New month brings with it new hope for a bottom in the severely beaten down growth names. I don't think it will be a V shaped bottom. It still could be very choppy. I don't write off the risk of this just being a bear market rally.
I would say its time to put together that list of companies you really wanted last year that were way too expensive. They are now trading at 70% discounts. Its definitely time to start nibbling away a those names you like. $XBI, $ARKG, $ARKK
I went as far as loading up on biotech for my biotech portfolio. I used some spare cash to dip a toe into #Crypto with them down nearly 50%. I even put $PATH and $PLTR on my shopping list for my IRA if the down trend resumes.
There is a massive bubble in value with many companies trading at 30 P/Es and only having 5% to 10% growth. Even $AAPL has nearly a 30 P/E with only 11% growth. There is so much value in the growth stocks that have been crushed.
That divergence between value and growth will close at come point. I am looking for signs of the change of leadership in the market away from bubbly value and toward cheap growth. The key will be inflation which erodes long term returns.
• • •
Missing some Tweet in this thread? You can try to
force a refresh
When it comes to Synthetic Biology, there is no company I like better then $TWST. I think they offer everything an investor wants with a top quality management and great long term potential in a key theme.
When you look at the SnyBio space, the top developer is $DNA. Another company with top quality management and very big long term potential. I think this company could be the mega cap of the 2030's as more manufacturing switches to sustainability and new concepts come to market.
I think when it comes to CRISPR the top pick in everyone's book has to be $BEAM with base editing. Right now, they are the only company that can do base editing. Some of the others are attempting to build their own, but no success has been shown yet.
Base editing solves all of the potential issues of first generation CRISPR tech around Double Stranded Breaks and possible mutations. It does so by giving up the ability to do insertions. That is no big deal as no CRISPR company has done successful insertion except ex-vivo.
The Triage strategy to raise funds in a bear market.
Now that we are getting a good relief bounce on this tragic biotech selloff, we can look at a strategy I like to use to raise some funds while not selling your best picks.
I call it "triage my portfolio". Some call it "circling the wagons". No one wants to sell stock while its down and getting crushed, but we all have at least 1 stinker in that portfolio that we just wish we could get rid of so we could put that cash into something we like.
These big bounces provide and opportunity to raise cash by dumping the bad companies at a better price so we have some cash incase the bear market resumes or goes lower. That can always happen. Never dump the good companies to fund the bad. That is always a bad idea.
If it were not for the fear of another leg lower, I would be wildly bullish on biotech here. There are so many really cheap names that could have huge returns from these levels. $XBI Here is a look as how much each is down and what I think it could return to reach value.
AI Based Drug Development
$SDGR -69% and 33% upside to value
$RXRX -62% and 33% upside to value
$RLAY -56% and 25% upside to value
$EXAI - 33% since IPO
Targeted Oncology
$BPMC -21% and 21% upside to value
$MRTX -31% and 10% upside to value
$RVMD -51% and 35% upside to value
$ERAS -32% since IPO and 35% upside to value
When it comes to growth investing, it is all about net growth. That is the growth expected - the rate of inflation. In economics, we study the time value of money. All growth in the future must be discounted by the rate of inflation.
As inflation goes up, the net rate of growth goes down. If you have 20% growth and 2% inflation, net growth is 18%. If inflation goes to 10%, then net growth drops to 10%. Inflation destroys the time value of money.
That is why people will run to the companies that are making money now. The value of money will be higher now then any time in the future as inflation is wiping out the growth over time.