested in Biota, it is noteworthy that their largest shareholder Hunter Hall has upped their stake to 13.14%. LANI approval is due any week now, the annual report was out recently and Biota’s foray into the ASX S&P200 was short and bitter.
Disclosure: Long Biota (BTA.AX)
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Hey, keep your hands off HotCopper!
Well, seriously, I do understand your point, but you are dealing with traders and gamblers mostly on HC. most of whom are into technical analysis and short term trades. I have visited HC for over 10 years now, and nothing has changed at all.
Your posting also reminds me of David Einhorn’s approach, which is detailed in his book, which essentially requires one to consider realistically why something is mispriced, and to examine our own egos by asking why we believe we have an edge when we are competing against so many smart and hungry market participants.
As a matter of interest, one of my checklist items when considering a stock is to visit HC and to look at the “noise level”.
So try not to destroy my “HotCopper Indicator”, but I suspect that will not happen however hard you try.
The share price does not appear to have much of the impact of a LANI approval priced in because sentiment is very much against Biota at the moment. In fact, market sentiment is against most profitable small-caps on a “prove-it-or-lose-it” basis. Blame it on previous overly optimistic earnings forecasting by analysts.
The big picture is that Tamiflu has a huge chunk of the flu antiviral market and even if the pie has shrunk considerably following the pandemic-that-wasnt, health authorities are aware that global antiviral stocks need to be rebalanced away from Tamiflu for which resistance has begun to emerge. So the things I ask myself are (1) what is the likelihood of having no global flu event appear in the next 5 years and (2) what are the chances of a new substitute for flu antivirals in that time? (Vaccines are not a replacement, you can’t vaccinate an already-infected voting public).
As for (1), the share price assumes a very low likelihood, which seems to be an asymmetric bet to me. As for (2), think how long it took for Relenza to be accepted by the risk-averse health authorities, then consider how long any new treatment would take to be accepted.
What fundamental story has changed with Biota? That the pandemic did not trigger mass uptake and cycling of Relenza? If that’s what the average Biota investor believed, then the price drop is understandable. Stockpiling no longer the preferred option? Well, GSK has upped its production capacity to make up for it.
$3 was a ludicrous price. I sold partially at that price. I should’ve sold all. I don’t know whether LANI will get approved or not. The news on the grapevine is that it will go ahead as expected. What I do know is that at current prices, Biota is an asymmetric gamble that the market is mispricing. We’ll see.
Talk about timing!
Announcement out this morning re LANI approval in Japan.
Now HC participants will start speculating on other licensing deals. The cycle never ends.
Thank-you for balanced view of Biota
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