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dswinters (94.78)

Hello, My Name is....and I make Investing Mistakes

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December 09, 2012 – Comments (4) | RELATED TICKERS: ABMD , VPHM , APP

I think one of the hardest things to do is admit that 'you got it wrong'. Well, I am trying to get better at this and recently, I got it real wrong and this isn't the first time....probably not the last either.

After spending years reading about the markets and doing fairly well as a whole, I still look back on my mistakes. The first stock I ever bought was HMX because I liked their clothes. I sold it for a loss, but the company went bankrupt. This was a great lesson because it took much pain to sell at a loss, but I needed to learn and feel that pain. My second investment was VPHM a few years ago. I did hours upon hours of diligence and 'figured' out the story. So I thought I was in a $9 stock that was going $30-$40. FDA setback droped the stock to $5 and I sold at $6 for another nice loss. The stock ultimately went to $30, but my second lesson was timing is almost as important as diligence. This was my second lesson. I made back both of these losses when Natural Gas was trading under $2 and I went into UNT and road it back to the black.

All my stock picks are my 'gambling' money, the bulk of my investment dollars are in VWINX, DODIX, VWELX. These are solid, low cost funds that reinvest all my money in tax shelter accounts like an IRA/401k.

However, I am back in the game and recently took a nice loss with APP. I thought the catalyst was going to be the refinancing of the debt and the increasing sales would drive the stock much higher. So far, I have been very wrong and sold the stock after reading about the CEO being back to his similar ways. I investment the rest of the money into ABMD.

I think ABMD is a hated stock on the street right now, but the story is too good to pass up. Medical devices have turned into a very boring sector, but ABMD's Impella is a star. The company is debt free, profitable and growing leaps and bounds. The FDA just made them refile their 510k into a PMA, but they can still sell and market their device how they please. The data is remarkable over balloon pumps. The wind is truly at the back of ABMD and a larger player can't ignore this technology forever (esp considering that developing a similar product and getting a PMA would take at least 3-5 years). I know the company faces some near term headwinds like the device tax and this FDA PMA, but in 12-24 months when sales and profits are at new highs and the dark clouds have past, someone will want to buy this company like a BSX or JNJ for $30-$40 a share depending on how well profitability grows. 

4 Comments – Post Your Own

#1) On December 09, 2012 at 10:00 PM, HarryCarysGhost (99.70) wrote:

but in 12-24 months when sales and profits are at new highs and the dark clouds have past, someone will want to buy this company like a BSX or JNJ for $30-$40 a share depending on how well profitability grows.

Nother mistake man,

Never invest on hopes of a buyout. If you dig the fundementals of the company..cool~

Slim Shady.

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#2) On December 09, 2012 at 10:10 PM, HarryCarysGhost (99.70) wrote:

http://www.youtube.com/watch?v=ZZrY1jMcmO0

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#3) On December 10, 2012 at 10:06 AM, TSIF (99.96) wrote:

I'm a sucker for equities that are beaten down, but not dead.  It depends on if the "news" is temporary.  FDA related stocks can have some serious cycles and the patient can indeed be dead even though it looks like a bargain.  A company with decent cash flow, cash reserves, cash to debt can often be left for dead when it's not, especially if hedgies dump.

I agree with HarryCarysGhost, however, alone, a hope of a buyout is a bad investment thesis.   It sounds like, this is a "sub"-thesis except for the maximum value you are assigning.

I generally find that any investor who assigns even as "possible"  3-4X multiple ot an equity on a catalyst, even with the high risk portion of their portfolio, is setting themselves up and falling more for speculation than investing.  Clarity can be harder to find with that type of analysis.

Sounds like you also limit yourself to one-two "speculative" stocks, which can be great, but if it's a separate pool of funds you could position yourself to run out of ammo.  Many speculative investors lose the funds and thier drive.

Keep analyzing your wins/loses.  Stay small on the risk.  Thanks for sharing!!!   All the best!

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#4) On December 10, 2012 at 5:57 PM, ikkyu2 (99.31) wrote:

Peter Lynch, one of the great value investors of all time, said something like "If you get six out of ten right in stock picking, you're doing really well.  No one gets nine out of ten right."  So there you go, Peter Lynch is encouraging you to have a 40% mistake ratio.  You had better know which 40% those are!

I tend to agree that you shouldn't buy a stock thinking it'll get bought out.  Buy it because it's undervalued.  If you're really right about that, some entity with a lot of money may agree and maybe buy it themselves, but that's hardly something you need think about.

I'd be careful with balloon pumps.  The history of cardiology is littered with good ideas that were tried for a few years and then relegated to the dustbin of history.

I was recently reading a thread on a docs-only bulletin board; a primary care doc was seeing his patient with CHF go downhill and recommended a transplant or a pump.  The guy refused and died.  After all the breast beating died, I posted to the thread saying: "show of hands, if this patient had been you, would you have taken a balloon pump or a transplant?"  NONE of the participants, including the original posting doc, wanted either.

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