AMRN - Radiography of a stupid decision
On Sep 24, I was watching the market and I noticed this insane move of AMRN from $3 to $9 in the premarket. I usually get greedy when I see large increases in price, I buy at the top and I usually end up losing money in the following days.
This time won't be the same! I will go against my instincts, which failed me so many times before! This time I will go short! It will be my very first short and I will end up with a quick and healthy profit. I am well aware of the risks of shorting. If I go long on a stock and the stock is $1, I can lose at most $1. But if I go short on a $1 stock and the stock increases to $10, then I lose ten times the money I put down.
Yet, such an increase of 300% has to go down once the market open. I will be cautious though. What's the news that triggered such a big move? I have no idea about medicine and pharmaceuticals, but from what I understand the company makes some fish oil pills. Plenty of companies manufacture fish oil pills. What's the news about? They did studies and found a statistically significant correlation between people who took the pills and some positive health effects. About one in four people had positive effects in cardiovascular disease. Which means three out of four people did not benefit in an observable manner from taking the pills. Is it a good news? Of course it is. Does the stock deserve to go up? Sure it does! How much should go up? Well, this is a good question. If 25% of people benefited from taking the pill, why shouldn't the stock go up 25%? This seems fair to me.
Apart for this, they make fish oil. There are hundreds of companies who produce fish oil tablets. What AMRN found about the benefits of taking fish oil should make people aware of the benefits of taking any fish oil pills. The same with the generic medicines, versus the good brand medicines. At the pharmacy, we are asked all the time if we want to buy the generic types and they still work. Their study will merely convince more people to buy fish oil, no matter what the brand.
So, unless Amarin are using extraterrestrial fish to produce their pills, what's the big deal?
Ok, now let's check the company fundamentals. It is a pretty large company, with a market cap of almost 1 billion dollars. And they are still losing money! They recorded a loss of 84 million dollars in the last year. How much debt do they have? There is no information of the level of debt. Could be nothing, could be more? Not that important. What did the stock do in the last year? Lost 20%. Did the insiders purchase stock? In 2018 all trades were sales. So the insiders don't see a very bright future of the company. Same business as usual.
What do analysts say about the stock? The number is 1.60 (1 is strong buy, 5 is strong sell). More analysts say to buy than to sell. I don't trust analysts that much anyway, most of them can't even beat the market!
So let's follow closely the moves in the stock. In the premarket, the peak was around $12.48. People are really insane!Then it started dropping. In the five minutes before market opens, the stock already dropped to $10! I was right! If I had shorted above $12, I would have made 20% in minutes! The traders must have more sense. So let's not lose this golden opportunity of shorting the stock. I got in at $9.98. After about 30 minutes since the market opened, the price dropped to $9.55. I was right! I am making money on my first short! Now it's getting late. Let's go to bed and count the profit in the morning!
Of course, I am aware of my performance. I am losing money on almost every trade I make. No matter how much I want to get rich (fast!), let's prove first I can at least bring my balance to the starting value. I started my trading account with about US$10000 a few years ago, now I am down around $8500. I bought Netflix for $97 (after reading the CEO of Netflish purchased $60 million of shares) and I sold it a week later for $94. I purchased one Amazon share and one Google shares and they made money for me. They almost covered the losses I encountered on all other tens of trades I made! But then I decided I will sell everything, so I can have liquidity for my day trading adventures! They are so exciting!
So I will only put $100 in this great trade. I will be very happy if I end up with 30% profit on my first short.
Next morning, I discover the stock actually closed at $12.55. Hmm, traders can be such fools! Let's give them time to realize it's not such a big deal. What do analysts say after the first day? Some of them actually recommend buying and they think the stock may reach $20! Poor buggers. A day before they had no idea the stock was about to explode and now they show up with their wise advice, when it is already too late! I am wondering though, have I took the right decision? Maybe the jump of 300% was really too high to think about shorting the stock? Maybe the market capitalization of one billion shows this is a pretty solid company? I would have felt more confident shorting a company which is under 200 million and which has a clear downtrend. Well, let's wait a few more days and see.
Morning of 29 of Sep - damn, the stock is now up to $16.94. Had I went long on the stock I would now be up almost 70%. And some analysts are thinking the stock may have another 5X upside from the $12.50 it reached on Sep 24. That's around $60? I'll most likely cover my loss on Monday. I already lost $70 from my initial $100. At least I was wise enough to remember my past performance and not to risk too much money!
What do I think now? I have no idea. I was clearly wrong shorting the stock. Should I go long? At $16.94? When I had my hands on it at $10? I am not THAT stupid! And what if I buy it around $17 and the stock will fell to $10? Won't I become a double fool? Could the stock reach $60? Most certainly, but only if I don't buy shares! :)
This time won't be the same! I will go against my instincts, which failed me so many times before! This time I will go short! It will be my very first short and I will end up with a quick and healthy profit. I am well aware of the risks of shorting. If I go long on a stock and the stock is $1, I can lose at most $1. But if I go short on a $1 stock and the stock increases to $10, then I lose ten times the money I put down.
Yet, such an increase of 300% has to go down once the market open. I will be cautious though. What's the news that triggered such a big move? I have no idea about medicine and pharmaceuticals, but from what I understand the company makes some fish oil pills. Plenty of companies manufacture fish oil pills. What's the news about? They did studies and found a statistically significant correlation between people who took the pills and some positive health effects. About one in four people had positive effects in cardiovascular disease. Which means three out of four people did not benefit in an observable manner from taking the pills. Is it a good news? Of course it is. Does the stock deserve to go up? Sure it does! How much should go up? Well, this is a good question. If 25% of people benefited from taking the pill, why shouldn't the stock go up 25%? This seems fair to me.
Apart for this, they make fish oil. There are hundreds of companies who produce fish oil tablets. What AMRN found about the benefits of taking fish oil should make people aware of the benefits of taking any fish oil pills. The same with the generic medicines, versus the good brand medicines. At the pharmacy, we are asked all the time if we want to buy the generic types and they still work. Their study will merely convince more people to buy fish oil, no matter what the brand.
So, unless Amarin are using extraterrestrial fish to produce their pills, what's the big deal?
Ok, now let's check the company fundamentals. It is a pretty large company, with a market cap of almost 1 billion dollars. And they are still losing money! They recorded a loss of 84 million dollars in the last year. How much debt do they have? There is no information of the level of debt. Could be nothing, could be more? Not that important. What did the stock do in the last year? Lost 20%. Did the insiders purchase stock? In 2018 all trades were sales. So the insiders don't see a very bright future of the company. Same business as usual.
What do analysts say about the stock? The number is 1.60 (1 is strong buy, 5 is strong sell). More analysts say to buy than to sell. I don't trust analysts that much anyway, most of them can't even beat the market!
So let's follow closely the moves in the stock. In the premarket, the peak was around $12.48. People are really insane!Then it started dropping. In the five minutes before market opens, the stock already dropped to $10! I was right! If I had shorted above $12, I would have made 20% in minutes! The traders must have more sense. So let's not lose this golden opportunity of shorting the stock. I got in at $9.98. After about 30 minutes since the market opened, the price dropped to $9.55. I was right! I am making money on my first short! Now it's getting late. Let's go to bed and count the profit in the morning!
Of course, I am aware of my performance. I am losing money on almost every trade I make. No matter how much I want to get rich (fast!), let's prove first I can at least bring my balance to the starting value. I started my trading account with about US$10000 a few years ago, now I am down around $8500. I bought Netflix for $97 (after reading the CEO of Netflish purchased $60 million of shares) and I sold it a week later for $94. I purchased one Amazon share and one Google shares and they made money for me. They almost covered the losses I encountered on all other tens of trades I made! But then I decided I will sell everything, so I can have liquidity for my day trading adventures! They are so exciting!
So I will only put $100 in this great trade. I will be very happy if I end up with 30% profit on my first short.
Next morning, I discover the stock actually closed at $12.55. Hmm, traders can be such fools! Let's give them time to realize it's not such a big deal. What do analysts say after the first day? Some of them actually recommend buying and they think the stock may reach $20! Poor buggers. A day before they had no idea the stock was about to explode and now they show up with their wise advice, when it is already too late! I am wondering though, have I took the right decision? Maybe the jump of 300% was really too high to think about shorting the stock? Maybe the market capitalization of one billion shows this is a pretty solid company? I would have felt more confident shorting a company which is under 200 million and which has a clear downtrend. Well, let's wait a few more days and see.
Morning of 29 of Sep - damn, the stock is now up to $16.94. Had I went long on the stock I would now be up almost 70%. And some analysts are thinking the stock may have another 5X upside from the $12.50 it reached on Sep 24. That's around $60? I'll most likely cover my loss on Monday. I already lost $70 from my initial $100. At least I was wise enough to remember my past performance and not to risk too much money!
What do I think now? I have no idea. I was clearly wrong shorting the stock. Should I go long? At $16.94? When I had my hands on it at $10? I am not THAT stupid! And what if I buy it around $17 and the stock will fell to $10? Won't I become a double fool? Could the stock reach $60? Most certainly, but only if I don't buy shares! :)
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