精华 苦辣酸甜难书尽，成败得失笑谈中

[加京游子]

Dynavax is quite interesting at $0.25 but it is a bit late now. I can tell you spend a lot of time on analysis.

Are you interested in hunting the next Fairfax ? If yes, can we talk privately via email ?

My mind is always open to any new idea! Through the DNDN saga, I got to learn that Fairfax launched law suits against Wall Street big boys like Stevie Cohen and his network and won. But I did not follow Fairfax at all. I know it is a Canadian insurance company and that is about it.

As for DVAX, it is not too late at this price level at all, IMO (contrary to your bashing). The days of DVAX selling for a quarter are long gone. In fact, I would add significantly if my hands were not tied up these days. Let me just say that owning DVAX at 1.6 is a whole lot better than buying it at .25. This sounds crazy but if you think about it, you may realize that makes perfect sense. I own DVAX as another next big thing, sitting on 20K shares at the moment (and my cost base is a big negative!). It takes extreme patience to wait and wait but I firmly believe the potential payoff justifies the wait. I do not mind owning up to 100K shares if my hands could get to that kind of cash. That hope rests on ARNA now and the wait does not have to be long at all. I am very much biotech-minded.

Sure, let me know the next big thing in the market you think. My email is wanderer1963@live.ca.

 

[加京游子]

Dynavax is quite interesting at $0.25 but it is a bit late now. I can tell you spend a lot of time on analysis.

Are you interested in hunting the next Fairfax ? If yes, can we talk privately via email ?

I just took a look at Fairfax. It is very solid, no doubt about it whatsoever. And it has a nice breakout lately. But the stock performance is, by no means, that stellar at all over the longer term. What is there about Fairfax that impresses you so much? Tell me about the next Fairfax in your mind and I will take a look.

 

[加京游子]

Weekly jobless claims and revised GDP releases at 8:30am today

After 6-7 consecutive green sessions, the markets appear somewhat tired. The failure of yesterday's fantastic new home sale numbers to spark a powerful rally is indicative of this sluggishness after a good run. This is just a normal reaction, nothing serious to worry about, IMO. While market-moving corporate news is not on the horizon, economic data will take the centre stage. Today, weekly jobless claims and revised GDP releases will no doubt dictate market directions.

While the overall market may take a breather to consolidate, biotech will be in play given the busy FDA schedule in September and other individual corporate news. All three biotechs I own (DNDN, ARNA and DVAX) will have big news in September, and I expect them to make significant moves. To recap, DNDN will surely on the September 24 Analyst Day unveil its detailed plans going forward, including Provenge aBLA filling and market launch and pricing, and possibly an ROW partnership deal --- why would it spend so much money and effort to organize such a dog-and-pony show to attract attention if it has nothing new to say？DVAX will have FDA's clinical path decision on Heplisav and possibly a co-development and marketing partnership news; ARNA will at least release top line results for BLOSSOM, the 2nd Phase III clinical trial for its weight loss drug candidate, Lorcaserin. Should BLOSSOM hit (a very good probability, IMO) and ARNA gain FDA approval, Lorcaserin will be a multi-blockbuster within a short time after launch.

I intend to get some more ARNA October call options．

Good luck, everyone!

 

[加京游子]

Got another 100 UGGJU at 0.6

That is it, no more dry powder to make any more adjustments in the short term. Fully loaded in desired positions, ready for big news to hit now. Wanting to get some Oct. DNDN calls for an Analyst Day play but that was only available from Monday and there is no strike I like. I may still consider that play if BLOSSOM positive news hits before September 24.

Taking a few days off after a tooth removal, now watching the market for fun only.

In the order of value, the following is my portfolio: BAC (Jan. 2011 40 calls); DNDN (Jan. 2011 40 calls); ARNA (Oct. 7.5 calls); DVAX; and MGM (Jan. 2010 15 calls).

 

[lazycatcat]

Jia Jing You Zhi

The business model for Fairfax is very simple. If $1 dollar of equity can control $4 dollar of cash with low or little cost, then a 5% return on $4 dollar is equal to 20% return on the $1 dollar equity.

The way to get the $4 dollar is via insurance. This is essentially same model that Buffett used to accumulate wealth.

Although this model is very simple, but it is not easy to realize and this is where the skills of management come in. From 1985 to now, Fairfax management did an excellent job in steering clear of crashes in 1987, 1990, 1999 and 2008. They actually profited from the crash with limited cost on the protection they bought.

Fairfax is still worth following as Prem Watsa is 59 this year.

To find next Fairfax needs a lot of work and luck. In Canada, we need to screen the 1000 companies listed by Report on Business by following thinkings on how good business grow at fast pace. Fairfax grew its book value from $3 to around $150 in 10 years.

Any interest in starting the journey on the 1000 companies and then more in the US market ?

 

[lazycatcat]

Bio etc

I can tell your position in Bio is large. Do you have any special insights ? Like you work in this area or know a lot about the pharma ?

Investment and speculation don't mix and speculation does provide excitement. So, I try to turn speculation into a business model rather than just gambling. In particular, there are a few models:

1. Kamikatze operations (K-Operation)

Say I think BAC is going to report surprises in Oct. About one or two weeks before reporting, I can normally buy BAC call with strike price 10% above for about $0.10 or $0.05 cents. So, If I spent $500, I can control 5000 to 10,000 shares. If the earning surprise does materialize, $500 will be lost.

The key is to play unexpected events with controlled loss. This is speculation but can kind of play market sentiment.

2. Insurance operation (I-Operation)

This is to sell put options of a stock on monthly basis. In some cases, it could be long-term puts. The key is to know the intrinsic value of a stock and its stock price is well below this level. For instance, selling puts of USB at $20 or $21 is good bet. There are variations here. This is again speculation but current market condition is pretty good for this operation.

It is more fun but a lot of hardwork to find companies like Fairfax, Apple (in 2002), etc ... though. Specualtion is just to add fun and play the Mr. Market ...

 

[lazycatcat]

Good business and good business people

Didn't realize you have a PhD and connections. Did you have a chance to ask around for the current best business and business people your advisor or colleagues know of ?

 

[加京游子]

Didn't realize you have a PhD and connections. Did you have a chance to ask around for the current best business and business people your advisor or colleagues know of ?

I am an economist and my PhD has nothing to do with biotechs. And I have no connections whatsoever, just trying to be a careful student of Mr. Market. I have been playing a lone wolf. I take cues from all sorts of sources but only treat them as ice breakers. I never rush into any stock owing to rumours or spamming. And I am not a technical trader, having done that a number of times before and failed miserably. My decisions in owning any stock are based on public info analysis and personal judgement.

If you are interested in getting any technical model of stock trading, I will surely disappoint you miseraly because I have none. In my book, any stock decision is speculation, some may call that investment, others call that speculation, which is of course definitely very different from gambling. The key to success in speculation is anticipation of future events and preparation for the unexpected and unexpectable.

Investment or speculation is a very individual thing. What works for one may not work for others. I try my hardest to stick with what works for me. Even in a good period like up to date this year, I have made many blunders whose cost is in the hundreds of thousands of dollars. But that is the cost of human endeavour and business conducting, inevitable IMO.

 

[加京游子]

I can tell your position in Bio is large. Do you have any special insights ? Like you work in this area or know a lot about the pharma ?

Investment and speculation don't mix and speculation does provide excitement. So, I try to turn speculation into a business model rather than just gambling. In particular, there are a few models:

1. Kamikatze operations (K-Operation)

Say I think BAC is going to report surprises in Oct. About one or two weeks before reporting, I can normally buy BAC call with strike price 10% above for about $0.10 or $0.05 cents. So, If I spent $500, I can control 5000 to 10,000 shares. If the earning surprise does materialize, $500 will be lost.

The key is to play unexpected events with controlled loss. This is speculation but can kind of play market sentiment.

2. Insurance operation (I-Operation)

This is to sell put options of a stock on monthly basis. In some cases, it could be long-term puts. The key is to know the intrinsic value of a stock and its stock price is well below this level. For instance, selling puts of USB at $20 or $21 is good bet. There are variations here. This is again speculation but current market condition is pretty good for this operation.

It is more fun but a lot of hardwork to find companies like Fairfax, Apple (in 2002), etc ... though. Specualtion is just to add fun and play the Mr. Market ...

When I am done with my stock operations, you will have an L-operation (Lin's operation), huh?

 

[加京游子]

I can tell your position in Bio is large. Do you have any special insights ? Like you work in this area or know a lot about the pharma ?

Investment and speculation don't mix and speculation does provide excitement. So, I try to turn speculation into a business model rather than just gambling. In particular, there are a few models:

1. Kamikatze operations (K-Operation)

Say I think BAC is going to report surprises in Oct. About one or two weeks before reporting, I can normally buy BAC call with strike price 10% above for about $0.10 or $0.05 cents. So, If I spent $500, I can control 5000 to 10,000 shares. If the earning surprise does materialize, $500 will be lost.

The key is to play unexpected events with controlled loss. This is speculation but can kind of play market sentiment.

2. Insurance operation (I-Operation)

This is to sell put options of a stock on monthly basis. In some cases, it could be long-term puts. The key is to know the intrinsic value of a stock and its stock price is well below this level. For instance, selling puts of USB at $20 or $21 is good bet. There are variations here. This is again speculation but current market condition is pretty good for this operation.

It is more fun but a lot of hardwork to find companies like Fairfax, Apple (in 2002), etc ... though. Specualtion is just to add fun and play the Mr. Market ...

Are you lecturing me here? Fairfax is one company that has done quite well, Apple another, RIM another, MSFT another, Dell another, DNA another, AMGN another, the list of successful businesses may go on and on and on. But bear in mind that they are leaders at the moment or in the past, and past performance is not indicative of future performance. Time passes, business environment changes, market regulations change, company leaders change, stock players change ... But Mr. Market is Mr. Market, always been, always will be. Why? Very simple, human nature never changes!

I have worked very hard in an attempt to find the next DNA/AMGN. In my own little mind, I have found that --- DNDN, the next DNA/AMGN in the making and I have been saying that since 2007, in private conversations or public postings! I am sure I will find more companies in my endeavour to own in the days, months, and years to come. But I am also sure I will always have a stake in DNDN for as long as I remain a market participant!

Your vision sounds grand, which I appreciate a great deal! Back it up with specific operations! Good luck!

 

[加京游子]

Four factors in my stock selection

Management, balance sheet, product/service, and market potential

Owning a company's stock is equivalent to letting the management manage my money. You don't entrust your money to just anybody, do you? Therefore, my DD includes the CEO, CFO and if possible, the board of directors. I just cannot own stocks when I am not comfortable with the management style.

Balance sheet shows the company's financial viability, cash on hand is an important part of that. In good times when credit is loosely available, this may be of less a concern. But in bad times when credit is tight and/or it is hard to raise capital in the equity market, the cash position plays a crucial part in a company's survival.

Product/service is, after all, what a company sells to make money. If a product/service is not in good demand, how can a company sell it, no matter how good sales people the management may be?

Market potential is also very important. I am using the biotech space as an example to illustrate. The sector is full of hundreds of companies, some with drug candidate for niche markets, others for blockbuster markets. I am only interested in markets with blockbuster potentials.

Taken together, my rational for selecting BAC, DNDN, DVAX and MGM for the long term is obvious and natural. ARNA remains a wild card, pending on the BLOSSOM result to come.

 

[加京游子]

Timing of entry and exit

The overwhelming majority of stocks I own is for long-term holding. That is not to say I do not trade them. I do, in an attempt to reduce cost base. How do I choose the time to enter and exit？

Timing is everything, as they say. But realistically, have how many people perfectly timed the market on a consistent basis in a prolonged period？I know I am not one of those geniuses.

My entry into BAC on March 6 was a combination of good luck, good judgement and good anticipation of future events, triggered by the announcement of the M2M accounting rule change congressional hearing in the following week. I publicly posted my intension before hand in a fun post in似水流年about a Chinese economist (Dr. Li) who came up with a formula in an academic publication that became the theroretical backbone of the exploding sophisticated financial derivatives like CDO, CDS, and MBS.

My re-entry into DNDN in late February was also a combination of good luck, good judgement and good anticipation of future events. But my swap of May 10 calls into shares and selling low-strike puts in early April before the 9902b (IMPACT) results cost me in missing potential profits of about 400K. A very expensive blunder, huh？Indeed and only can be judged after the fact. That swap was a calculated move after two weeks of careful research. It was made based on the consideration that I could not afford the risk of a wipe out should IMPACT not hit, as my capital base was so tiny. I needed to do everything in my power to preserve that tiny seed money for a come back.

After following MGM for months, I started to buy MGMAC at 0.5 when MGM was about 7. I bought it all way down to 0.2 when MGM reached the low of around 5.5, ending up with a little over half of the open interest (2200 call options). Then MGM started to go up. I started selling MGMAC from 0.35 alway up to 0.75, getting my money back and some profits plus the remaining 500 free call options. A colleague joked at me why I sold at 0.35 and not waited for a couple of more days to sell at 0.7-0.75. I told him I was extremely happy to sell at 0.35 something I bought at 0.2 in a matter of days. I was confident MGM would shot up and so would MGMAC at the time when I sold at 0.35 but I still wanted to unload a good portion because I was concerned about the liquidity.

I have been very happy with DVAX except my buying back shares in the AH and PM in the last round of news. That portion of shares is deeply in the water now. But all my shares taken together are at a net negative cost base.

I started to buy ARNA last week and completed the acquisition by yesterday. I got to know that BLOSSOM results will be released in September but anticipated that the company would raise capital via debt issue or secondary stock offering, both of which actually happened in July and drove the stock down to around 4 from about 5.5. After getting my 100 October calls last week, further DD pointed to a good probability of BLOSSOM hitting and by the weekend, my mind was made up to add another 400. I hesitated Monday when I could buy as many as I wanted at 0.45, ended up paying at 0.6 Tuesday, Wednesday and yesterday --- huge percentage differences.

Good luck may strike now and then and I have indeed occasionally bought stocks at the very bottom (BAC at 3.06 and DNDN at 2.75, for example) but I am generally not a good market timer. I realize that long ago. Hence, I always complete my desired acquisition in installments, which so far work pretty well over a longer time period.

Best of lucks, everyone!

 

[lazycatcat]

Thinkings

I definitely not intend to lecture or do other funny things. The reason I am here is to share ideas and probably find someone sharing the thinking of Buffett and go out to find the next great investment idea.

For Bio, I have to admit I can't achieve any insight after reading reports of many companies. To achieve exposure, I think there are two ways for me:

1. Buying an index of the industry.
2. Doing K-Operation based on events. For instance, if the company is to release results in September, buy September or October calls.

I appreciate your sharing of your knowledge of some bio companies you have been following. Along the way, maybe I will ride along with K-operations on ARN or DNDN etc ...

Your spot of DVAX at $0.25 was marvelous (if it had $1.6 cash per share at that time). Hope something similar coming up again.

I agree that timing is important. I am more interested in timing that shows convincing evidence that there is a high probability something good is to happen. A lot of studies or luck are needed. Here are some recent examples:

1. Apple: The only time I am comfortable with Apple is in 2001/2002. It was sold at $14 (pre-split) per share with around $10 cash per share without debt. Jobs was to take CEO at that time. Nokia was sold at similar price at that time too.

2. RIM: When it was in the law-suite tangle, its share hit $50 (pre-tax) a few years ago. The total amount of damage is $1 B that RIM can easily handle.

3. The banks in March of 2009, like WFC, USB and AXP. BAC was OK. C was a bit stretch ...

 

[加京游子]

I definitely not intend to lecture or do other funny things. The reason I am here is to share ideas and probably find someone sharing the thinking of Buffett and go out to find the next great investment idea.

For Bio, I have to admit I can't achieve any insight after reading reports of many companies. To achieve exposure, I think there are two ways for me:

1. Buying an index of the industry.
2. Doing K-Operation based on events. For instance, if the company is to release results in September, buy September or October calls.

I appreciate your sharing of your knowledge of some bio companies you have been following. Along the way, maybe I will ride along with K-operations on ARN or DNDN etc ...

Your spot of DVAX at $0.25 was marvelous (if it had $1.6 cash per share at that time). Hope something similar coming up again.

I agree that timing is important. I am more interested in timing that shows convincing evidence that there is a high probability something good is to happen. A lot of studies or luck are needed. Here are some recent examples:

1. Apple: The only time I am comfortable with Apple is in 2001/2002. It was sold at $14 (pre-split) per share with around $10 cash per share without debt. Jobs was to take CEO at that time. Nokia was sold at similar price at that time too.

2. RIM: When it was in the law-suite tangle, its share hit $50 (pre-tax) a few years ago. The total amount of damage is $1 B that RIM can easily handle.

3. The banks in March of 2009, like WFC, USB and AXP. BAC was OK. C was a bit stretch ...

No, I did not buy DVAX at 0.25. My first buy was at 1.25 last December on the GSK partnership news. I have traded it many hands ever since.

And I am not hoping to find the next DVAX at 0.25. To me, buying DVAX at 0.25 was simply unthinkable if you know why DVAX sank all way there --- I am not throwing hard-earned dollars at something that appears to go under! I have bought DVAX for as low as 0.56 and as high as 2.30 in AH and PM a few weeks ago during that last round of news.

And if you are hoping to see the market at last March's level, you may have to wait for quite some time.

After reading your posts, I admire your grand idea of pursuing Buffett's approach to find your next Fairfax. I am very sorry I have no desire in any partnerhsip for such an endeavour. Best of lucks to you!

 

[lazycatcat]

Thanks

Thanks for your wishes. My best wishes to you too for your endeavors in the stock market.