Use access key #2 to skip to page content.

On capitulation.

Recs

0

April 15, 2014 – Comments (74) | RELATED TICKERS: ABUS , ALNY , ARWR

It's been an interesting ride the last four months. I thought watching my portfolio going up 600K in three months was wild, but it was nothing compared to seeing it drop 500K in less than a month. After watching my net worth drop more than 50K today for about the ninth time in two weeks, I decided that I had no choice but to mitigate risk and liquidated most of the RNAi and speculative IPO positions in my portfolio. If biopharma continues to bleed, I will liquidate more positions and go to all cash if I think I have to. Alll trades are reported in my twitter account with the #zzporte hashtag.

Why kill some speculative positions and leave others intact, rather than making an orderly and proprotionate reduction across my holdings? Basically, time considerations. I'm working from 8 AM to 6 PM this whole week and don't have time to screw around. 

How did I choose what to kill? There's no question everything in zzporte is getting smoked, but RNAi seems to be doing the worst right now. I think RNAi is legitimate but right now the market is treating it like it treated silly dot com stocks in 2001. I have no idea when the drop will end and no reason to think that the prices can't drop back to early 2013 (Tekmira at 3, Arrowhead at 1.5, Alnylam at 25). I generally left alone positions smaller than $10000. I disproportionately killed Portefeuille's babies for no better reason than I couldn't bear to capitulate on my own bad bets (Exelixis, KaloBios, Dynavax). Mine will be going on the block next.

Why now? I don't trade on margin. I can stand to lose everything in my trading accounts and it won't affect my lifestyle in the near term. However, I'm rapidly approaching the point of going from a profit to a loss over the last year and I simply can't justify the potential implications for my family. It's one thing to lose a million dollars and shrug it off and know I'll be sticking with my job another fifteen years. It's entirely another thing to know that I'll be compromising on my next home because I couldn't suck up my pride and take losses after being too stubborn to sell on the way down.

Why didn't I sell at the top? Didn't I see the bubble? Yes and no. Bottom line is, we were being greedy. Strange as it sounds we were going for the big money - mega millions. Half a million is certainly nice but it wasn't going to change my life and it's not what I got into this for. I saw a window to eight figure profits and I went for it. All or nothing, and right now we're a lot closer to nothing.

Where do we go from here? zzporte is still alive and I still believe that Portefeuille is a genius. A six year track record outweighs getting caught in one popping bubble. I made these selling decisions on my own and I may have found the nadir of a V shaped curve not unlike the subprime crisis of 2008/2009. If that's true, I'll be looking pretty stupid in the next few days and weeks as RNAi and recent biopharma IPO's blast through previous highs. It doesn't matter. I really had no choice but to take action. zzporte still has large positions in companies that have marketed products and are, in my opinion, highly likely to recover as they continue to report growth and profits. We also have more speculative positions that have catalysts in th near future. We will move forward from here but I think we will be focusing more on discipline in taking profits and not immediately plunging those profits into more speculative ventures.

 

 

74 Comments – Post Your Own

#1) On April 15, 2014 at 11:05 PM, portefeuille (98.89) wrote:

#zzporte top40 positions.



enlarge

 

#zzporte gains/losses. 



enlarge

 

performance chart.



enlarge

Report this comment
#2) On April 15, 2014 at 11:39 PM, portefeuille (98.89) wrote:

One important comment first. I am not a genius :)

This is a great post, reminds me of the best posts by checklist34.

Checklist34 by the way offered me a job in early 2011. He asked me whether I wanted to move to the U.S. to work for a hedge fund he was getting ready to go. If you are familiar with checklist34 you will understand that that was a serious offer, not some lunatic on the internet playing the big guy.

I declined, mostly due do a rather prolonged illness.

In December 2012 zzlangerhans asked me whether we should start a collaboration and get started with a common biopharma portfolio.

I have written about that before, just have a look at recent blog posts of mine for details.

As much as I thought, at the time of the offer, working for checklist34 might be really interesting I always new that working with zzlangerhans would make far more sense (anchak always knew that ;), so I was sold on the idea within a few seconds. It also helped that I did not have to move.

As zzlangerhans is far richer one of us we soon settled on just investing some of his money, so now we are co-managers of the zzporte portfolio. Best job I ever had, with the added benefit that I am experiencing (at least until a few weeks ago ;)) the euphoric starting phase of a venture. That is the part I missed when I started working for a Düsseldorf internet start-up in 2001. I missed the late 90s fun and only caught the depressing end :)

Report this comment
#3) On April 15, 2014 at 11:45 PM, portefeuille (98.89) wrote:

always new

always knew

is far

is the far

Report this comment
#4) On April 16, 2014 at 12:01 AM, Momentum21 (98.17) wrote:

Can't argue with anything except for the "being greedy" part...you were playing the game properly. You pulled the plug to cut losses because you recognize that risk is higher now than it was when you entered. It is a fact that Nobody knows the timeline on this selloff so you did the right thing based on your personal circumstances. Chasing here would be greedy...IMO 

Appreciate the post... 

Report this comment
#5) On April 16, 2014 at 12:29 AM, Momentum21 (98.17) wrote:

That said, I am about to get super, hog a$$ greedy in an ugly way : )

Report this comment
#6) On April 16, 2014 at 10:08 AM, constructive (99.97) wrote:

Wow. Those are some sharp losses. Good luck reformulating your approach to reduce some risk. You are smart guys so I think you will succeed.

Another potential lesson from the past few weeks is the value of diversification. In an extreme market, I'm sure you have witnessed the correlation between your positions climb significantly beyond what you were expecting.

Report this comment
#7) On April 16, 2014 at 12:47 PM, constructive (99.97) wrote:

http://caps.fool.com/Blogs/why-im-buying-biopharma-crap/840066

In retrospect "Why I'm Buying Biopharma Crap" was not the most promising blog title on the fear/greed scale.

Report this comment
#8) On April 16, 2014 at 1:44 PM, portefeuille (98.89) wrote:

Diversification would not have helped all that much. Cash would have helped, short positions and put options would have, but we were and still are very diversified. The overweight of the RNA(i) / gene therapy sub-sector was a problem on the way down, but of great benefit on the way up. And we did sell quite a few TKMR shares at higher prices. A few weeks ago I thought selling so many TKMR shares on the way up was our biggest mistake. Things change very rapidly in the land of biopharma investing (today for example we made around $20k so far) :)

I have a few TKMR and ARWR shares in my own portfolio, so I am still in that game and zzporte still has a few SLN:LN shares, we don't suddenly hate all those RNA(i) stocks. 

Report this comment
#9) On April 16, 2014 at 2:29 PM, awallejr (36.02) wrote:

Well the past is the past all you can do is regroup and learn some lessons.  Believe me I have made costly mistakes.  If you plan to keep on going you really should do some hedging, especially since you are sector specific.

Report this comment
#10) On April 16, 2014 at 2:38 PM, constructive (99.97) wrote:

Well 40+ positions are plenty, but companies within a single sector are the least useful form of diversification.

Cash / fixed income / equities / short equities is the most useful since they behave very differently, even in extreme conditions. Multiple sectors is the next most useful.

Report this comment
#11) On April 16, 2014 at 2:54 PM, portefeuille (98.89) wrote:

#9 I don't like the idea of hedging. Biopharma options are just too expensive (high IV) and the indices are too large cap / blue chip heavy to be used. Cash management and shifting between high and low beta is the way to go (I think) and we are very cash heavy (slightly less than 50% cash now if you include "outside cash"), so we are in a rather "conservative" investing mode right now. That does not preclude large losses with the non-cash portion obviously.

 

#10 We are managing a biopharma equity portfolio (large cash ratio and some options on biopharma stocks is allowed, non-biopharma stuff is not).

zzlangerhans has quite a bit more than the zzporte portfolio (bonds, real estate, a "well-payed" job ...). He is diversified.

Report this comment
#12) On April 16, 2014 at 3:29 PM, portefeuille (98.89) wrote:

bonds, real estate

At least I imagine he does at least have some cash laying around and maybe a small flat in or near Miami Beach ;)

Report this comment
#13) On April 16, 2014 at 5:22 PM, dragonLZ (73.41) wrote:

The only thing I'm pretty sure of is that Porte and ZZ will do very well. Also pretty sure that it will happen for them sooner rather than later. 

This blog and the way they are playing this correction just strengthen my belief.

p.s.

I was in a similar situation back in 2003-2004. I thought I was going to get filthy rich in a short order as my stocks kept only going up (a lot almost every day) until a "mild" correction (much severe in stocks I owned) wiped me out. Obviously, I was much less smart than these two guys.

It took me a few years to be able to start investing again, but I'm back and loving it. :) 

Report this comment
#14) On April 16, 2014 at 9:54 PM, Option1307 (30.51) wrote:

Great blog and great insight into some unique minds. Sorry to hear about the recent losses but I agree with others this will only be a bump in the road for you two!

 

Report this comment
#15) On April 17, 2014 at 5:46 AM, portefeuille (98.89) wrote:

A great side effect of #zzporte succeeding would be that we would demonstrate that quite a few things can be done "differently".

An incomplete list of things I think we do in a slightly less ordinary way.

zzlangerhans and I only communicate via email, twitter and fool.com (we might even publish our email correspondence once we reach that magical $1B. Maybe we will make an interesting case study by then :)).

We spend "next to nothing on anything". If your output is not free we are unlikely to encouter it. No FT, no Reuters or Bloomberg, no newsletters, no research reports, ...

We obviously also don't have a travel budget, so don't expect us to ever visit a conference, a company, other investors, ...

(QGEN is only a few km away, so maybe one day when I am really bored (happens quite frequently actually) I will show up ;))

We don't hedge (see above).

We don't really do any planning. There are no buy lists, sell lists, elaborate scenarios. If I ever make a buy or sell list I send it away and then watch on twitter what made it through Miami Beach to the stock exchanges of the world :)

We almost never discuss anything. zzlangerhans buys/sells his stuff and what he likes from my suggestions. Around 80% of my suggestions make it to the exchange unaltered (the pass right through ratio is even higher for "European stocks").

I think I have never blamed TF and he he has never blamed me for anything. We transmit an apology every now and then and we know who would be to blame for what if we were into blaming but we are not so we don't ;)

... 

Report this comment
#16) On April 17, 2014 at 6:46 AM, portefeuille (98.89) wrote:

Something else we do differently.

We publish all our trades usually soon after order execution. TF works as ER physician, has wife, kids, travels occasionally, so longer than normal delays might simpy be due to him saving lives or having a spotty internet connection in the Sahara :)

We don't check anything. He has my bank account number for the remuneration transactions and I assume he does the transactions he posts on twitter. He might be adding an extra zero or two to the share numbers (I give that p << 0.001 ;)) but even if he would I would not really care as I care about the absolute size of my profit share remuneration, not the relative one :)

What is maybe not just different, but almost a little bizarre is that TF pays me for a service the essence of which everyone with an internet connection receives for free. I try not to think about that point too often :)

Report this comment
#17) On April 17, 2014 at 11:38 AM, JaysRage (77.62) wrote:

Two of the best and brightest to ever contribute to CAPS.   The two of you are huge assets to the investing world.   Thanks to both of you for sharing your exploits with the rest of us.  It is much appreciated.    I have no doubt that you will continue to be successful.   Understanding exposures and correcting investment techniques is the mark of a long-term successful investor.   

Best of luck to you both, and thank you for sharing all of your experiences with us all!   

Report this comment
#18) On April 17, 2014 at 3:26 PM, dcsilver (< 20) wrote:

 

You guys are amazing -

 

I was introduced to TF when he ridiculed me for supporting AMRN (when it was curing Huntington’s disease). I then started following him in and out of NVAX.  Portefeuille – I don’t know who you are, how old you are, or where you live, but I got introduced to you on twitter (a medium I never used until you guys forced me too).

Now, I follow you guys like ants to food.  EXEL – I had a nice sized position but TF said it was going from $5 to $3.50, I sold.  TF changed his mind at $4.15 so I bought back in at $3.65… $3.35… $3.06… but I disgress.  I believe you guys are providing a valuable service with free information and responses that no one can question the legitimacy of.  For that I thank you.  I’m simply hoping for EXEL to return to $6 and make us all a killing… 

 

Report this comment
#19) On April 18, 2014 at 12:19 AM, roofman6 (< 20) wrote:

Porte and ZZ, I would like to add my thanks to you both. I started investing with you a bit over a year ago. I  sold off also in the last week or two, but managed to make off with a 59% gain. Thank you. Thank you. Thank you. 

roofman6 

Report this comment
#20) On April 19, 2014 at 10:03 PM, portefeuille (98.89) wrote:



enlarge

 

#zzporte up ≈ $1k ;) for 2014, cash ≈ $227k.

Report this comment
#21) On April 21, 2014 at 10:55 AM, drugtrader (95.74) wrote:

I didn't see this correction coming. That's probably why I work in the service industry and not for a hedge fund or something. Or perhaps I simply didn't see it precisely because I don't work for a hedge fund. I assumed the bubble was just beginning to form and would blow through the roof. Actually, I still do. I think this is a temporary "skimming of profits." Biotech is very risky after all. The "smart money" that started buying in cheap in 2010 - 2011 is starting to pull out. They aren't leaving for good. There are some tremendous values that are becoming even more attractive and will likely take us back up when this nasty pullback is ended. I have checkmarked all of my actual current holdings and believe many of them are oversold.... PS: thanks zzporte for all your selfless hard work helping us all to become better investors.

Report this comment
#22) On April 22, 2014 at 2:03 AM, ColdWaterSurfer (< 20) wrote:

I think schadenfreude is the wrong word, because I don't take any pleasure in your pain...but the fact that you're fallible just makes your commentary all the more valuable. I've enjoyed the CAPS quips and discovered the twitter feed a couple of months ago...and all I can say is, I love it. Insight and humor will carry you when arrogance and belligerence fail, so don't let the downdraft crush your spirit. Good stuff, keep it coming.

Report this comment
#23) On April 22, 2014 at 5:54 AM, portefeuille (98.89) wrote:

#zzporte gains went from

0 (at start in Q1, 2013) to
≈ $150k (end of Q4) to
≈ $620k (peak) to
≈ $400k (end of Q1) to
≈ $238k (April 11) to
≈ $100k ((wild guess) April 15 when capitulation sells were executed) to
≈ $176k (now).

So we are now up around $26k for 2014, but down around $224k for Q2 and down around $424k from the peak.

 

Report this comment
#24) On April 22, 2014 at 6:27 AM, portefeuille (98.89) wrote:

zzporte AUM lost around 35% "peak to trough", the biotech ETF XBI lost around 33%, so we did not underperform vs. XBI by all that much on the way down.

 



enlarge

 

XBI top positions.

MNKD (1.71%)
MYGN (1.67%)
GERN (1.64%)
RGEN (1.63%)
UTHR
EXAS
ALKS
ARNA
CELG
AMGN
EBS
GILD
ACOR
GHDX
REGN
SRPT
CPHD
DNDN
IMGN
KERX
AMAG
ARIA
ITMN
BIIB
ACHN
ALXN
MDVN
LGND
CBST
OPK
SPPI
GEVA
AEGR
DVAX
IRWD
VRTX
CHTP
MACK
ONVO
CTIC
NBIX
BMRN
IDIX
KYTH
THRX
SGEN
VNDA
ALNY
OREX
BCRX
MDXG
NVAX
ISIS
NPSP
ARRY
INFI
ANAC
DYAX
RPTP
ACAD
INCY
MNTA
PCYC
INO
RCPT
INSM
XOMA
TSRO
CLVS
NLNK
PBYI
CLDX
SGMO
GALE
HALO
PTCT
ARWR
ZIOP
EXEL
ICPT
SGYP (0.76%)
LXRX (0.57%)

Report this comment
#25) On April 22, 2014 at 10:45 AM, portefeuille (98.89) wrote:

The capitualtion sells‪ (then -> now).

ALNY‬  50.14 -> 57.40
‪ARWR‬  10.45  -> 14.10
‪BIND‬  8.44  -> 9.86
‪BLUE‬  19.35  -> 21.36
‪DRNA‬  15.76  -> 17.32
‪FURX‬  75.53  -> 81.83
‪ISIS‬  31.14  -> 37.37
‪REGN‬  278.40  -> 310.54
‪RGLS‬  6.35  -> 7.44
‪TKMR‬  11.86  -> 15.36

 

Oh well ;)

Report this comment
#26) On April 22, 2014 at 11:10 AM, dragonLZ (73.41) wrote:

Porte, that's how it works - "capitulation" is what starts the market move the other way... :)

Report this comment
#27) On April 22, 2014 at 11:11 AM, dragonLZ (73.41) wrote:

Porte, that's how it works - "capitulation" is what starts the market move the other way... :)

Report this comment
#28) On April 22, 2014 at 11:11 AM, dragonLZ (73.41) wrote:

Porte, that's how it works - "capitulation" is what starts the market move the other way... :)

Report this comment
#29) On April 22, 2014 at 1:01 PM, Momentum21 (98.17) wrote:

Porte: have you asked Tony to just give you his user name and password for his trading account? ; )

It would be interesting to see if you could maintain your "lack of emotion" trading in a non-virtual environment. zzlangerhans ruined that experiment it appears but I think your ability to be less bothered than most by the noise is your most valuable asset.  

 

 

 

 

Report this comment
#30) On April 22, 2014 at 1:03 PM, Momentum21 (98.17) wrote:

Report this comment
#31) On April 22, 2014 at 1:13 PM, portefeuille (98.89) wrote:

#29 No, I think you have a wrong picture of both the real me and the real TF. I think that even if it were my money he should do the trading.

I find it a great relief that my ideas go through a filter first, one that is very good at keeping an overview of a universe of a few hundred biopharma stocks and that has "biochemistry", "Havard", and "summa cum laude" in its CV while I did not even manage to finish university ;)

Report this comment
#32) On April 22, 2014 at 10:55 PM, portefeuille (98.89) wrote:

#23 zzporte is now back to being up $216k, so we made around $40k in "today's session", the best result in quite some time. Still around $184k to go to be in the green for Q2. We have not had a down quarter yet, I could well live with deferring that event a little longer ;)

Report this comment
#33) On April 22, 2014 at 11:06 PM, Momentum21 (98.17) wrote:

Yes, I was half joking here...I do find you two to be an outstanding match. And think TFs call to scale back was a solid decision.

The psychological aspects of trading/investing is what I find the most fascinating. The types that make (and lose) millions do so as a result of their conviction in an investment or system. Managing risk and one's own emotions has to be the hardest part of thriving in the game. It is why the brightest minds take 2 and 20 and deal with other people's money I guess. And then when their luck runs out they write articles pointing out bloated valuations or sell newsletter subscriptions with "ideas" on what to buy but not when to sell. : )

Report this comment
#34) On April 24, 2014 at 2:47 AM, portefeuille (98.89) wrote:

still a close race with the other German CAPS biopharma specialist.

 

 

Report this comment
#35) On April 25, 2014 at 8:15 AM, portefeuille (98.89) wrote:



enlarge

Report this comment
#36) On May 28, 2014 at 9:20 PM, portefeuille (98.89) wrote:

update.



enlarge

Report this comment
#37) On June 05, 2014 at 10:54 AM, portefeuille (98.89) wrote:

updates.

$IBB $BBH. Biotech starting to look really pretty again :)



enlarge

 

#zzporte top40 positions. $EXEL $BMRN $ENTA $FLML $IPHYF $MDGEF $ALKS $VRTX $APPY $MDVN. cash ≈ $93k.



enlarge

 

#zzporte gains/losses. $TKMR $ENTA $MDGEF $OGXI $ALKS $IPHYF $PCYC $RNN $SRPT $CORT $AVEO $KBIO $EXEL



enlarge

Report this comment
#38) On June 09, 2014 at 10:54 AM, portefeuille (98.89) wrote:

update.



enlarge

Report this comment
#39) On June 18, 2014 at 9:41 AM, portefeuille (98.89) wrote:



enlarge

Report this comment
#40) On June 20, 2014 at 11:06 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#41) On June 24, 2014 at 12:50 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#42) On July 01, 2014 at 12:53 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#43) On July 02, 2014 at 10:30 AM, portefeuille (98.89) wrote:



enlarge

Report this comment
#44) On July 22, 2014 at 3:09 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#45) On August 03, 2014 at 12:12 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#46) On August 08, 2014 at 8:32 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#47) On August 11, 2014 at 1:01 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#48) On August 12, 2014 at 11:32 AM, portefeuille (98.89) wrote:



enlarge

Report this comment
#49) On August 14, 2014 at 1:20 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#50) On August 19, 2014 at 1:08 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#51) On August 26, 2014 at 4:09 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#52) On August 29, 2014 at 12:03 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#53) On September 02, 2014 at 10:52 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#54) On September 11, 2014 at 5:34 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#55) On September 12, 2014 at 8:44 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#56) On September 25, 2014 at 4:17 AM, portefeuille (98.89) wrote:



enlarge

Report this comment
#57) On November 03, 2014 at 8:17 AM, portefeuille (98.89) wrote:



enlarge

Report this comment
#58) On November 20, 2014 at 12:19 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#59) On November 20, 2014 at 12:45 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#60) On December 09, 2014 at 10:54 AM, portefeuille (98.89) wrote:



enlarge

Report this comment
#61) On December 18, 2014 at 10:06 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#62) On December 24, 2014 at 11:02 AM, portefeuille (98.89) wrote:



enlarge

Report this comment
#63) On December 27, 2014 at 12:21 AM, portefeuille (98.89) wrote:



enlarge

Report this comment
#64) On January 05, 2015 at 5:07 PM, portefeuille (98.89) wrote:

Might be time to close the capitulation thread. Maybe it was simply yet another blip :)

 



enlarge

Report this comment
#65) On January 07, 2015 at 9:57 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#66) On February 05, 2015 at 5:26 AM, portefeuille (98.89) wrote:



enlarge

Report this comment
#67) On March 03, 2015 at 3:25 AM, portefeuille (98.89) wrote:



enlarge

Report this comment
#68) On April 08, 2015 at 7:25 AM, portefeuille (98.89) wrote:



enlarge

Report this comment
#69) On April 11, 2015 at 6:29 PM, portefeuille (98.89) wrote:

mini-crash is over.



enlarge

Report this comment
#70) On September 01, 2015 at 12:20 PM, portefeuille (98.89) wrote:

update.



enlarge

Report this comment
#71) On September 24, 2015 at 11:01 PM, portefeuille (98.89) wrote:

update.



enlarge

Report this comment
#72) On September 27, 2015 at 6:18 AM, chenjesu (< 20) wrote:

I like the extra whitespace at the end.  You two must be looking far into the future. :)

Report this comment
#73) On November 04, 2015 at 11:04 PM, portefeuille (98.89) wrote:



enlarge

Report this comment
#74) On November 26, 2015 at 9:01 AM, portefeuille (98.89) wrote:



enlarge

Report this comment

Featured Broker Partners