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Contest strategy and ideas

Olmsted

By Olmsted
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Olmsted Newbie

Olmsted

Posted
Posted

I was solicited to participate in a private stock-picking contest today.  Essentially, 1-3 ideas, 1 year holding period, no trading, top performer wins.  Stocks or bonds, no derivatives.  It got me thinking about how the strategy to win a contest is so different from putting one's own money to work.  Whereas in life you do not have to outperform all others, in this contest if someone else makes 105% in a year, you lose if you only make 100%.  And there is no differentiation between the #2 (with, say 100% profit) and the last place guy (with, say, a 99% loss).

 

The strategy here, then, is to pick just one security.  Make it one with a ridiculously high upside, and of course with a concomitant high likelihood of going to zero or close to it.  Ensure that the catalyst for it to go - either 1) to the moon or 2) to zero - happens within the time frame of the contest.

 

Obviously not the way to invest in real life, but I cannot think of better ways to increase one's odds at winning such a contest.  Thoughts?

 

And, while we're on the topic, anyone have ideas that fit the profile I described? 

 

I only have one in my portfolio that fits the mold, the TMST senior unsecured notes.  Bunch of trials later this year will either make them worth $83 or whatever is left in the trust (less than $10).  They trade around $10-$12 now.

jay21 Newbie

jay21

Posted
Posted

BAC B warrants

 

Are you allowed to buy/sell options / warrants?

 

Stocks or bonds, no derivatives.

 

Yeah, i think freddie is good?  FIATY maybe?

vpagano Rookie

vpagano

Posted
Posted

Olmsted,

 

I'm sick of trials, I'm hoping we don't go to them at all and settlements have our bonds trading the mid-point of your range ;) Think anyone else on here holds seniors?

 

-V

gg Rookie

gg

Posted
Posted

I'd be interested in reading more about these TMST notes - any suggestions for a good starting point that summarizes the situation before I go to the filings?

Olmsted Newbie

Olmsted

Posted
  • Author
Posted

I could probably sneak a warrant through since they trade like stocks, but it wouldn't be in the spirit of things. 

 

Familiar with most of these ideas.  Haven't heard the theses on EXEL and ITMN.  Care to point me somewhere?

 

EXEL

 

Intermune

 

ITMN

 

Lottery tickets stocks like we're targeting here may also be good candidates for that "cheap option" portion of the portfolio.  A basket of non-correlated, binary risk is not bad to have around.

 

I'll toss another one out: UNTK.  No margin of safety, but if revenues stabilize and they refi their usurious term and revolver, could be worth much more.  Catalyst should be within a year.  Downside, of course, is a wipeout.

Josh4580 Newbie

Josh4580

Posted
Posted

possibly some marijuana stock?  ;D

 

It looks like most of the upside is already baked in.  They have been really flying high lately.

 

For ITMN:

 

http://www.bloomberg.com/news/2013-02-19/intermune-sale-looms-as-lung-drug-nears-fda-nod-real-m-a.html

 

basically their drug Esbriet is approved in the EU and Canada.  They have done 2 phase III studies already but the FDA made them do another one after rejecting approval in 2010.  The outside FDA advisory Panel actually recommended they approve the drug and they went against that.  Wall Street analysts are pegging chances of approval at 50-80%. 

 

"The company’s revenue may more than double this year and next to about $130 million in 2014, analysts’ estimates compiled by Bloomberg show."

 

"The pressure will be on the FDA to clear the drug because no other treatments have been approved specifically for IPF in the U.S. yet, said Liisa Bayko, an analyst for JMP in San Francisco. At least 132,000 Americans have the disease and 40,000 die from it each year, according to the Pulmonary Fibrosis Foundation."

 

The stock price is down from over $18 on this news:

http://www.bloomberg.com/news/2014-01-31/intermune-sinks-on-competition-from-boehringer-lung-drug.html

 

However, I find that these stocks always run up before Phase III study results which are coming out in Q2. 

Olmsted Newbie

Olmsted

Posted
  • Author
Posted

Olmsted,

 

I'm sick of trials, I'm hoping we don't go to them at all and settlements have our bonds trading the mid-point of your range ;) Think anyone else on here holds seniors?

 

-V

 

Yeah, I agree.  Actually going to trial indicates a failure somewhere.  Arbitration failed on the big ones (would have liked to been a fly on the wall there) - so we have a window now where the lawyers will be moving things along.  The trial is the forcing function.

 

possibly some marijuana stock?  ;D

 

It looks like most of the upside is already baked in.  They have been really flying high lately.

 

For ITMN:

 

http://www.bloomberg.com/news/2013-02-19/intermune-sale-looms-as-lung-drug-nears-fda-nod-real-m-a.html

 

basically their drug Esbriet is approved in the EU and Canada.  They have done 2 phase III studies already but the FDA made them do another one after rejecting approval in 2010.  The outside FDA advisory Panel actually recommended they approve the drug and they went against that.  Wall Street analysts are pegging chances of approval at 50-80%. 

 

"The companys revenue may more than double this year and next to about $130 million in 2014, analysts estimates compiled by Bloomberg show."

 

"The pressure will be on the FDA to clear the drug because no other treatments have been approved specifically for IPF in the U.S. yet, said Liisa Bayko, an analyst for JMP in San Francisco. At least 132,000 Americans have the disease and 40,000 die from it each year, according to the Pulmonary Fibrosis Foundation."

 

The stock price is down from over $18 on this news:

http://www.bloomberg.com/news/2014-01-31/intermune-sinks-on-competition-from-boehringer-lung-drug.html

 

However, I find that these stocks always run up before Phase III study results which are coming out in Q2. 

 

Thanks for the overwiew, Josh!  This would fit the bill.  A lot of biotechs seem to have attributes that would make them perfect candidates for a contest or an uncorrelated risk basket.  The more it is a pure-play on one drug or one FDA decision the better!

  • 2 weeks later...
Josh4580 Newbie

Josh4580

Posted
Posted

http://finance.yahoo.com/news/intermune-reports-phase-3-ascend-120000665.html

 

"A 10% decline in FVC in an individual IPF patient is considered clinically meaningful and strongly predicts mortality.  At Week 52, 16.5% of patients in the pirfenidone group experienced an FVC decline of 10% or more or death, compared with 31.8% in the placebo group, representing a 47.9% reduction in the proportion of patients who experienced a meaningful change in FVC or death.  Additionally, at Week 52 the data demonstrated that 22.7% of patients in the pirfenidone group experienced no decline in FVC, compared with 9.7% in the placebo group, representing a 132.5% increase in the proportion of patients whose FVC did not decrease between Baseline and Week 52."

 

Made this a 9% position and happy this morning. 

Josh4580 Newbie

Josh4580

Posted
Posted

Olmstead, I hope you picked ITMN and won the contest.

 

Up a modest 170% today. I actually bought more in the am.

 

I think it gets bought out for much higher.

Liberty Contributor

Liberty

Posted
Posted

Olmstead, I hope you picked ITMN and won the contest.

 

Up a modest 170% today. I actually bought more in the am.

 

I think it gets bought out for much higher.

 

Congrats, nice pick.

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