They say the first Golden Rule of investing in the stock market is 'Buy what's worth owning forever’, and this is a sound analogy based on years of investment experience.
This rule tells you that when you are selecting which stock to buy, you should think as if you will co-own the company forever. Research your company of choice, get to know it inside out and make a calculated decision of when and how much to buy based on your research.
Yet despite seeking advice from professionals, doing your own research and making the decision to invest, your stock may well fall in price dramatically from time to time, during the course of your life. Is it all bad? Are you going to lose everything? Well human instinct would tend to point us in the direction of doom and gloom. We recount and think back to similar instances when we have lost before and as a primal defence mechanism begin to think irrationally and at times panic. However in the cool light of day we perhaps need to remain somewhat detached, for if the fundamentals of the stock in which we have invested remain unchanged, maybe we have nothing to worry about.
Nick Kirrage Co-head Global Value Team at Schroders in 2017 noted of falling share prices “If after your cool, unemotional analysis you decide that the company is still in good health and the bad news is merely ‘noise’ you might want to take advantage of the falling share price and buy more. This is called averaging down. However, if you choose to do this, accept this point with near-certainty: the share price is probably going to fall further still.”
Nick suggests “It’s best to make that assumption. Be at peace with it. Very few people buy ‘at the bottom’. If you are buying the shares today, you have to believe your rationale for doing so is strong enough that even if the price continues to fall, you would be happy to buy more. Not get scared and throw in the towel.”
In conclusion he goes on to say “Being objective in the face of negative news is one of the hardest challenges all investors face. The emotional disappointment we feel affects our ability to deal with the news. However, learning this skill is essential to improving your portfolio returns. Some of the greatest investment gains have come from using bad headlines to buy good businesses at their darkest moments.”
For me Kirrage’s analogy applies in the current Imugene (IMU) situation. When one or two large institutions cash out of Imugene it tends to have an adverse effect on the IMU share price as the volumes for sale clearly cannot be met by incoming individual and retail buyers of the stock. In fact rather than buy these individual and retail holders tend to sell, in effect joining the queue as their own fortitude, patience and resilience gives way to panic. The Golden Rule of stock market investing flies out the window and they sell their stock of a lifetime. Conversely the fund manager may have sold for reasons totally unrelated to their IMU holding. They may have needed to rebalance into fixed interest, cash or value stocks given their own investment strategy or fund mandate at the time. They may have need to satisfy end of quarter or in the case of US funds end of financial year cash requirements. Either way it may be due to their own situation, as opposed to the underlying fundamentals surrounding Imugene.
Imugene has had some well documented communication and public relations issues. They have at time failed to convey the value of their pipeline to the market by focussing on their science as opposed to placing financial values on their products. They could have sought to compare their products to similar products in the market. They could have chosen to develop hypothetical cash flow modelling and forecasts to support their product development decisions. Instead they have turned to research houses such as Roth Capital, Diamond Equity Research and Bell Potter, all of whom have utilised underwhelming significantly discounted cash flow models to under pin their research. In other words remained cautiously optimistic without taking into full consideration the potential future sales of Imugene's flagship products, in particular Vaxinia. This company decision, or indeed company strategy, has worked against Imugene and their board of directors. The public in general, and for that matter the majority of the market fail to grasp the complexities surrounding the Imugene science. They comprehend pieces of it, but not the whole story. Therefore when the share price begins to fall they are hanging on by a thread as it were, as their own research and advice is simply not enough to solidify their position as a long term holder of the stock.
Whether you are in Imugene for the short or long haul is clearly a personal decision. Though I would counsel anyone against making decisions based purely on market trends. There may be short term gains to be made in trading and following such an investment strategy, but very few investors can ever pick the bottom, or the top of the charts. Ash Barty stepped out of the limelight whilst on top, but how long could she have continued winning for? Is Davie Warner set for another duck in the Boxing Day test, or are his run of outs over? Who knows. Return to the stock fundamentals, and the rationale behind making your initial investment decision(s). Long term holders who have followed the golden rule in share investing have much to hang their hat on in 2023, when it comes to IMU. The team at Imugene have made several key announcements in 2022. Firstly Vaxinia, their flagship OV product has and is proceeding well through cohorts 1 and 2 of patients in an IT and IV trial designed to tackle and target all manner of solid tumours. Soon it is to be combined with the world leading drug Keytruda to produce strong efficacious results, in the eyes of founder Professor Yuman Fong, a coveted medical researcher from the esteemed City of hope facility in the US. Secondly their flagship B cell vaccine HER Vaxx has entered and is progressing through the clinic with Keytruda in a clinical trial for gastric cancer patients, a market segment of great need in which the company has established worldwide patents. Having announced the immunotherapy drug achieved strong results in initial trials as late as June of this year, HER Vaxx is set to produce even stronger efficacy this time around, as gastric cancer patients are administered twice the dosage rate of the vaccine in this trial, than those in the previously successful trial received. And thirdly Imugene is soon to appear on the world stage in front of thousands of bio tech investors at the JP Morgan Health Care Conference in the US. Up until now Imugene has focused predominantly on scientific conferences and conventions to spruik their wares. These venues, whilst big on industry accolades, are short on investors.
Imugene (IMU) has and shall continue to experience highs and lows during its relatively short life span. One thing is for certain, this trend is set to continue. Growth stocks are prone to volatility and therein open to increased levels of market manipulation and movement than hybrid or value stocks are. However for those who have in fact bought a stock worth owning for life, clearly this is all just background noise along the way. Alternatively for those who don’t adhere to golden rule of stock investing, good luck in picking the bottom, or should I say top for that matter.
Nb. Hey @Nickporthcawl I just read your post. Keep your chin up. I took my son to see “The Killers” last night in Sydney. The lyrics upon leaving are still ringing in my head this morning…
But it's just the price I pay
Destiny is calling me
Open up my eager eyes
'Cause I'm Mr. Brightside
DYOR - Seek investment advice as and where necessary - Opinions Only
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