Thursday, August 28, 2008

Bookkeeping: Closing Amylin Pharmaceuticals (AMLN)

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Every so often, maybe once every 3 years, I need to be reminded why I have a rule to not buy individual biotech stocks. I remember now. This is the sector where people with a full time staff of analysts devoted to this 1 niche get regularly blown up.

So aside from victories you get to see bad decisions in this transparent methodology we pursue here. Unlike the pundits I'll put the post it note on my head that says "Doh!" and admit it.

Personally I think there is a major overreaction happening in Amylin Pharmaceuticals (AMLN) but this is essentially a 1 drug stock, and while I think the cloud around this drug is very overstated I have no idea how the Street will treat this stock going forward. Even the analysts are on completely opposite ends of the spectrum based on what I'm reading.

We were lucky to cut back, for technical reasons only, earlier this week, so we can escape with a very minor loss of $1300. A part of me wants to double or triple down here, and then try to sell around $25-$26, but I don't have enough conviction to make this a 4-5% type of stake. And as a 1-2% position, even if it bounces back to $28 or so it would not affect the overall portfolio enough to matter. Plus it would be a risky maneuver - and/or something I would of done 10 years ago when I was a gunslinging brash non capital protecting fella. In the end I don't like drama. But in a year this could be a $45 stock or a $20 stock. I just don't know which. So we'll take our ball go home and remind ourselves why we should stick to biotech ETFs [Aug 15: Where is Institutional Money Going? Biotech - 3 ETFs to Review] instead of individual stocks, unless those individual stocks are named Gilead Sciences (GILD).

With the stock up 6% today after yesterday's carnage, we'll take our remaining 0.4% position and go home.

XBI, which was the biotech ETF we had our eye on a few weeks ago as it was "breaking out", now has punished anyone who bought the breakout, and has pulled back to the 50 day moving average. Impossible to tell if HAL 9000 is done selling off biotechs (HAL must change his mind by the day), so I'm not buying but it's a low risk entry with an easy stop loss for those interested. But is biotech something the hedge funds were just playing with for the month of July before they move to another field to ravage? Or is this a new place to hide out? Who knows.

No position



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