This past week in Charlottesville, The Boar’s Head Women’s Open took place. This is an annual tennis tournament featuring 32 professional tennis players, most of whom are ranked in the top 250 in the world. Several past winners of the tournament, including UVA favorite Danielle Collins, have gone on to big success in major events. The level of play here is outstanding.
Mrs. Carlson and I had the pleasure of being a host family for the tournament which meant that one of the players stayed with us during her time here in Charlottesville. We’ve done this several times in the past during The Tiburon Challenger and, for tennis junkies like me, it’s a blast. When Kyle Edmund reached the semifinals of the Australian Open, I’m like, «yeah, he thought my steak with chimichurri sauce was outstanding.»
Staying with us this year was Francesca DeLorenzo, a former All-American and National Champ at Ohio State (sorry, that’s THE Ohio State University). She is not only an amazingly talented young tennis star but a wonderful person and a pure pleasure to get to know. Her future as a tennis player is very bright. And, she lost in the first round.
Losing in tennis is very commonplace. Half the players lose in on day one of every tournament. By the end of day 2, 75% have been sent packing. Only one player wins each week. Winning on any given day is truly a 50-50 proposition.
At dinner with Francesca, her coach, and another former Buckeye All-American, I asked how one handles the fact that you’re most likely not to be winning each week. The response was this…
The most commonly heard phrase on the pro tour is, «it’s a process.»
Tennis players simply cannot evaluate themselves on the results of any given day. If you place all your emphasis on winning or losing, you’ll be out of the sport in a very short time. Half the players lose every single day.
Instead of letting the results of each match validate your level of success, players need to have a process in place to get to the next level. They have a roadmap to success and the timeline associated with that roadmap is measured in years not in days or weeks. Where do I hope to be as a player in 2025 and what must be done to get there? The journey is long and hard but keeping your eye on the target, and understanding the big picture, allows players to overcome weekly disappointment and keep striving forward.
In a way, being an investor in micro-cap stocks during a bear market is a similar mental experience to those of a professional tennis player. There are many factors that go into determining how a stock trades on any given day, or over the course of a week or month.
Atomera (ATOM) was down 2% on Friday. Is this company any different than it was on Thursday? INmune Bio (INMB) was down 18% last week. Did something fundamentally change there? In both cases the answer is a definitive no.
If you’re trading stocks, I get it; winning and losing each day is a very key metric of success. Your fortunes, and your ability to make money, are evaluated daily. For you, the results of each and every day are all that matters. I used to be a day-trader; hated it.
For investors, daily fluctuations are a fact of life but really meaningless to the long-term outcome of an investment. If Atomera’s technology is broadly adopted in the semi-conductor industry, the stock will return many multiples on investment. Focusing on how the company is doing in achieving long-term success is all that matters. Get that right, and you’ll be fine. Get it wrong and you’ll lose a lot more than Friday’s 2% downturn.
Investing for the long-term in micro-caps is truly a process. The process involves finding opportunities that have outstanding upside potential, understanding the risks involved with achieving that potential, and tracking the progress towards eventual success or failure.
TFF Pharma (TFFP) is a great example of a company that is making great progress. Their technology is a platform that, if adopted, has huge upside. While they remain pre-revenue and partnerships aren’t coming as quickly as investors would hope, the process they are going through continues to march forward towards success.
Validation from BARDA and the US Army doesn’t come easy. Working with major pharma like Pfizer and Astellas is a great signal. Having MTAs with over 50% of the largest drug companies is great validation. Oustanding data from all three of their internal drug development programs is proof positive of the platform’s success.
TFF stock was down last week. Honestly, it’s down over any time frame you want to choose shorter than 2 years. TFF is living the life of a young tennis professional; every week has ended with a loss lately.
But, does that mean TFF isn’t going to work out in the long-term? Not at all.
Not to be naive or avoid the obvious reality, it’s been a tough 15 months. The bear market in small cap stocks, in particular biotech where I have several large investments, has been painful. The process is not exactly fun during this time.
I have suggested caution in an overall investment strategy. I continue to believe that the overall market will head lower. I wouldn’t be betting the ranch on stocks right now. Keep some firepower in reserve and know that things are likely to get worse before they get better.
That said, now is not the time to be giving up on our investments. If you want to evaluate how a company is doing based on recent stock action, you’re using the wrong metric. Instead of looking at enVVeno (NVNO) trading at 90% of cash value and saying, «it’s down 50%, therefore something must be wrong,» I suggest you look at what happened to Checkmate Pharmaceuticals (CMPI) this past week as an indication of what can happen when the process works.
Checkpoint was down in excess of 50% over the last year. Investors were losing almost every week. Every week, that is, until Tuesday when Regeneron acquired the company at a roughly 400% premium to the prior day’s closing price.
How our companies doing in their process is a question I ask myself daily. This is by far the most important indicator of the future success or failure of my investments.
My new favorite tennis player lost last week. However, Francesca turned her focus immediately to the next week. Her journey is a process and the final result will be revealed years from now. Her ability to see the big picture and not let the daily grind wear her down will be a key factor in determining how the process ends.
The TW portfolio also lost last week, to the tune of 5% for the average stock in our group. A war in Ukraine, inflation in the US, higher interest rates, and fears of a recession are hitting stocks. All of this is beyond the control of the companies in our universe and yet none of it directly impacts their process. At this time, the risk/reward of the portfolio is greater than ever.
Meanwhile, the process for each company continues. It’s a long process and not easy. But, the rewards for those who successfully complete the process is a major victory.
Amryt (AMYT) was the best performing stock in TW’s universe last week on the back of positive news regarding Filsuvez, their EB drug. If you recall, the FDA had a negative view towards Filsuvez a little over a month ago. Now, however, the EU seems to be giving them an opportunity.
Amryt is a very cheap stock based on price to sales and is likely to see excellent growth over the next few years as MYCAPSSA takes market share in a billion dollar product line. Meanwhile, the balance sheet is strong. As far as biotech goes, this is a good place to hide during the overall market swoon.
For those who own INmune Bio (INMB), I’ve mentioned the research of Carl Kestens in the past. He is a dedicated investor who has made it his passion to help educate investors on the opportunity in front of us with INmune.
This week he published a paper titled, «THE $10 BILLION UNICORN IN INMUNE BIO: IT’S THE (MICRO)GLIA, STUPID!» As with all his previous work, which is available on the same blog site, it’s outstanding.
I highly suggest you read this piece. In the meantime, however, I’ve taken the liberty of publishing the summary of it here.
- The detrimental action of glia, mostly microglia, in the inflamed brain is the last piece of the scientific puzzle;
- We know XPro targets glial activity by focusing on reducing neuroinflammation;
- By reducing neuroinflammation, XPro effectively appears to revert glial activity back to its normal, caring, state;
- That the right microglial targeting leads to the right downstream effects has meanwhile been proven by more than one company;
INmune has proven that XPro reduces neuroinflammation while simultaneously improving glial activity. As Carl says, and I wholeheartedly agree, our opportunity lies in the fact that investors are still ignoring that proof, and not fully appreciating the significance of INmune’s success with clinically validated biomarkers. When the market finally catches on here, it will be a wild ride.
Anixa (ANIX) saw more insider buying last week, this time coming from their CFO Mike Catelani, who was recently promoted to the role of president.
In recent weeks we have seen buying from insiders at TFFP, INMB and ANIX. All have drugs in clinical development and, across the board, those programs appear to be doing great. As they say, insiders sell for many reasons but they only buy for one…
With their positive niclosamide data this week, TFF Pharma (TFFP) is well positioned to make a lot of money from that drug. The inhaled version showed 15 times the uptake into the blood stream versus the oral version. Also, by directly targeting the lungs, it can possibly affect Covid-19 before it even enters the blood.
Thin-film-freezing of Niclosamide is proving out the plaform’s capability to deliver drugs more efficaciously at lower dosages resulting in a greatly increased safety profile. Besides looking very beneficial in covid, the data suggests it can work in RSV and VSV, two other big indications. The drug has blockbuster potential
UNION Therapeutics is now on the clock with 45 days (from last Monday) to exercise their option. I expect them to do so, but one never knows. If they do pull the trigger, TFF gets immediate cash and major validation; if they pass, it’s likely that based on this data TFF can actually get a far better price at some point in the future.
This week’s cover photo is from Moneyball. Another strategy that is a process…the long-term success of the Oakland A’s under Billy Bean was tremendous and changed the game of baseball.
* Disclaimer: DFC Advisory Services LLC, dba: Tailwinds Research, owns shares in companies mentioned in this report. For a full list of disclaimers and disclosures, please visit http://tailwindsresearch.com/disclaimer/.
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