The No BS Plan, Week 4: Whoa!

Weeks 2 and 3 presented a sort of mixed bag, placing my personal pet holding Advaxis (ADXS) on notice and ultimately bowing out of one of the lots in the plan.

So how is the plan faring? First, let’s get to the recap of the rules, which are laid out in full in the original article.

First, 6 biotech stocks were chosen to receive investments of $2,000 each, broken into 4 lots:

Short-term: To be traded at a range of 5% gain and loss. That is, sell this lot when it gains 5%, and buy back in when it falls 5% from the sell price. Near-term: Same as short-term, but with a 20% gain sell target and a 10% loss buy-in. Mid-term: Same as near-term, but with a 50% gain and loss range. Held forever: To never be sold.

I also instituted a mercy rule for the position, whereby a loss of 20% from baseline or from the past week’s holding would put the security “on notice,” and if that loss persists into the following week, then the holdings will be liquidated. In real life, this would mean cutting your losses and moving on. In the “No BS” fake world, it will be counted as an overall loss for the portfolio.

Week 4 report

Advaxis (ADXS) had a sideways week again, but with some very odd trading patterns. On two separate days, the stock price, which tracked along without much movement, suddenly jumped. This led to an unlikely 8% on last week’s position, so I am inclined to wait a little longer on this position before taking it off the board entirely, especially with a shareholder meeting coming up. We should also find out more about the recent cash raise in its earnings release and conference call, although I would expect too much on the ADXS front.

So as you can see, since we permanently removed half our holdings in ADXS, this will create a drag on any forward momentum that the company might gain, so I care a bit more about the weekly gain/loss for this one, at least for now.

Progenics Pharmaceuticals (PGNX) met a milestone that I did not expect to hit this early. After a favorable earnings call, PGNX started climbing and refused to stop, making it the first of the No BS stocks to hit the 50% gain threshold and trigger selling in all 3 lots.

So clearly the plan, which left half the holdings sitting in cash right through the runup, did not effectively capture all the gains that were on offer with PGNX. And thus continues the issue of what one might do with the gains if the company does not fall back down.

Now, in real life you might decide to set a new baseline, or you might decide to move your cash into another stock. However, for the sake of the experiment, I will not alter the original parameters this way. That way, we are more likely to end up with data that are interpretable at the end.

But needless to say, in my mind, it is difficult to imagine PGNX falling back down to the $5.41 and $5.85 buy-in targets for the short- and mid-term lots, respectively.

Geron Corp. (GERN) also had a rather good week, but without any action. Currently it still needs an almost-10% gain to hit the sell target for lot #2, but it needs to fall some 60 cents to hit the buyback target for lot 1. So for now we watch the incremental gains pile on and wait to see what happens!

Foundation Medicine (FMI) felt like opposite day from PGNX for a few days there, as a negative earnings report dragged the stock price to levels that made me think it could reasonably fall back down to my near-term buy-in price (currently $70.04), but a late-week rally squashed that idea, and it would appear as though FMI will continue barreling ahead.

NovoCure (NVCR) is generally behaving as anticipated in the plan, with the short-term selling back out at a price of $21.94. It will be looking for a buyback of $20.85. And this share accumulation has allowed the gains to inch up bit by bit overall. Other than that, there’s not too much to say about NVCR!

Bristol-Myers Squibb (BMY) also generally moved sideways in week 4, although moving into Wednesday, it appeared as though it may be beginning a fairly deep slide. Currently, I am waiting on a buyback target for the short-term lot of $62.54, which is rather feasible in any given trading week.

Conclusions

In total, the No BS plan has accumulated $1,198.16, representing a near-10% gain on the original $12,000 stipulated at the beginning of the experiment. Obviously, week 4 was quite big for the plan, and there were some rather fortunate events pushing these gains higher than I might expect (PGNX earnings being the ringleader there).

But this is part of what I had hoped to capture with the plan. Some stocks will succeed. Some will fail. Many will move sideways for a while. ADXS has been behaving very strangely, and with a shareholder meeting coming up, we’ll just continue to watch it. In the meantime, we will continue to evaluate what kind of bottleneck holding cash ends up being for the PGNX lot, and I’ll be happy to bask in the green, hopefully for another week!

Disclosure: I am/we are long ADXS.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Like this article