Friday, October 27, 2017

From Stock Market Hero to Dud in less than a Month

Hi Everyone,

After investing in the stock market now for roughly 8 years, I thought I was starting to get the hang of things.

I read earnings reports, check companies financials, predict future growth, look for undervalued companies based on those prior factors and for once, I was confident!

Phillip Morris (PM) was a stock I had owned since 2011.  After years of doing nothing except paying out a nice dividend, all of a sudden it took off - from $90 to $110 in a span of 2 months.  I looked at this as an opportunity to get out.  The earnings were still deteriorating, and there was only hope from investors that IQOS would save the company.  There was also rumors of a possible merger back to Altria (MO) swirling around.  None of which was based on results from the company.

Well, I like to try and invest more on numbers and not hopes and dreams.

So I sold PM around $110.

It continued its run up to $120.

I want to buy the company back around $100 or less so as of writing, that is still looking good!  PM is back down to $106...  basically still about $110 if you throw in the dividends I have missed along the way.

Now here is the real kicker...

Remember I was saying how confident I was earlier in the post...

Well, I took a look at Biotech stocks.  For a couple of years now they have been under pressure.  Mostly due to drug price concerns and the government interfering.  I look at that as unfounded concerns because it takes a lot of money to develop said drugs.  If you take away the companies ability to make good money off the homerun drugs they create this hurts their ability to do research on new drugs.

Anyway...   after looking through companies I liked two the most...   Celegene (CELG) and Biogen (BIIB).  Both had good earnings, a good pipeline, and were beaten down from their highs.

I took $9000 from the sell of PM, added another $2500 sitting in the accounts for a round number of $11,500 to invest into Biotech - CELG, BIIB.

I now have an average buy price for CELG at $125 and BIIB at $280.

Then they both start to go up!  Life is good!  PM is going down, CELG and BIIB going up!

CELG then hits an all time high! $146 a share!  I'm up over $2000 in a span of just a couple months.

BIIB breaks through the $300 level which was resistance and hits $348!

And then American Dividend Dream bad luck hits home in a hurry....

In the span of less than 3 weeks, CELG hit a an all time high and a 52 week low..   What are the F*($%&G odds!!!!

Now, I'm sitting on a broken stock, a broken company with negativity all around and no path forward.  What should I do?  Sell it and kiss $2000 goodbye?  Hold it for another year most likely, before any positive things happen?  I have no idea.

This just goes to show that no matter how confident you might be about an investment, you are one downgrade from Morgan Stanley, one cancelled phase 3 trial, and one earnings revision down from seeing your stock go from Hero to Dud in less than a month.

BIIB is still looking okay.  Looks like I will have to go another 3 months until another earnings report comes out from that one before seeing which way it wants to go.

I feel so defeated right now its unbelievable.  I almost want to give up on the stock market entirely and try my hand at something else.



  1. The market is unforgiving. It doesn't matter who you are. Set yourself up so you are not one of the people you hear about jumping out of windows when the market drops. Sometimes it just doesn't matter how good the numbers are. I have the vast majority of my money in VWELX and just have a few dollars in dividend stocks.

  2. Hi ADD, you certainly sound frustrated. However, those are good companies, so it's quite possibly just a temporary setback. Plus, you are still up on BIIB! Unfortunately, neither pays dividends at this time, so nothing to collect while you wait for a recovery. Your portfolio page doesn't appear current, so it's hard to tell how diversified your portfolio is at this time, but assuming you are well diversified, hits like this to a stock or two shouldn't result in much of a decline overall. Just keep persevering and I bet you'll be fine.

  3. I can feel your misery. The question is, what was your initial goal when you purchased CELG? Looking at the EPS estimate for 2020 everything looks good to me. Why can't you feel comfort in knowing you bought a 2020 P/E of 10? Even if they continue to lower the guidance, it's not comparable to the actual P/E of 24.
    I've also initiated a small position in CELG. Small because it doesn't pay a dividend, but I want to have some exposure to this great company. And I'll certainly add if it drops to the low 90s.

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  5. I would say hold fast and average down a bit. Both are good companies that hit a bump in the road it looks like. Time on the market is the best remember Gilead was down for close to a year before rebounding some of course it pays dividends

  6. Stay in the game. No need to feel defeated. Investing in any bio-tech can be a wild ride, even the larger well known players like AMGN, BIIB, CELG, GILD and more. I'm guess you were being sarcastic about wanting to leave the market. Even "solid" consumer staples can fall flat on their faces. That's why we diversify and have a long term outlook.