To those of you who wish I’d spend more time writing about personal finance and less about personal peeves (Home Depot on-line is so screwed up! and why does my iPhone keep changing the — not an uncommon word!!! — to T&E, whenever I mistype it?) . . . I say:
Ask Less. He knows everything about personal finance and prudent investing. My speculations — to be made only with money you can truly afford to lose — make him blanch. A question here — will ordinarily elicit a quick answer on his blog. (Hence the little asterisk that’s been blinking on the right-hand side of this page for years. See it? Nearly 500 million blinks by now, if my math is right.)
But while I have you . . .
First suggested here at $6.65 and then again at $5.50 or so, it closed Friday at $22.59, for about a quadruple. I celebrated by taking some profits; yet Guru writes of the company’s wildly expensive drug ($295,000 a year): “There are probably 1,000 to 3,000 people in the US who could really benefit from Gattex. Could be more. That’s $300 million to $900 million in the US. They will launch in Europe where the market is similarly sized. For sure this is a $500 million in peak sales. Every year. For a long time. No competition. No one even trying to compete. This product could extend survival. Meanwhile, they have another product, for hypoparathyroidism — to supply the missing parathyroid hormone. Will file this year. Launch end of next year. Another $300 million potential market in the US. Then they get a royalty from Amgen of $100 million. The stock should hit 36 over the next year.” So I’ve kept some.
Guru told us about this one in May at $10.30, suggesting it could be $15 or more fairly soon. Up 20% since then, he now writes: “NKTR reaffirmed that the arthritis trial — the focus of my interest — will be out ‘this summer.’ So: soon. I just don’t see how it doesn’t succeed. I think this drug, NKTR-181, and a second one — a short-acting pain drug , NKTR-192 — fully justify the current market cap. These should be easy approvals because they’re based on known effective drugs that have been chemically and permanently altered so that they reduce abusability and adverse events dramatically. They address a current market of $12-$15 billion. At the same time, NKTR has partnerships with AZN on the constipation side, with Baxter on an extended release hemophilia factor, and with Bayer on extended release antibiotics to treat hospitalized lung infections, so lots of ways to win here. It’s one of my favorite intermediate cap stocks.” So on I hang.
Suggested here in February at 85 cents, it closed Friday at $1.11, which I suppose is good, up 30% in six months, but is really not the point. The point of this one, as stated then, is either to go to zero if its device fails to get approved or else to $10 or $20 if it does get approved (very possibly by the end of this year). Two smart people I know think there’s a better than even chance it gets approved. I am skeptical, as “the market” sure doesn’t seem to be assigning those same odds. But if there’s even a 20% chance the stock could hit $10 or $20 in the next year or two (say), that chance is worth approximately 20% of $10 or $20 — and so still this gamble appears cheap. Wish us luck.
By contrast, I just don’t see Borealis going to zero. Why would a patented technology for a little motor powerful enough to drive a fully loaded commercial jet at 20 miles an hour — and all its other patents and even its iron ore — be worth zero? It could be, with sufficiently bad management and sufficiently bad luck. So this is, as always, a speculation to be made only with money YCTATL. But even if there is only a 10% chance that it will pan out — and by now I think the chances are higher, given their 11 signed airlines and their impressive production partners and the fact that their system has been shown to work — then it seems to me that a reasonable valuation for the company might be $200 million to $500 million, which is to say 10% of the $2 billion to $5 billion that success might be worth.
I know these numbers are insanely large (the company would doubtless argue they are not nearly large enough, and that the chance of success is well north of 10%), but with 5 million shares outstanding, a $200 million market cap is $40 a share.
So who is selling it at $12?
I know who’s not buying it — anyone with a fiduciary responsibility to buy only S.E.C. regulated companies. (Did I mention that the company is headquartered in Gibraltar?) But in a way, if this thing ever does pan out, that’s an advantage for us: it’s kept demand low while we were buying.
And I know one guy who sold 2,000 shares recently at $10 a share. “What were you thinking?” I asked him. It turned out, he was thinking he had to pay the landscapers. Hurricane Sandy had left him a big uninsured mess. But he was also thinking these were not his only shares — by a long shot — so he’d just take the profit on these, for the sake of the rhododendrons, and hope to do well with the rest.
Who else is selling I don’t know.
RUNNING OUT OF GAS
I once got to test drive what was then the revolutionary new Mazda, with its Wankel rotary engine. I ran out of gas on the Saw Mill River Parkway. At night. With cars whizzing past and no paved “shoulder” — the charm of a parkway as opposed to a highway (or at least this is how I remember it 40 years later). It seemed like a big problem at the time; but imagine running out of gas on the approach to, say, Gatwick. Or Laguardia. This story about discount carrier Ryan Air reminds us what a bad idea it is to leave the gate with insufficient fuel. And because you can’t know before you push back how long you may be delayed on the tarmac, what a good idea it is to have enough extra fuel to allow for longer-than-usual delays, even if 90% of the time you won’t have them. Even though it’s generally unused, that extra fuel weighs hundreds of pounds; WheelTug makes it unnecessary, reducing the weight of the plane accordingly — which in turn lessens the amount of fuel required to thrust it 37,000 feet into the air. (How much extra fuel would you require to climb 3,000 flights of stairs with an extra, generally-unused barrel of jet fuel on your back?)
Quote of the Day
That I'm their competition.~Famed hedge fund manager Michael Steinhardt, when asked the most important thing an investor could learn from him.
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