By the time you read this newsletter, there’s a good chance that the Ukraine will be begging for a ceasefire and, basically, surrendering to Russia. The lines are being redrawn on the next cold war, reinforcing the two facts that Vladimir Putin is a dangerous man and that the best days of globalization are behind us.
For your portfolio, this is going to be a very interesting time. The last few days saw a classic bear market rally. Traders positioned for a selloff so, of course, we get the opposite. But, here’s the thing about bear market rallies…they occur in bear markets. My opinion remains convicted that the broader market is going lower and this is a time for caution. We are not out of the woods yet.
However, from the perspective of TW’s universe of micro-cap stocks, the Ukraine will turn out to be a blip on the radar screen. Our companies, having been mired in a year-long bear market of their own, are not going to be dramatically impacted by anything that happens in Eastern Europe.
Sure, the market’s day to day gyrations have an effect on trading but, longer-term, only one thing is going to major impact on a beaten up micro-cap stock; success or failure of the business model. I mean, how cheap can a stock like enVVeno (NVNO) get? It’s trading under the net cash per share. It can go lower, but success isn’t being discounted here.
enVVeno is a great example of the short-term mentality that permeates investing in 2022. The company has a product that likely is approved in under 24 months, at which time they will partner the device off to a larger medtech company. If successful, investors will make many multiples on their money.
Success is never guaranteed but enVVeno has had nothing but pristine results from their work done to date. This week they announced additional data from their first-in-human trial. The patients are still seeing success at 30 months, a truly outstanding result. enVVeno did climb 10% on the news but still commands a negative enterprise value. Long-term investors are going to be well rewarded for their patience.
It’s that long-term perspective that needs to be taken at this time. The market is treacherous and, if you are expecting immediate returns, you’re likely going to be disappointed. Instead, as I’ve said for a while now, focus on companies with strong balance sheets that are achieving operational success. That’s the key to surviving through the bear market and being well positioned for the good times that will follow.
The Ukraine is a s*** show right now and, sadly, that county and its citizens are going to suffer for a while. However, cooler heads will prevail. The lines of the new cold war are being set and, once established, investors will return to looking at exciting companies that are changing the world. TW’s portfolio is well positioned and our time will come.
Also in the news this week was TFF Pharma (TFFP) who announced that their inhalable version of niclosamide is highly effective against both the omicron and delta variants of covid-19.
While these results are pre-clinical, they are important. TFF is going to be announcing the results of their phase 1 safety trial of niclosamide within the next month. If that is successful, which is highly likely as the drug is well known already, the covid results will carry increased importance as UNION Therapeutics will have the clock start their 45 day purchase option upon the release of the results. Bottom line, the likelihood of UNION exercising their option has gone up on this news.
This coming week, INmune Bio (INMB) will be hosting an investor update call on Thursday after the market close. I’m hopeful that we’ll finally see some data from the current compassionate use patients.
Also this week, Amryt (AMYT) should be hearing from the FDA regarding Oleogel S-10. I’m concerned about the likelihood for approval, but believe that the stock is very attractive at this current price and would be looking for an entry post the FDA decision, whether positive or negative.
For those interested in crypto, it’s been interesting to watch the trading of bitcoin. This has gone from being a replacement to gold (a hedge against dollar printing, inflation, etc.) to becoming a risk asset that trades just like Cathy Wood’s ARKK. Check out this 3-month chart of the two.
I remain very unconvinced in bitcoin and have a Trading Places (ie $1) bet that it goes to $5,000 before it hits $100,000.
* 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/.
TW Research Group
