Mike Taylor (2015)

Without commenting specifically on the AVXL situation: Public biotech companies trade on hope and the promise of a substantial future payoff. It's precisely because the craziest ideas sometimes work that a lot of investors can get carried away by stories.

I don't think that small-cap biotech is for the faint of heart. It requires a lot of due diligence, and people get burned even when they're careful. My take: Acting on hot tips is always a bad idea, but especially dangerous in biotech.

I think a lot of writers can overlook company fundamentals because they're so focused on the science and the amazing opportunity for advancement. The problem is that the clinical stats can sometimes distract from what might make a company a good or bad opportunity from a business standpoint.

For evaluating clinical stage products, I'd say it's good to start with understanding the disease, or the problem being addressed, then evaluate the market size and level of competition. Ask yourself about the pros and cons of the product, then assess what management has to do to get there. It's absolutely critical to go beyond company-provided sources and to do thorough due diligence to create successful analysis. There are a lot of moving parts, and I think a person has to really study the industry before just diving in.

Finally, I prefer analysis that operates against the backdrop of the risk involved, especially for cash-burning bio/pharma companies that have a long way to go before they ever reach the market. Was that concise? The people will decide.

Hi 50billionStocks. That is an excellent question.

First of all, I think one of the things that distinguishes SA is that it publishes short ideas at all. (Also, our short ideas tend to get a lot of attention.) Publishing a meaningful volume of short ideas is not ultra common among financial media outlets, so it's easy to see why we'd get a reputation as being overly short-friendly just on that basis.

I personally don't think we are. Even taking a recently controversial stock like AVXL, one of our top contributors is bullish, and featured it prominently multiple times this week. Our mission is spirited discussion on all aspects of a given investment. That includes bearish takes.

I won't speak for Eli, he's more than capable of speaking for himself.

But I'll talk in general terms -- our editors form opinions about particular stocks. That's inevitable when your job is to evaluate the quality of multiple investment cases every day. Probably every editor publishes articles every day that he or she personally disagrees with.

I personally value investment commentary that presents useful information to the public and helps investors make better decisions. Long ideas and short ideas both can make that happen.

I believe markets are efficient enough to make it very difficult for anyone to beat them over the long term.

My understanding from reading Matt Levine at Bloomberg is that insider trading is about theft of intellectual property and not fairness. If that's true, then strong-form market efficiency obviously doesn't hold. But I don't think even Harry Markowitz or John Bogle believe that.

I think allowing insider trading could create perverse incentives for company employees to use the company's information to benefit themselves in the stock market rather than their employers. There's probably more to consider than price discovery when you think about insider trading.

I don't agree that insider trading bans really only serve high-speed traders. Does anyone think that?

5 million premoney YOLOs, 35 million YOLOs is pretty standard to get you through Phase 1-2.

This is an interesting question, lick. Seeking Alpha usually tries to keep the focus on the investment case. I think that actions in the past several years by numerous companies, Shkreli's Turing and RTRX before it included, have revealed that the system in the U.S. is vulnerable to abuse. It's a thorny issue when it's not always the patients who are paying directly for the drugs, and when big-payday incentives have driven so much innovation in the past few decades.

Amid the height of the Turing scandal, Evaluate Pharma created a list of companies that have raised prices in excess of 70%, sometimes at a compound rate over a number of years. Can't find the link at the moment, but it was a disappointingly long list. ... I'm not that deep in the drug-by-drug statistics, but it seems from a broad standpoint that some drugs are priced more appropriately than others, to put it mildly.

One last note on Shkreli: It seems to me he is willing to play the heel in this business. I don't admire him by any means, but let's at least admit he makes no pretense of respectability, and has revealed a real leak in our system. Hopefully he keeps backing down from Turing's original position.

I've never traded on material nonpublic information. In fact I've never traded. I don't even actively manage my investments. I invest in boring old index funds and am content to live off my wages as an editor. Thanks for the question, though, mangist.

Probably not.

Hi programmingguy, thanks for the question. Glad you like the site.

1. I am the sole editor with explicit biotech/pharma duties, though the managing editor, and members of our PRO subscription service team all chip in daily to help with challenging pieces and shoulder some of the workload. We also have an awesome ContentQA team that serves the function of an old-media copy desk, which is an incredible benefit to me and to our readers.
2. Last I checked, we publish around 12 "healthcare" ideas per day. I'd say I read between 15 and 20 on a typical day.
3. It demands a lot of attention and energy. I work for 3-4 hours in the morning, take a break to exercise, then take another break in the afternoon to make sure I'm fresh.
4. I haven't been privy to those conversations. Without speaking for the company, I take a pretty journalistic view that the vast majority of what we do is protected by the First Amendment, and that our writers deserve to be protected as sources of information.
5. Hard to dig up specific articles right now, but a Seeking Alpha article touched off the discussion on Lumber Liquidators. That's the one that comes to mind as a story Seeking Alpha was really moving forward throughout its life.

Not speaking for the company, I agree with you that this creates a pain point for readers -- I've felt it myself. My impression is that it's hard to get people downloading and using apps, but that good ones create a user experience that's sticky and beneficial for both the reader and the company. Again not speaking for the company, I expect that Seeking Alpha will swing between ends of this trade-off over time -- sometimes gating the browser site on mobile devices to get people using the app, sometimes being more accommodating of browser-based use of the site from mobile. Good question, and thanks for giving us feedback on this.

I have a hard time mentally endorsing any clinical stage biotech stocks. I personally like when companies have assets and revenue to provide some kind of backstop for an investor, and that's not typically available in the industry except among well-established megacaps.

If I were more speculative-minded, I'd be looking for products that address pressing unmet needs. I'd also be rigorously checking management's use of the cash made available to them. Great scientists don't always make great businesspeople, so I'd be quick to sell at the first sign that a company wasn't executing on its plan.

The FDA is tricky. I have been memorably wrong about at least two major approval decisions in the past year. There is fierce ongoing debate about what clinical markers the FDA is likely to accept in cancer, for example. It seems like it's very rare for a bio/pharma company to produce data that's an obvious layup for approval.

Pharma and biotech stocks are ultra-risky. They are often made of cash and an idea. Investors can easily hurt themselves. Scientific data create a particularly dangerous type of confirmation bias. And even if you understand a product, that's only half the story at most. Management has to correctly structure and properly execute clinical trials, then develop a reasonable go-to-market plan. There's probably a dozen layers of uncertainty added on to the typical stock-market risk you'd find investing in a grocery store or what have you.

Hi realerlifethrowaway. For starters: I am not sure I said any of the things you're mentioning. I don't have a scientific view on $AVXL, because I am not an expert in Alzheimer's and haven't done any specific research on their products. The science is unclear to me, and I suspect it's unclear even to management at this early stage in the process.

I have no better guess about the chances of success than anyone else in this case, or in many other cases. More than 0%, less than 100%? If you have a view I hope you'll share it. Likewise about any new pipeline drugs.

This might sound bad, but I became much more interested in investments and finance through business school. It's something you have to work at to understand, and you have to understand it to find it engaging. So business school helped me engage in the investing world in a new way by tuning me into the positive and negative implications of public companies' actions. It also alerted me to how many stories go untold in the business press. So business school was energizing from a journalism standpoint.

Not necessarily getting MBAs, but more business journalists should learn more about business. There can be a tendency, especially in New York, to defer to experts and industry professionals, especially when looking for quotes. With the proper training, journalists are much better off doing their own homework and analysis.

More MBAs should think about getting into journalism. But they'd probably be taking pay cuts. Maybe after their first big exit. :)

I like the constant flow of ideas, and the capacity the stock market has to surprise me. I've thought to myself that quite a few stocks were totally dead in the water only to see an acquisition or trial result completely turn things around. Most of all I admire the panache and rigor our best contributors bring to their coverage.

Thanks for another question, lick. Academic research shows that naively giving equal weight to a bunch of different strategies is a successful approach to investing for retirement. I believe in allocating to different levels of risk based on the level of need for the asset. So your emergency funds should be in cash or close, retirement assets should be conservative. You should keep the YOLO alive with some money after thorough fundamental analysis, but only do max YOLO top-down 90 mph speculating with money you would otherwise be happy setting on fire.

Read financial publications like (plug) Seeking Alpha, The Wall Street Journal, The Economist. Take business-related classes, and save up for college. Build savings so that when you have some ideas worth acting on you have some money to put to work. None of this is personalized investment advice!

I don't think PE tells the whole story of a company. My disposition doesn't tend toward growth investing, so super high PE ratios aren't attractive to me. When looking at a company I'm not usually looking at PE in isolation. Sorry to be boring with my answer. How about 10. 10 starts to feel comfortable, margin of safety wise.

The closest I've come is I told an old business school classmate I was really looking carefully at Gilead Sciences sometime in the past few years. That story hasn't changed very much. Check out Seeking Alpha's coverage of the company. It's a mysterious one from a valuation perspective. Not investment advice, and I have no positions in individual stocks.

Hi Hexxman007,

You could view it that way, though Seeking Alpha pays its contributors, so I think there's a clear exchange of value right there, and if you asked me what I do from 8 a.m. to 5 p.m. every day, one answer I personally would give is "working for money."

It sounds like the second part of your question is referring to crowdfunding? Maybe you can clarify.

That's a tough one. I don't have a systematic answer. The big thing for companies with approved products is how long the products are likely to maintain share and pricing power. That's a really hard thing to forecast. It's made more difficult by my perception that "mid-stage" companies as you call them don't seem to last long as independent entities -- either spiraling out or getting acquired.

I'll let the lawyers fight out the answer to your question. But I'm glad I can make a living doing something besides selling shakes, which seems like quite a grind.

I don't know or follow him, sorry. I like bearish takes because they make people second-guess their assumptions, and they're usually more entertaining to read.

The most common reasons articles don't get published on SA are:

1) Outside the scope -- we get a fair amount of wealth management and personal finance content, which is a little broad for what we're targeting. We're looking for specific and actionable ideas on stocks and ETFs that trade on U.S. exchanges. We get a lot of well-written articles that just don't quite fall in line with our mission.
2) Underdeveloped/not forward-looking. We want articles that can help investors make decisions, so we wind up giving a lot of feedback about articles that are more recaps of the current situation than opinion pieces that can inform investors.

The company's position as I understand it is: We're a platform so we don't endorse the factual assertions of articles. This is why we often publish completely opposing viewpoints on the same company. We make sure the information is clear and gives readers an idea of the evidence supporting it to the best of our ability. When a material fact is disputed with legitimate supporting evidence, we make a correction or, in rare cases, will retract an article.

Being honest, I get a fair share of articles that seem repetitious from my perspective, but I read a lot of what comes across the transom, so I might not be a fair judge. We want to create a place where people can discuss ideas, and sometimes the insight comes from the discussion threads in the comments. I tend to err on the side of publishing when articles are repetitious, but it's a judgment call.

I used to read it a lot, in 2008-2010. I like bearish takes and the overall style of the site. I don't think I can really use much of the content to make investment decisions, but the attitude is fun.

This is a great question. One thing I think we as editors need to do better at is going beyond enforcing our minimum standards and start providing authors with material that gives them opportunities to learn and grow as analysts.

I think my broad feedback for authors would be the flip side of that: Authors have the tendency to get into a groove with their approach, and I think over time there can be a tendency to stop trying to refine the analysis, look for new types of opportunities and approaches, that kind of think. I'd exhort authors to always be trying to learn something new, identify and challenge their own assumptions, and get increasingly specific with their data and evidence. The most exciting authors are the ones who manage to make large leaps in the level of their analysis over time. I'd encourage all authors to keep that goal in mind.

I think that there is potential for more on than saber-rattling around specialty pharmacies when it comes to regulation. It's a complex issue, but I think the downstream system looks a little dysfunctional at the moment. By the same token, an exceptional drug development industry is a key competitive advantage for the US economy, and it seems like regulators understand that profit incentives are a key part of that. Overall I think IP protection for novel compounds will continue to be an important source of big competitive advantages for drug developers -- the core of the system is likely to remain intact.

An investor should listen to a variety of sources, but there's probably no substitute for doing one's own diligence and making decisions according to what one knows about his or her asset base and risk tolerance. Not individual investment advice.

If you like /r/wallstreetbets, that's great.

Star Wars will blow up the Death Star and probably do very little to DIS stock price of any immediate consequence.