On Thursday this week, as we finished dinner I looked out the window and the sky was on fire. It was quite possibly the most amazing sunset I’ve seen from our house and was a great way to end the day. I managed to get my camera and take a picture quickly, which was good because in the blink of an eye, it was gone.
Thursday was also a day in which my portfolio went from being on fire to, suddenly, not. The strong upward, across the board move we had been experiencing seemed to disappear just as quick as the sunset. It was a beautiful thing…then it wasn’t.
We all know that markets don’t move in one direction forever. What goes up must come down, and visa-versa. So, after having trounced the market over the last 7 weeks or so in my portfolio, it makes perfect sense that there would be a pause or correction to the move.
From my point of view, as I discussed in my 2020 market preview, I think we are about to enter a choppy (but not bad) market going into the elections. This could be the start of it, coming earlier than expected, and sparked by the outbreak in China. I think we’ll see the virus contained soon; however, nothing is going to contain the ugly political rhetoric that will only heat up heading into November. We have that to look forward to.
A choppy market will not be good news for companies that are pre-revenue, extended on the chart, or simply expensive. If a speculative company doesn’t have an impending catalyst, it could see pressure, especially from short sellers.
This is the risk we run in a long only, micro-cap portfolio. There will be times when stocks take a hit. However, if you try to time these moves, you’ll generally be wrong. And, if you get out, it might be impossible to get back in. Sometimes stocks move at unexpected times. I’m a believer that you want to own great companies regardless of the market environment.
A good case in point is that of Atomera (ATOM). Atomera is up 50% year-to-date. If you were thinking of reducing ATOM due to market concerns (it is pre-revenue with unknown timing on catalysts), you would be missing this move. I think ATOM could be a very big stock this year. All it takes is one phase 4 license and it’s off to the races. I’m willing to suffer mood swings in the near-term for the big upside in the future.
Looking out, I continue to be very comfortable with my portfolio even if the overall market is not acting great. The sunset last night turned into a cloudy morning. But, as the song says, the sun will come out tomorrow.
Thoughts from the week…
I spoke briefly with management of CATS. Things are going very well there. I could tell because Terren simply said, “we’re focused on execution”. I believe we are about to see a national rollout. Shorts remain large in the stock, but despite their weight, the trading is positive. Very happy with this position.
FBIO and ATXI. If you didn’t read my piece on Fortress and their Avenue subsidiary, I highly suggest you do so. All my checks lead me to believe that Cipla’s acquisition of Avenue will occur this year and this is a great risk/reward scenario…especially in a choppy market. Can you tell that I’m pounding the table here?
There was a great piece in Twice Magazine on WISA. Love the technology. Still awaiting balance sheet repairs.
Monaker (MKGI) is close to announcing the launch of product through their RateGain partnership. Management has been rather silent as this launch has been delayed, but I suspect we are very close.
I spent an hour on the phone with INmune’s lead scientist on Xpro. The market is really missing what I believe is a low risk phase 1 trial in Alzheimer’s…any success here would be significant for INMB.
We are picking up coverage on Akazoo (SONG). This is an online streaming company focused on emerging markets. The valuation is very reasonable compared to their peers and the emerging markets are the best growth areas for this business. With some barriers to competitors in place, SONG is well positioned for growth and would likely be an acquisition candidate for a larger player looking for more exposure to emerging markets. (Here’s a link to an article discussing how a smaller competitor is being funded at a higher valuation) Management, with whom I spent a lot of time this week, is top notch and the company is well funded.
We dropped coverage on Bioasis. The bull case is for a partnership to be announced soon, but my checks lead me to believe that other companies in our universe offer equal upside with less uncertain outcomes. I appreciate the job management is doing, but the lack of funding leaves them in a position of always being behind the eight ball; another financing looms and I’m not sticking around for it.Tailwinds' Disclaimers & Disclosures: For a full list of disclaimers and disclosures, please visit http://