On the one-year anniversary of this journal I want to run over the performance of the portfolio. It has been a good 12 months for stocks in general and for biotech stocks in particular. The 12 month performance of the NASDAQ is +18% while for the NASDAQ Biotech index it is +39%. The portfolio is +298% for the same 12-month period. Clearly this has been significantly impacted by ACAD yesterday – however, even before the ACAD move the performance was +182%.
The portfolio had 165 up days over the year with 87 down days. The average up day showed an increase of 1.49% in value while the average down day was -1.1%. The average daily movement over the year was ~+0.6%.
The maximum drawdown for the portfolio was ~11%. The longest period of drawdown was 48 days (April 4 to June 12). The longest drawdown for the NASDAQ was 113 days, with a max. of 12%. The NBI’s longest was 36 days, and largest was 13%.
In total, I opened 30 positions. 2 remain open. Of the 28 that are closed, 20 were positions in stocks (19 long, 1 short) while the remaining 8 were in options. Of the positions in stocks 80% were winners while in options 88% of the trades produced positive returns. The average return for a stock trade was +30%; the average option return was +103%.
On average, stock positions were held for 47 days while option positions were held for 2 days.
By far the most successful strategy was selling good news (either via a short or by buying put options). I had no losing trades with this approach during the year. Of course, this will be a transient phenomenon and I do not expect it to prevail moving forward. Its potential is also limited by availability of shares to borrow and the liquidity and availability of options.
It has certainly been a better year that I could have planned for when I started writing these updates last November. I am encouraged by how well the portfolio has stacked up against the indices in terms of drawdown size and durations and Sharpe ratios. Biotech has been on a tear for most of the year. While that will certainly slow down or reverse, hopefully we can continue to outperform the market and grow assets moving forward.
The portfolio now has two open positions. The position in RPTP was initiated on Monday at a price of $4.80. It is currently up by about 5%. The position in PATH was entered yesterday at a price of $3.06. It is at $3.10 today.
Approximately 17% of the portfolio is in RPTP while 25% is in PATH. The rest is in cash. I generally initiate with a 25% position. The RPTP portion has been diluted downwards based on the sizable increase in assets following ACAD’s monster move yesterday.
When I last posted at the start of August I was holding IRWD and ACAD. As I have just described, I held ACAD until today (153 days held – longest-held position of the year).
I sold my position in IRWD on September 28th at $13.14. My entry was $13.56 so this was a 3% loss. The stock has continued to perform very poorly since then and is now trading at ~$10.80. I continue to believe that this drug could have huge potential so it might be worth developing a position at these prices.
After IRWD my next position was PATH. I bought a 25% position on September 21st ahead of the mid-September PDUFA date. I bought at $4.18. This was a good, old fashioned mistake. 3 days later the company announced a dilutive financing that threw the stock into a tailspin. I knew that the company was cash-stretched and that they would need to find some way to finance through the PDUFA so I should have been ready for this. The stock did try hard to recover but I sold on November 7th for $3.44. This was an 18% loss.
Today I reentered PATH at $4.06. Still hoping for some momentum ahead of the PDUFA date and they should have dealt with a lot of the uncertainties now.
On October 22nd I shorted SUPN following its successful PDUFA for SPN-804. I sold at $14.05 and covered the position at $10.93.
Opened a position in EXEL on October 22nd ahead of the November 29th PDUFA date for Carbozanatinib. I don’t want to hold through this (in fact I may short an approval) so I sold the position today for $5.32. I entered at $4.68 so this was a 14% gain.
Today is November 27th, 365 days since my first post on this blog. After a promising initial 8 months I am afraid that my posting discipline really dropped off over the summer. Apologies to my regular readers who have been checking back frequently to read updates – and leaving disappointed. Actually, I suppose that would just be my Mother! The fall off on posting was due to a variety of reasons – not least of which was that I worked on a consulting project for some time over the summer. This became quite involved and totally threw my rhythm off.
Given that tomorrow is the start of year 2 for this blog I will make a New Year’s resolution to return to my old posting ways and try to be a bit more regular.
In addition to slowing down on posting, I also slowed down on trading over the last few months. So updating on what has been going on since I last posted should not be too taxing. I may spread the update out over a few posts but there is one update which is certainly worth commenting on – given that the stock is the big mover of the day…
So I opened my position in ACAD some time back (June 27th) at $1.56. At the time I was hoping for some movement ahead of the announcement of Phase 3 data from a pivotal trial. I had a position on this back in 2009 when the data disappointed and the stock got crushed. This time it seemed like the trial had really been designed in a way that was very likely to succeed. And today succeed it did. I held my position when the stock touched $3 in early October and watched as it plummeted back through the $2s. Given the high probability of success I decided to hold through the data release. This is not something that I generally do but on this occasion it worked out very well. I sold for $6.15 right at the open. It reached $7.45 in the pre-market but was not able to sustain tat strength in regular trading. This really has given a huge boost to the portfolio’s performance. Up ~40% today just based on that trade.
The chart is in no way helpful now – but it’s nice to look at.