Tuesday, May 8, 2018

Stock Update: Apple and SIGA

As previously discussed, I've been more or less living on Apple's stock swings for the past few years. My strategy is simple: buy low and sell high. I deem this safe, because I'm confident Apple will not be perma-crushed by some fritzy antenna or wobbly case. And I deem "high" and "low" to be relatively easy calls because the company's too big to be super volatile. There's only a macro-volatility, whereby it periodically dips 25% and then returns to a new high - over and over and over and over again. Even a plebe like me can profit from that.

As I wrote in that link, people go wrong by assuming "buy low and sell high" means "buy at the very bottom and sell at the very top." They do stupid greedy things in pursuit of this impossibility. The last time Apple's stock plummeted, I bought around $115, and it eventually sunk further still, to the 90s. Fine. I did not curse or wail. And, as the stock recovered, I sold most of my shares in the $160s, missing out there as well (it's currently in the mid $180s). It's ok. I'm not greedy. My non-greediness is an investment superpower. I revel in it.

I'll sell my remaining shares around $200, if the price seems to settle there. And next time the price dips by over 25%, I'll buy a ton more as soon as it seems to settle. Yah, "seems to settle" is a fallacy; any foothold in this realm is strictly imaginary. So I may miss top and bottom. But I sure won't miss "high" or "low".

I realize I'm betting against Warren Buffett, who's been buying at the high end of the price curve, in violation of his own value investing rule. But my thinking is different from Mr. Buffett's. He's apparently figured out that Apple is a very fine company with a solid future. I take that for granted. I bet on Apple's dips because I have the assurance that even when it's plunging like a stone, it's never existential. Most investors - with twitchy short-term objectives - hate to be caught holding a stock whose price is dropping. But I don't feel that fear, because I know that when short sellers and their minions periodically frighten investors, none of it can ever jeopardize the company's future, so I don't move with the herd. I wait. And since I don't like to pay taxes on short term capital gains, that patience only increases my profit.

Meanwhile, it looks like SIGA will get FDA approval this fall. That may open the gates to foreign orders. Or it might not. There's also another government contract around the corner, and this is the news that brought the stock back to the mid $6 range.

I see things very differently from most SIGA investors. They see a rich and prosperous future of US and international sales, corporate sales, alternative formulations and applications (e.g. animal poxes), and stock replenishment. I think they're missing what's really going on with this stock.

SIGA will never be a "real" company, with rich and diverse revenue streams. Rather, it's a three or four or five trick pony. The new US gov contract may well come to pass, and they may get a foreign contract or two at some point. Perhaps some other icing. But it won't be Pfizer. No ongoing, dependable brisk revenue, just long parched becalmings between unpredictable one-off outcomes. The stock chart will perennially alternate between lengthy drifts and momentary spikes, and unless you're tapped directly into the trading system with mega-twitchy algorithms, you'll never catch a peak. And this ain't Apple, so those who tenaciously hold on will miss out.

Hopefully FDA approval will come around the same time as the new US gov contract is awarded. That might create some actual exuberance for this stock, in which case the whole formula could change. But as of now, I plan to sell and run the moment this contract's awarded and the stock moves. Because the moment we put that award in our rear view mirror, SIGA is looking at yet another parched horizon, with nary a buck firmly in sight. And there's nothing the stock market hates more than no-hard-evidence-of-next-shiny-prospect.

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