Talking Stocks 2.0

[Romeojk]

My portfolio is still not up to where it was at the end of 2021. So I would not say the market is too crazy overall. But don’t get me wrong, this has been a great year.

Timing the market will not work well for me. I’d be watching every day and wondering if I should jump back in. I’ll have to ride the rollercoaster. Haha.

A deeper look into the companies I hold is in order. Shift from growth and move dividend paying stocks are in order.

I think I’ll get rid of a few dogs, lick my wounds and have some ready cash.

I’ll set up stop losses for what I keep.

What are you guys doing to protect yourselves? Any big changes or staying the course?

Thanks B. for the heads up

[huncho]

outside of 7 stocks the S&P is actually flat YTD. the top 7 are up 50%



it's a weird rally and most growth stocks are still down pretty bad. not sure if most are even up the past year unless they bought these 7 or index etfs, and by that i mean those buying with a long time frame in mind

[SDGT3]

Originally Posted by huncho

outside of 7 stocks the S&P is actually flat YTD. the top 7 are up 50%



it's a weird rally and most growth stocks are still down pretty bad. not sure if most are even up the past year unless they bought these 7 or index etfs, and by that i mean those buying with a long time frame in mind

As crazy as this sounds, the chart above is accurate but it’s 11 days old and a lot has changed since then. The market isn’t as concentrated and it broadening out with some leaders like Apple closing at all time highs each day.

There’s a lot of money on the sideline and it appears FOMO is real, but I the entry points for new money at these nose bleed is unnerving.

[huncho]

Originally Posted by SDGT3

As crazy as this sounds, the chart above is accurate but it’s 11 days old and a lot has changed since then. The market isn’t as concentrated and it broadening out with some leaders like Apple closing at all time highs each day.

There’s a lot of money on the sideline and it appears FOMO is real, but I the entry points for new money at these nose bleed is unnerving.

yeah s&p is up 3.5% since then (1.3% today) but i imagine it's not too much different since then. nvidia is up about 10% since then and tesla's up about 20% lol

[HHIslander]

Today is a triple witch. Been long biased since October, going 100% to cash at the open. There will be a better entry point.

[904VT]

Originally Posted by 7sins

Interesting chart here, extreme greed is nearing all time highs with index levels overvalued at 52 week highs, QQQ RSI 90+. Companies are no longer able to pass along higher prices, unit volumes are falling and earnings expectations will miss into the future - SPY earnings at $240 next year, that is absurd.

I've liquidated all my positions ex my small cap bios, loading into a 5 year treasury and then the proceeds into QQQ puts Jan 2025 strike 380 where IV is only 15%. That is a 525 day runway with a b/e of only a 10% move down on a very overvalued market, laddering those with OTM 2025 QQQ puts. Will put the remaining 50% DCA the next month before the following fed meeting in July. Fed pausing at 5% will eventually break the economy, Citadel the largest market maker is doing the same except going short on HY credit: https://www.bloomberg.com/news/artic...g-us-recession

Just my .02, not financial advice, you should probably do the opposite of whatever my strategy is at this point. Typically not a bear, but been bearish for awhile now and now this is the biggest bearish position i've had since 2013. That or next thread I start is, sold all my watches to pay margin calls

Originally Posted by huncho

outside of 7 stocks the S&P is actually flat YTD. the top 7 are up 50%



it's a weird rally and most growth stocks are still down pretty bad. not sure if most are even up the past year unless they bought these 7 or index etfs, and by that i mean those buying with a long time frame in mind

It’s all about individual names right now as well as companies in the structural growth phase or that have an economic moat. Anyone buying long equity beta imo is just asking for trouble. Some money to be made with short beta though.

[SDGT3]

Sure seems like there's a downward trend in the markets, albeit at glacial pace. Not trying to time the markets as it's hard to be right twice, but I do like to put new money to work when markets are down and we're just not there yet. In the meantime, parking that new money earmarked for entry and earning a risk free 5.4% isn't bad.

[huncho]

Originally Posted by 904VT

It’s all about individual names right now as well as companies in the structural growth phase or that have an economic moat. Anyone buying long equity beta imo is just asking for trouble. Some money to be made with short beta though.

Originally Posted by SDGT3

Sure seems like there's a downward trend in the markets, albeit at glacial pace. Not trying to time the markets as it's hard to be right twice, but I do like to put new money to work when markets are down and we're just not there yet. In the meantime, parking that new money earmarked for entry and earning a risk free 5.4% isn't bad.

yeah market feels very toppy and still not for the long term despite what the "bull market" narrative the media is trying to push

on the other hand, crypto is showing signs of life finally with the blackrock news. also i love how the SEC approved a leveraged btc futures etf before a spot etf, gotta keep protecting the people lol. but seriously, looks like it finally will be because blackrock doesn't mess around and that would be huge news. i think Gensler lost all his credibility and we can finally move forward

[7sins]

Originally Posted by 904VT

It’s all about individual names right now as well as companies in the structural growth phase or that have an economic moat. Anyone buying long equity beta imo is just asking for trouble. Some money to be made with short beta though.

Bingo...look at the 20 and 50 day exponential moving average on the QQQ vs the 200 day MA. Should be some regression back to the mean, or at least my puts certainly hope so.

[INC]

Originally Posted by 7sins

Bingo...

Before I forget, you were also right about BTC and I was wrong with my terrible chart

[7sins]

Originally Posted by INC

Before I forget, you were also right about BTC and I was wrong with my terrible chart

Don't believe that was me, I've never posted on BTC or any crypto for that matter

[Zack21]

AUPH currently halted

[huncho]

so assuming the worst is behind us, would you guys consider what we got a "soft landing"?

apple at new highs every day and touching 3T mcap while growth stocks continue to get destroyed. job market is somehow still statistically good despite huge tech layoffs, inflation is coming down and q1 gdp spiked up. all while multiple large banks collapsed. what a weird environment

i'm still of belief the recession started q1 last year and the bear market started mid 2021, and i don't think this is a bull market

[vipereaper30]

Originally Posted by Zack21

AUPH currently halted

Time to extract some value. Maybe.

[thedak]

Originally Posted by huncho

i'm still of belief the recession started q1 last year.

We didn't un-invert yet and got even deeper today.

The best is yet to come.

Permabear here.

Hope the market gets smashed.

[FLGatorM5]

Originally Posted by thedak

We didn't un-invert yet and got even deeper today.

The best is yet to come.

Permabear here.

Hope the market gets smashed.

Don’t know who said it but:
“The market can stay irrational longer than you can stay solvent.”

But yeah, I agree.

[FLGatorM5]

Any recommendations on a charting service? Just need the ability to easily draw, zoom, save, all the indicators, etc. and do it quickly. Charts only, as I can’t leave my brokerage.
Willing to pay, but not a lot since it’s a hobby that comes and goes.

At the point that I need something outside of my current platform with my broker. Too slow and difficult to draw/edit my own lines.

[huncho]

Originally Posted by FLGatorM5

Any recommendations on a charting service? Just need the ability to easily draw, zoom, save, all the indicators, etc. and do it quickly. Charts only, as I can’t leave my brokerage.
Willing to pay, but not a lot since it’s a hobby that comes and goes.

At the point that I need something outside of my current platform with my broker. Too slow and difficult to draw/edit my own lines.

tradingview. super fast, clean, completely customizable and has everything you can think of. their mobile app is really good too and lets you chart very easily. you can pretty much do all you need with the free version but i'm paying for their base plan (12.95/month) just to have access to live futures + a few extra bonuses like more active alerts, since i work a 9-5 and prefer to set tons of alerts, and to show them support

[SDGT3]

Originally Posted by huncho

so assuming the worst is behind us, would you guys consider what we got a "soft landing"?

apple at new highs every day and touching 3T mcap while growth stocks continue to get destroyed. job market is somehow still statistically good despite huge tech layoffs, inflation is coming down and q1 gdp spiked up. all while multiple large banks collapsed. what a weird environment

i'm still of belief the recession started q1 last year and the bear market started mid 2021, and i don't think this is a bull market

It's such a crazy time in markets right now it's hard to know if we've even landed yet. With regard to Apple, even with high multiples, it's a great company with great management and balance sheet. In times of uncertainty, it's not a bad place to be. Some analysts sold APPL and now they're saying it could have room to go up another 30%.

We did have a technical recession last year, but it was spun by the current admin as not a recession, despite every business school having that same definition

With regard to the inverted yield curves, the person who brought us this indicator for recession after inversion is now saying that today's economy may be different and his indicator may not be pertinent in this environment... so who knows.

Here's my summary of what some of the heads of the central banks said this week at the ECB forum in Portugal:

I was listening to a fascinating, extended panel interview with the heads of the major central bankers yesterday from Portugal where they have all gathered for the ECB forum. It's a wonderful and rather rare treat (if you like those sorts of things) to get to listen to these people expand past sound bites filtered through media outlets for public consumption. Included in the panel interview was J. Powell of the Fed, Christine LaGarde, the current ECB president, Gov. Bailey of the Bank of England and Gov. Ueda of the Bank of Japan.

Here are some of the takeaways from what was over an hour interview of all 4 individuals and what stood out to me:

Jerome Powell absolutely believes there will likely be more rate hikes for the US coming soon. He did not know if it would be 1, 2 or more, and did not rule out two consecutive rate hikes in July and September (dates of the Fed's next meetings). When asked if he was certain of a higher rates in the future, then why did the Fed pause in June and a unanimous pause at that, he beat around the bushes and basically said they wanted to wait and see what the previous hikes have done and see if more were necessary. IMO, given we're still in June and they paused in June, it was a pretty weak argument for pausing and now saying there will likely be more hikes next month as it's not enough time to digest prior hikes in a couple week's time. Bond markets did not respond immediately, but are now going higher with the 2 year treasury at nearly 5% yield. For comparison, the 2 years was at 3.87% just over a month ago.

President of the ECB, Christine Lagarde said that although inflation has dropped in Europe from over 10% to 6.1% (the latest reading), she says the ECB will push forward with more rate hikes. This despite the fact the EU had negative growth in the first quarter and is flat for the 2nd quarter. They expect marginally higher GDP for the 2nd half of 2023, but as a whole, they expect to grow at only .9% for the entire year. It's clear the EU is in a state of Stagflation at this point. CL did point out that the EU was very fortunate to have a mild winter on the heels of the war between Ukraine and Russia as it related to energy. She added that their reserves of energy storage are currently at appx. 65% and expect that number to go up to 95% by the end of summer.

Gov. Bailey of the Bank of England stated that the UK's biggest issue at the moment is very high food inflation which continues to be sticky. He's spoken with supplier and companies up and down the supply line and they cite the already known about Covid issues followed by the war in Ukraine which causes shortages which then caused what he had not considered; hoarding of food and supplies which exasperated the shortage of food and extended the inflationary pressures. In talking with people down the supply chain, they have told him that they believe this should be more normalized in a 6 to 12 month period.

Another topic Gov. Bailey stated was that the BOE was purposely removing liquidity from their balance sheet and not letting it just roll off organically as instruments mature. This is in direct contrast to J. Powell who said they are not removing liquidity from the Fed's balance sheet aside from natural roll off of maturities. He justified it by saying that the Fed is on target to remove about $1 trillion dollars a year from the balance sheet. Lest we forget that the Fed was late to understand that inflation was not at all transitory and was still buying MBS in early 2022. Nor did offer to say the the Fed's balance sheet had swollen to several trillion dollars in a very short period of time and it would take years to get it back down to where it was before 2020.

Gov. Ueda of the Bank of Japan said that this inflationary period has been very good to his country and they have welcomed it as the "long and variable lag" of being having accommodative monetary policy in Japan has not worked for is over 30 years now. Their workers have not had real wage growth in 30 years, but now are experiencing a 2% wage hike on average. Japan's inflation rate is 3% and they would like to lower it, but they are in now hurry as they continue to be accommodative and the Yen weakens against other major currencies.

On the topic of workers, all 4 said that tight labor market conditions continues to be a challenge and that wage inflation has been an issue but seems to be cooling down. Powell continued to reinforce that the US used to have 2.2 jobs for every person in the US looking for a job, but now it's down to 1.7 jobs per person. Japan continues to struggle for workers as their demographics have the oldest populous in the world.

When asked if they believe if they can get inflation down to the 2% target, each said they believe they can achieve that goal by at least 2024, with the exception of J. Powell. He shocked the panel by saying that he does not believe the US can achieve a 2% inflation rate any sooner than at least 2025.

An interesting question was posed to the panel and one that I've touched on in previous posts, but does not appear to get the attention it deserves in the media... That question is the relationship between monetary and fiscal policies and what would they do about fiscal policy if they had the power to do so. Powell was careful not to offend the Biden Administration and gave the most diplomatic answer saying that the Fed only has 2 mandates and that is price stability and full employment and does not have control over fiscal policy, which we all know, but he would not deviate from that answer. The most outspoken on this topic was Christine LaGarde as she was rather direct and pleaded for governments to pull back on fiscal stimulus and related policy as it is hurting the ability to combat inflation with the unprecedented spending.
__________________

[INC]

Originally Posted by huncho

so assuming the worst is behind us[...]

I almost forgot to tell you, you were right about BTC and I was wrong

[huncho]

Originally Posted by SDGT3

It's such a crazy time in markets right now it's hard to know if we've even landed yet. With regard to Apple, even with high multiples, it's a great company with great management and balance sheet. In times of uncertainty, it's not a bad place to be. Some analysts sold APPL and now they're saying it could have room to go up another 30%.

We did have a technical recession last year, but it was spun by the current admin as not a recession, despite every business school having that same definition

With regard to the inverted yield curves, the person who brought us this indicator for recession after inversion is now saying that today's economy may be different and his indicator may not be pertinent in this environment... so who knows.

Here's my summary of what some of the heads of the central banks said this week at the ECB forum in Portugal:

I was listening to a fascinating, extended panel interview with the heads of the major central bankers yesterday from Portugal where they have all gathered for the ECB forum. It's a wonderful and rather rare treat (if you like those sorts of things) to get to listen to these people expand past sound bites filtered through media outlets for public consumption. Included in the panel interview was J. Powell of the Fed, Christine LaGarde, the current ECB president, Gov. Bailey of the Bank of England and Gov. Ueda of the Bank of Japan.

Here are some of the takeaways from what was over an hour interview of all 4 individuals and what stood out to me:

Jerome Powell absolutely believes there will likely be more rate hikes for the US coming soon. He did not know if it would be 1, 2 or more, and did not rule out two consecutive rate hikes in July and September (dates of the Fed's next meetings). When asked if he was certain of a higher rates in the future, then why did the Fed pause in June and a unanimous pause at that, he beat around the bushes and basically said they wanted to wait and see what the previous hikes have done and see if more were necessary. IMO, given we're still in June and they paused in June, it was a pretty weak argument for pausing and now saying there will likely be more hikes next month as it's not enough time to digest prior hikes in a couple week's time. Bond markets did not respond immediately, but are now going higher with the 2 year treasury at nearly 5% yield. For comparison, the 2 years was at 3.87% just over a month ago.

President of the ECB, Christine Lagarde said that although inflation has dropped in Europe from over 10% to 6.1% (the latest reading), she says the ECB will push forward with more rate hikes. This despite the fact the EU had negative growth in the first quarter and is flat for the 2nd quarter. They expect marginally higher GDP for the 2nd half of 2023, but as a whole, they expect to grow at only .9% for the entire year. It's clear the EU is in a state of Stagflation at this point. CL did point out that the EU was very fortunate to have a mild winter on the heels of the war between Ukraine and Russia as it related to energy. She added that their reserves of energy storage are currently at appx. 65% and expect that number to go up to 95% by the end of summer.

Gov. Bailey of the Bank of England stated that the UK's biggest issue at the moment is very high food inflation which continues to be sticky. He's spoken with supplier and companies up and down the supply line and they cite the already known about Covid issues followed by the war in Ukraine which causes shortages which then caused what he had not considered; hoarding of food and supplies which exasperated the shortage of food and extended the inflationary pressures. In talking with people down the supply chain, they have told him that they believe this should be more normalized in a 6 to 12 month period.

Another topic Gov. Bailey stated was that the BOE was purposely removing liquidity from their balance sheet and not letting it just roll off organically as instruments mature. This is in direct contrast to J. Powell who said they are not removing liquidity from the Fed's balance sheet aside from natural roll off of maturities. He justified it by saying that the Fed is on target to remove about $1 trillion dollars a year from the balance sheet. Lest we forget that the Fed was late to understand that inflation was not at all transitory and was still buying MBS in early 2022. Nor did offer to say the the Fed's balance sheet had swollen to several trillion dollars in a very short period of time and it would take years to get it back down to where it was before 2020.

Gov. Ueda of the Bank of Japan said that this inflationary period has been very good to his country and they have welcomed it as the "long and variable lag" of being having accommodative monetary policy in Japan has not worked for is over 30 years now. Their workers have not had real wage growth in 30 years, but now are experiencing a 2% wage hike on average. Japan's inflation rate is 3% and they would like to lower it, but they are in now hurry as they continue to be accommodative and the Yen weakens against other major currencies.

On the topic of workers, all 4 said that tight labor market conditions continues to be a challenge and that wage inflation has been an issue but seems to be cooling down. Powell continued to reinforce that the US used to have 2.2 jobs for every person in the US looking for a job, but now it's down to 1.7 jobs per person. Japan continues to struggle for workers as their demographics have the oldest populous in the world.

When asked if they believe if they can get inflation down to the 2% target, each said they believe they can achieve that goal by at least 2024, with the exception of J. Powell. He shocked the panel by saying that he does not believe the US can achieve a 2% inflation rate any sooner than at least 2025.

An interesting question was posed to the panel and one that I've touched on in previous posts, but does not appear to get the attention it deserves in the media... That question is the relationship between monetary and fiscal policies and what would they do about fiscal policy if they had the power to do so. Powell was careful not to offend the Biden Administration and gave the most diplomatic answer saying that the Fed only has 2 mandates and that is price stability and full employment and does not have control over fiscal policy, which we all know, but he would not deviate from that answer. The most outspoken on this topic was Christine LaGarde as she was rather direct and pleaded for governments to pull back on fiscal stimulus and related policy as it is hurting the ability to combat inflation with the unprecedented spending.
__________________

nice writeup and summary. i haven't really followed what's going on in europe, did they start too late and the effect is now showing? it seems like even though the fed was late they were early compared to the EU

i'm with you on apple, i don't think we'll ever see a company that well run, profitable and with that kind of balance sheet again

regarding hikes, with the pce coming in way under expectations today i wonder what that does to Powell's plans. i do agree with him on the timeline for dropping to 2%, can't see that happening soon. also everyone knows inflation is really much higher anyway because everything is ridiculously expensive nowadays. i get that with their metrics it's actually going down but i think the damage in the real world is done and hard to reverse. things like cars have had their msrp driven so much higher and will never be lowered

Originally Posted by INC

I almost forgot to tell you, you were right about BTC and I was wrong

it's ok, i was wrong about almost everything else the last 2 years lol. i'm just glad it's finally becoming more and more legitimized

[austinp]

Great first half of the year! A little unexpected but great. The advice to stay in the market and not try to time it has been good. Good luck to everyone in the second half.


Sent from my iPhone using Tapatalk

[uscmatt99]

Originally Posted by austinp

Great first half of the year! A little unexpected but great. The advice to stay in the market and not try to time it has been good. Good luck to everyone in the second half.


Sent from my iPhone using Tapatalk

Agreed! I sold my share of a business at the end of last year and plopped some of the proceeds into a pretty broad group of equities. Overall got lucky with the timing, glad I didn't sit anything out.

I tried to teach my two kids the value of diversification. Each got $500 to put in an S&P ETF and $500 for a stock pick. One chose Home Depot, the other chose Tesla. Tesla kid didn't learn the intended lesson yet, my bad Will see how the second half of the year goes.

[austinp]

Originally Posted by uscmatt99

Agreed! I sold my share of a business at the end of last year and plopped some of the proceeds into a pretty broad group of equities. Overall got lucky with the timing, glad I didn't sit anything out.

I tried to teach my two kids the value of diversification. Each got $500 to put in an S&P ETF and $500 for a stock pick. One chose Home Depot, the other chose Tesla. Tesla kid didn't learn the intended lesson yet, my bad Will see how the second half of the year goes.

Good on you for introducing investing to your kids!


Sent from my iPhone using Tapatalk

[FLGatorM5]

Originally Posted by huncho

tradingview. super fast, clean, completely customizable and has everything you can think of. their mobile app is really good too and lets you chart very easily. you can pretty much do all you need with the free version but i'm paying for their base plan (12.95/month) just to have access to live futures + a few extra bonuses like more active alerts, since i work a 9-5 and prefer to set tons of alerts, and to show them support

Thank you!

[scarlet knight]

Originally Posted by FLGatorM5

Don’t know who said it but:
“The market can stay irrational longer than you can stay solvent.”

But yeah, I agree.

He also said “I’m not a member of any organized political party. I’m a Democrat.”

[7sins]

Originally Posted by Zack21

AUPH currently halted

Originally Posted by vipereaper30

Time to extract some value. Maybe.

Almost gave me a heart attack Thursday afternoon, AH volume was more than the total volume for the day. Disappointing Friday to open up 17% and close only up 6%.

For those of you still on the AUPH train with me, here is my thesis/speculation on what is happening with the Strategic Review and my personal plan of action, this is not financial advice, do your own research, just my .02 for anyone who finds it helpful.

What Happened?: Thursday AUPH announced a strategic review essentially saying they are for sale. Alongside JPM as the financial advisor, notably the best IB for biotech M&A and two top law firms - US and Canada (AUPH is a Canadian firm). You don't hire JPM and two top tier law firms without serious intention. https://www.nasdaq.com/articles/auri...boot-strategic.

Why would they do this?: I have two thoughts here.
1. The have have a firm low offer, announcing a Strategic Review enables any BP serious about Lupkynis to place an offer, ultimately creating a bidding war to push the price higher.
2. They currently have no offer and are telling BP (Big Pharma) they are ready to be bought. Remember Big Pharma has a record amount of cash and patent cliffs, they desperately need revenue generating drugs.
Either of the two, does not ultimately put AUPH in a position of power, if this leads to BO I anticipate the offer to be lower than if they would have not issued a SR and waiting for BP to make an offer over time.

What was the genesis?: This was really a confluence of multiple impairments and mismanagement from the BOD over the last several years. To the point where during the last Annual Shareholders Meeting, two of the BOD were voted off the board due to the sheer greed over the years and unwarranted issuance of board compensation. AUPH is majority owned by retail and they had enough, if it weren't for one of the institutional investors (ILJIN) the CEO would have been voted off as well. No one knows what the CEO told Iljin to get their vote to save his seat but I suspect it had to be something meaningful or akin to announcing a strategic review.

EGM?: There has been talk of retail shareholders hosting an EGM (Emergency General Meeting) to fire the CEO and put the company up for sale, if that were to happen, the CEO would lose all of his RSUs which he would do anything to avoid given their significant value. You can see the pressure retail is putting on him and thus the announcement of the strategic review.

Sucampo: This was the company Peter was CEO prior to AUPH, he also announced a Strategic Review and two weeks later Mallinckrodt announced they were buying Sucampo for $1.2B.

AUPH Value: It gets complicated here as BO in biotech is challenging to value for numerous reasons. Here is what we have going for us:
2 Patents:
1. Voclosporin - This is a method of use patent, good until 2026, giving BP the opportunity to run trials for Voclosporin for potential new indications which so far covers transplants, proteinuric kidney diseases and dry eyes. There is intrinsic value here.
2. Lupkynis - Dosing protocol, good until 2037, that is a 14 year runway for BP to have exclusive rights for selling Lupkynis in America (Otsuka owns overseas rights).

Lupkynis: If you are unaware of the drug, it is the only FDA approved oral treatment for Lupus Nephritis. It is substantially superior than the only other approved drug for LN which is Benlysta (should be used more for SLE) with much better p values. Biospy results were incredible:
https://ir.auriniapharma.com/press-r...sies-sub-study. 1 year annual cost is $130,000 and margin is 95%. Currently 1.5M individuals have Lupus (SLE) and half develop into LN. There are roughly 16,000 new cases a year. You can see how IMMENSELY profitable this would be for a BP.

What went wrong over the last 2 years? If you recall, this has been my highest conviction trade over the last 2 years. AUPH sued Sun Pharmaceutical for a patent infringement, shortly there after Sun countersued AUPH right as buyout rumors from Bloomberg were started. This was completely unforeseen and cratered the stock from $30 down to $4, this is where I posted last Dec I went all in knowing the lawsuit was BS retaliation. Jan the lawsuit was dropped and the patents are stronger than ever. The other issue has been sales, currently there are only 1800 patients on Lupkynis which in my mind is an utter failure given how incredible the drug works. I think this is part due to Covid and the inability for reps to see doctors as well as the adaption rate typically takes a bit longer for doctors to start recommending. BP would exponentially speed this up given their access to doctors, marketing and ability to have more insurance companies cover this.

Buyout Value: Given the aforementioned and running my own DCF analysis, I believe a low ball bid would be $2.25B and BP gets the deal of a lifetime. That does not include the $350M in cash they have. Realistically, if this wasn't a firesale closer to $4B. Here are my probability ranges, current share price is $9.80:
$12-$15: 10%
$15-$20: 70% (my guess is ~$18.50)
$20+ hail marry: 20%
The options market has been dead wrong on AUPH for a long time, however, one massive recent outlier is someone has been buying an absurd amount of july $15C, OI 14k and they haven't been rolled, this was before the announcement of strategic review.

My Action Plan: I currently hold 200,000 shares, as I have written many times here this stock is a gold mine for covered calls given the high IV. I have been writing bi-monthly covered calls 30 and 50% OTM divided evenly on half my position. This has brought my cost basis close to zero. Now given the news, I am closing out my July $12c and $15c then rolling to 2025 $20C that is paying $1.70 due to the high IV and I will double my money if we get to $20 while generating $170k in income (DCAing all of that income into 2025 QQQ puts I discussed a few weeks ago that have been getting hammered as Nasdaq rally has continued). I am buying 2025 as if there is a deal it will be done by the next few months and I am getting much more premium to go further out. If there is no deal, the value of those 2025 will crater and I will close them out early to keep most of the income. Additionally the $4 purchase I made in Dec, I need to keep 12 months to be taxed as long term capital gains. I am leaving half of my shares naked with no covered calls should we somehow get more than $20 I will participate.

Risk/Reward: At $9.80 and covered calls, I don't see much downside from here, fair value should be close to $11 and remember last quarter they beat and raised guidance while scripts keeping ramping this quarter. Other analysts say high teens for BO and RBC saying high 20s possible for BO. Either way, I am done once my recent shares purchase enters long term cap gains in December and am moving on. If no BO occurs in the next few months, expect volatility in the stock price which will also depend on earnings results.

Hope this provides some insight for those still hanging on, what was meant as a few sentences update turned into a novel. Hopefully the end is near and we can toast to a Vegas trip! Remember, value is often delayed, never denied. B

[lukajur]

Originally Posted by 7sins

Almost gave me a heart attack Thursday afternoon, AH volume was more than the total volume for the day. Disappointing Friday to open up 17% and close only up 6%.

For those of you still on the AUPH train with me, here is my thesis/speculation on what is happening with the Strategic Review and my personal plan of action, this is not financial advice, do your own research, just my .02 for anyone who finds it helpful.

What Happened?: Thursday AUPH announced a strategic review essentially saying they are for sale. Alongside JPM as the financial advisor, notably the best IB for biotech M&A and two top law firms - US and Canada (AUPH is a Canadian firm). You don't hire JPM and two top tier law firms without serious intention. https://www.nasdaq.com/articles/auri...boot-strategic.

Why would they do this?: I have two thoughts here.
1. The have have a firm low offer, announcing a Strategic Review enables any BP serious about Lupkynis to place an offer, ultimately creating a bidding war to push the price higher.
2. They currently have no offer and are telling BP (Big Pharma) they are ready to be bought. Remember Big Pharma has a record amount of cash and patent cliffs, they desperately need revenue generating drugs.
Either of the two, does not ultimately put AUPH in a position of power, if this leads to BO I anticipate the offer to be lower than if they would have not issued a SR and waiting for BP to make an offer over time.

What was the genesis?: This was really a confluence of multiple impairments and mismanagement from the BOD over the last several years. To the point where during the last Annual Shareholders Meeting, two of the BOD were voted off the board due to the sheer greed over the years and unwarranted issuance of board compensation. AUPH is majority owned by retail and they had enough, if it weren't for one of the institutional investors (ILJIN) the CEO would have been voted off as well. No one knows what the CEO told Iljin to get their vote to save his seat but I suspect it had to be something meaningful or akin to announcing a strategic review.

EGM?: There has been talk of retail shareholders hosting an EGM (Emergency General Meeting) to fire the CEO and put the company up for sale, if that were to happen, the CEO would lose all of his RSUs which he would do anything to avoid given their significant value. You can see the pressure retail is putting on him and thus the announcement of the strategic review.

Sucampo: This was the company Peter was CEO prior to AUPH, he also announced a Strategic Review and two weeks later Mallinckrodt announced they were buying Sucampo for $1.2B.

AUPH Value: It gets complicated here as BO in biotech is challenging to value for numerous reasons. Here is what we have going for us:
2 Patents:
1. Voclosporin - This is a method of use patent, good until 2026, giving BP the opportunity to run trials for Voclosporin for potential new indications which so far covers transplants, proteinuric kidney diseases and dry eyes. There is intrinsic value here.
2. Lupkynis - Dosing protocol, good until 2037, that is a 14 year runway for BP to have exclusive rights for selling Lupkynis in America (Otsuka owns overseas rights).

Lupkynis: If you are unaware of the drug, it is the only FDA approved oral treatment for Lupus Nephritis. It is substantially superior than the only other approved drug for LN which is Benlysta (should be used more for SLE) with much better p values. Biospy results were incredible:
https://ir.auriniapharma.com/press-r...sies-sub-study. 1 year annual cost is $130,000 and margin is 95%. Currently 1.5M individuals have Lupus (SLE) and half develop into LN. There are roughly 16,000 new cases a year. You can see how IMMENSELY profitable this would be for a BP.

What went wrong over the last 2 years? If you recall, this has been my highest conviction trade over the last 2 years. AUPH sued Sun Pharmaceutical for a patent infringement, shortly there after Sun countersued AUPH right as buyout rumors from Bloomberg were started. This was completely unforeseen and cratered the stock from $30 down to $4, this is where I posted last Dec I went all in knowing the lawsuit was BS retaliation. Jan the lawsuit was dropped and the patents are stronger than ever. The other issue has been sales, currently there are only 1800 patients on Lupkynis which in my mind is an utter failure given how incredible the drug works. I think this is part due to Covid and the inability for reps to see doctors as well as the adaption rate typically takes a bit longer for doctors to start recommending. BP would exponentially speed this up given their access to doctors, marketing and ability to have more insurance companies cover this.

Buyout Value: Given the aforementioned and running my own DCF analysis, I believe a low ball bid would be $2.25B and BP gets the deal of a lifetime. That does not include the $350M in cash they have. Realistically, if this wasn't a firesale closer to $4B. Here are my probability ranges, current share price is $9.80:
$12-$15: 10%
$15-$20: 70% (my guess is ~$18.50)
$20+ hail marry: 20%
The options market has been dead wrong on AUPH for a long time, however, one massive recent outlier is someone has been buying an absurd amount of july $15C, OI 14k and they haven't been rolled, this was before the announcement of strategic review.

My Action Plan: I currently hold 200,000 shares, as I have written many times here this stock is a gold mine for covered calls given the high IV. I have been writing bi-monthly covered calls 30 and 50% OTM divided evenly on half my position. This has brought my cost basis close to zero. Now given the news, I am closing out my July $12c and $15c then rolling to 2025 $20C that is paying $1.70 due to the high IV and I will double my money if we get to $20 while generating $170k in income (DCAing all of that income into 2025 QQQ puts I discussed a few weeks ago that have been getting hammered as Nasdaq rally has continued). I am buying 2025 as if there is a deal it will be done by the next few months and I am getting much more premium to go further out. If there is no deal, the value of those 2025 will crater and I will close them out early to keep most of the income. Additionally the $4 purchase I made in Dec, I need to keep 12 months to be taxed as long term capital gains. I am leaving half of my shares naked with no covered calls should we somehow get more than $20 I will participate.

Risk/Reward: At $9.80 and covered calls, I don't see much downside from here, fair value should be close to $11 and remember last quarter they beat and raised guidance while scripts keeping ramping this quarter. Other analysts say high teens for BO and RBC saying high 20s possible for BO. Either way, I am done once my recent shares purchase enters long term cap gains in December and am moving on. If no BO occurs in the next few months, expect volatility in the stock price which will also depend on earnings results.

Hope this provides some insight for those still hanging on, what was meant as a few sentences update turned into a novel. Hopefully the end is near and we can toast to a Vegas trip! Remember, value is often delayed, never denied. B

Thanks for your thorough and detailed thoughts. I enjoy reading your analysis always!

[pk552502]

I bought some Verizon and Frontier communications today. Any thoughts on this whole lead cable issue? Was thinking about also buying some AT&T but haven't done so yet. Another stock on my potentially buy list is Ardagh Metal Packaging.

[Olive Drab]

What about Adragh is catching your eye other than the dividend (which looks like a trap)?