Well, you've asked the age old question of investing!I have written thought pieces on this in the past and it is a complex topic. The first point is that you have to know yourself - if you think you can invest on instinct and you are successful, then by all means go for it. I can't and I find my instincts can be tied up with emotions and lead to investment losses.I have learned (for myself) to try to take "instinct" out of the equation.Your instinct tricks you on investing - when the price is down, your animal brain kicks in an instinct tells you "fight or flight" (there's a third option in the animal kingdom of curling up into a ball or playing dead and hoping the negative stimulus goes away - and that can apply as well).Professional investors ignore that "instinct" and look at rational indicators of how to achieve long-term success in the market. They have an investment philosophy where they exploit their "edge" and they do it over a large number of stocks. Sometimes you lose, but the aim is to win more than you lose. You have to work with the uncertainty in the market, as it is always there. Accept it and find ways of exploiting it, but don't forget that you may well lose on any individual position. Most of it is up to you - the best stocks have down periods and the worst stocks can have tremendous bounces where people make money. You have to try to exploit that. Selling after a big fall may make sense if the company is going broke and nobody wants to buy its products, or it may be a great buying opportunity. That's why you need to do research.One way of doing this is just to buy stocks that go up and sell stocks that go down. Sounds easy, but it is like betting on runs of red or black at the casino. After a run of 7 reds, your "instinct" might tell you to bet on black - someone else's instinct tells them there is a problem with the wheel and they should keep backing red. Both are wrong - it is random - you have just happened on a pattern of reds and blacks that seem to a human to mean something, but they don't! Asking what your instinct is on the next spin is the wrong question - you should be asking what is my "edge" in doing this? You will find that the casino has the edge (green zero, and/or double zero) - that's a 1 in 37 edge (or 2 in 38) - so if you want to be rational in a casino, become the owner and don't be a mug punter!Instinct tends to trick you in many ways eg instinct tells many people to sell when they start to make a loss and others decide to sell after a stock in a big loss suddenly moves up and breaks even. Neither of these have anything to do with rational decision making.I invest on the principle of looking at the potential upside vs downside and try to do as much research as possible to assess whether those outcomes are feasible or even likely. That's why I have checked Mesoblast's story with leading global medical specialists who have been involved with the trials for several years. Don't ask a doctor who has no involvement! Don't ask a doctor who just has an opinion, ask a real expert.That's also why I have put my assumptions on these threads to show the potential upside and the downside under various conditions. I then make an estimate of the cashflows to be generated and discount them back to a net present value today.When I do this, I can't find a better stock with a better upside vs downside payoff. Maybe those assumptions won't pay off though. Maybe the FDA will never approve a stem cell product? Instinct and probability are no use here - we can't assess a probability on a completely new treatment that has never been approved before - it's a one-off. You can look at things like probability of approval after completing phase three trials and probability of approval after an ODAC vote in favour of the treatment - they all suggest Meso is a good bet - but it's just a bet until it gets an FDA approval and can start generating revenue from sales, royalties, or milestone payments.Under those conditions I embrace the uncertainty of the market and spread my risk, holding a portfolio of stocks with those high return vs risk characteristics. At present, I am concerned about the overall market (due to rising inflation and interest rates) and have sold all my other positions except Meso - so my share portfolio currently is cash and Meso.I don't know whether Meso will "make the big leap "- like I didn't know which of my other investments would pay off. Some don't. I just know that if it does pay off, I'll be extremely well rewarded. If the FDA comes out and says "we will never approve a stem cell product" I'll have to say I was wrong and move on with as little regret as possible - but they'd be flying in the face of the exceptional doctors who think Mesoblast's product is already showing spectacular results and saving lives of people with no other treatment optionsWell, you've asked the age old question of investing!I have written thought pieces on this in the past and it is a complex topic. The first point is that you have to know yourself - if you think you can invest on instinct and you are successful, then by all means go for it. I can't and I find my instincts can be tied up with emotions and lead to investment losses.I have learned (for myself) to try to take "instinct" out of the equation.Your instinct tricks you on investing - when the price is down, your animal brain kicks in an instinct tells you "fight or flight" (there's a third option in the animal kingdom of curling up into a ball or playing dead and hoping the negative stimulus goes away - and that can apply as well).Professional investors ignore that "instinct" and look at rational indicators of how to achieve long-term success in the market. They have an investment philosophy where they exploit their "edge" and they do it over a large number of stocks. Sometimes you lose, but the aim is to win more than you lose. You have to work with the uncertainty in the market, as it is always there. Accept it and find ways of exploiting it, but don't forget that you may well lose on any individual position. Most of it is up to you - the best stocks have down periods and the worst stocks can have tremendous bounces where people make money. You have to try to exploit that. Selling after a big fall may make sense if the company is going broke and nobody wants to buy its products, or it may be a great buying opportunity. That's why you need to do research.One way of doing this is just to buy stocks that go up and sell stocks that go down. Sounds easy, but it is like betting on runs of red or black at the casino. After a run of 7 reds, your "instinct" might tell you to bet on black - someone else's instinct tells them there is a problem with the wheel and they should keep backing red. Both are wrong - it is random - you have just happened on a pattern of reds and blacks that seem to a human to mean something, but they don't! Asking what your instinct is on the next spin is the wrong question - you should be asking what is my "edge" in doing this? You will find that the casino has the edge (green zero, and/or double zero) - that's a 1 in 37 edge (or 2 in 38) - so if you want to be rational in a casino, become the owner and don't be a mug punter!Instinct tends to trick you in many ways eg instinct tells many people to sell when they start to make a loss and others decide to sell after a stock in a big loss suddenly moves up and breaks even. Neither of these have anything to do with rational decision making.I invest on the principle of looking at the potential upside vs downside and try to do as much research as possible to assess whether those outcomes are feasible or even likely. That's why I have checked Mesoblast's story with leading global medical specialists who have been involved with the trials for several years. Don't ask a doctor who has no involvement! Don't ask a doctor who just has an opinion, ask a real expert.That's also why I have put my assumptions on these threads to show the potential upside and the downside under various conditions. I then make an estimate of the cashflows to be generated and discount them back to a net present value today.When I do this, I can't find a better stock with a better upside vs downside payoff. Maybe those assumptions won't pay off though. Maybe the FDA will never approve a stem cell product? Instinct and probability are no use here - we can't assess a probability on a completely new treatment that has never been approved before - it's a one-off. You can look at things like probability of approval after completing phase three trials and probability of approval after an ODAC vote in favour of the treatment - they all suggest Meso is a good bet - but it's just a bet until it gets an FDA approval and can start generating revenue from sales, royalties, or milestone payments.Under those conditions I embrace the uncertainty of the market and spread my risk, holding a portfolio of stocks with those high return vs risk characteristics. At present, I am concerned about the overall market (due to rising inflation and interest rates) and have sold all my other positions except Meso - so my share portfolio currently is cash and Meso.I don't know whether Meso will "make the big leap "- like I didn't know which of my other investments would pay off. Some don't. I just know that if it does pay off, I'll be extremely well rewarded. If the FDA comes out and says "we will never approve a stem cell product" I'll have to say I was wrong and move on with as little regret as possible - but they'd be flying in the face of the exceptional doctors who think Mesoblast's product is already showing spectacular results and saving lives of people with no other treatment options
MSB Price at posting:
$1.53 Sentiment: Buy Disclosure: Held
(20min delay)