Tag Archives: Research

The Rise of Regeneron Pharmaceuticals

With graduation approaching faster than a Randy Johnson fastball, I’ve been doing an insane amount of networking to find some exciting opportunities for next year.  One of the analysts I spoke to wanted me to create a stock pitch in 5 pages or less.  The requirements were to choose any equity I thought could gain a double digit return with a one year time horizon using fundamental analysis.  As a result, I chose Regeneron (REGN) – a position I’ve held for over a year already.  The stock has had an incredible run over the last two years, but my thesis still remains that the company’s pipeline is greatly undervalued.  I figured I’d post my final report on the blog to spark some debate on whether or not readers agree with my price target of $249.

Click the link below to view the PDF:

Regeneron (REGN) Stock Pitch

I’d love to hear any thoughts, comments or constructive criticism you have on the analysis!

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The Opportunity Cost Of Information

I’ve been struggling a lot recently with the opportunity cost of information. There are times when I’m tempted to spend an entire day weeding through my Google Reader subscriptions…but would that really make me a better investor? I’m usually reminded of this after I send others any interesting posts I come across.  The majority of responses consist of “That’s great…now how is this actionable?” The question never fails to stop me in my tracks, and it continually drives me crazy because its true.

David Merkel over at Aleph Blog attributes reading from many different sources as his #1 investment idea generator – which is certainly true. I’ve written in the past one of my main motivations to read unconventional blogs is to get a sense of what possibilities exist in the market that I may not realize on my own. That said, as I’m writing this post with 317 unread blog posts in my Google Reader, how much is too much? What percentage of these blog posts are actionable and will make me a better or more profitable investor?

Ultimately, pushing to read more articles each day simply gives me a false sense of security. Certainly, the more I know about people’s opinions of market trends and action the more likely I am to make money…right? I’ve yet to be convinced. What really helps me make progress, learn lessons, and take action is when I sit down to write a blog post of my own. It forces me to string together several articles and generate my own ideas on which I can take action. I’m able to send it out to various people in my network and receive feedback. Not only does it help me generate ideas, but I certainly have to put in my due diligence in order to prove my point. If I can’t sell it to others, why would I commit my own money to it?

By reading all 317 of these posts, what am I neglecting to do that would truly be actionable or beneficial? Personally, I think I miss out on networking and publishing my own blog posts. I’ve done a ton of networking over the years, and I actually really enjoy it. My favorite type of person to meet is the relatively older gentleman that’s already made it in life. He still works because he enjoys what he’s doing, but his main focus is spending time with the grand-kids. These guys have nothing to prove and simply tell it like it is. It always amazes me how little they care about the latest trends and fads going on in the market. They’ve seen a million come and go in their day. They take an objective approach to everything, which I truly admire. I think it’s incredibly important to get out and meet these people in person. Their knowledge, experience, and advice will never be conveyed in a blog post.

At the same time, I’ve been trying to limit my blog post intake and focus more on reading primary newspaper articles. While it may be more entertaining to read blogs, it’s difficult to disagree with a “successful/well-known” person’s interpretation of the market. Instead of knowing so much about which bloggers are bullish vs. bearish, I’m making a commitment to read newspaper articles about recent events and generate my own opinions and expectations in a blog post – which should lead to increased action. I love blogging my thoughts because it ensures everything I publish is well thought out and readers do a great job finding holes in my logic or pointing out opposing viewpoints. The action of blogging certainly creates a great habit of shaping and expressing my own opinions.

I’d love to hear your personal opportunity costs of information in the comments section and spark some debate!

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Cytosorbents’ Unique Financing Deal

My main speculative play over the past two years has been in a company called Cytosorbents Inc ($CTSO).  The video above gives a great 3 minute overview of the company’s technology and business model.  However, the main problem for the stock throughout 2012 was a pretty hefty dilutive financing deal.  Thankfully, the CEO – Dr. Phillip Chan – has promised to avoid any dilutive deals going forward and has mainly focused on obtaining grants from DARPA and other US Defense/Medical groups.  Last week, the company announced they had obtained $400,000 in non-dilutive financing, but the stock price still dropped 8%.  While the stock is thinly traded and has a small float, I still believe this was very positive news for the company – so I did some digging.

$CTSO released a press release on Monday stating they had sold their net operating losses (NOL) in order to acquire extra cash.  In all honesty, I had never heard of selling NOL’s or what that actually meant.  Turns out, there’s more to New Jersey than Ed Hardy and beach clubs.  In an effort to further promote the technology and biotech communities in NJ, the state has allowed any unprofitable company in the biotech/tech sector with less than 225 employees to sell their net operating losses.  All it takes is a $2,500 application fee and the state of New Jersey will allocate a portion of their $60M cap to your business and purchase your NOL’s.

But to figure out how NOL’s can be bought and sold I had to turn to an expert CFO (a.k.a my dad) – so bear with me for a bit of a “bean counter” explanation.  A net operating loss is the result of losses incurred over the years – i.e cumulative losses of a business.  According to Federal and State tax laws you’re allowed to “carry back” the losses you paid in the past if you are profitable or to “store up” the losses for when you eventually start becoming profitable and can offset the profits using the net operating losses.  Therefore, you don’t need to pay taxes until you’ve obtained a cumulative profit for your business.  For businesses that have already obtained a cumulative profit, there is an incentive to “buy” an unprofitable company’s NOL and write it off as a loss.  From a federal standpoint, NOL’s are not transferrable and can’t be bought/sold.  However, in order to spark investment and performance in certain industries, New Jersey has made this legal.

As for $CTSO, this is a sweet deal and in no way, shape, or form is it dilutive.  After watching the stock trade over the last two years, especially around news events, my hunch is that it’s mainly held by doctors – not financial types.  The company has a plethora of catalysts coming in 2013 and hopefully expectations will become more reasonable going forward.

For further details on the New Jersey’s net operating loss program take a look at the official description here and FAQ here.

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Wait…Normal Markets Really Exist?!


I interjected in a Twitter conversation yesterday between the esteemed Josh Brown and Keith McCullough that sparked an interesting thought.  I’m currently 21 years old and have been involved in the markets (actually investing and researching) since I was a sophomore in high school – which just so happened to be the end of 2007.  Looking back on everything, I’ve learned an incredible amount and gained great experience (albeit losing a fair amount of money in the process) in some incredibly turbulent markets and tumultuous times which, frankly, have baffled a significant amount of “experts.”  Because of this, my view of normal is completely skewed from the older generations of pros and market analysts.  In fact, I don’t even know what normal is!

That said, I am certainly not at a disadvantage by being young and interacting in a market that could be considered a standard deviation or two…or three away from normal.  For starters, there is no argument that this is the best possible time in my career to have learned some of the lessons that I did.  If my (and my generation’s) first bear market were to have come much later in our careers, it could have been much more devastating to our net worth, job status, marital status, etc.  You name it.

Second, I have learned very few people can correctly time the market by calling tops/bottoms.  I’m certainly not a black swan, but going forward in my career, I can assure you I will always be cautious of unexpected events and factor these risks into my portfolio.  I still have a hard time generating scenarios through “what if” analysis because, frankly, I haven’t seen close to everything there is to see.  For example, I would never have been able to say “what if a country leaves the Euro” and plan for those risks.  However, I’ve learned how great of an asset this analysis can be for portfolio managers and frequently work on generating such scenarios.  Because I’m unaware of so many of these possibilities, I’ve taken to reading as many blogs and newspapers (from different countries) as I can in order to get a better sense of what ideas are out there.  I’ve spoken to plenty of older investors who write-off blogs like ZeroHedge as winey conspiracy theorists venting about the world, but it can be one of the greatest ways to think about ideas coming from left field and help to better prevent unnecessary risk in my portfolio.  Plan for the worst, hope for the best…lesson learned.

Most importantly, I’ve learned there’s always a bull market somewhere – it just takes some digging.  I’ve gotten the perception from older investors that emerging markets as well as asset classes other than stocks/bonds are exotic and untouchable.  Look how popular the FOREX markets have become for retail investors in the past 4-5 years.  Every book I’ve read on investing has usually focused on U.S equity and bond markets, but we’ve seen over the last few years that foreign markets and asset classes can present incredible opportunities – hence, the rise of ETFs.  I’ve never had enough capital to open an account on margin, and therefore, I’m unable to short stocks.  As a result, I’ve been forced to look for bullish markets across the globe.  I think the next generation of analysts, portfolio managers, and everyday traders/investors are going to be much more accustomed to “exotic” markets and assets given their market upbringing.

At the end of the day, being 21 during such a volatile couple of years certainly hasn’t helped my current portfolio, but going forward it will most definitely shape my investing strategy and perception of risk.  I’ll be entering the full-time workforce this summer (hopefully), and so will everyone else who began investing around the 2008 financial crisis.  Look out for some interesting investing trends in the years to come that may have been shaped by our initial experiences in the market.

Follow @zringer21 for more commentary and updates!

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