Top Stem Cell Stock Performer 2/9/09 - 2/10/09:
Cord Blood America Inc. (CBAI) - Up 23% so far this week (was the only stem cell stock we track in the green at almost 7% on 2/10/09)
***Be on the lookout later this week for a post spotlighting the publicly traded Cord Blood Stem Cell Companies***
Topic of the Day: "I really believe that stem cell stocks have a lot of potential, but I don't want to make the mistake of holding on to them too long. When will be a good time to exit my position?"
Not even the red hot Stem Cell stocks were immune from today's rough stock market. It's easy to get lulled into thinking that a stock in a hot sector will continue to rise day after day, but it's days like today that bring stock traders or investors back down to reality. Based on history, stocks in bull market sectors can run for months. However, as the profits mount, it is nearly impossible to not think more and more about protecting gains. The 64 million dollar question becomes, "When should I exit my position?"
From a fundamental and technical viewpoint, there appears to be an awful lot of similarities between the Solar sector boom of 2007 and this current Stem Cell push. Both began in the mist of unprecedented economic circumstances (oil's rise and the credit crisis respectively). Both focus on much hyped technology that was previously underfunded. Finally, both obtained renewed government interest to catapult themselves forward. We can learn a lot from the recent booms in Solar, Coal, and other commodities. However, Solar appears to be the perfect comparison because its run happened to end before the recession began. I believe Solar will be a reliable indicator of what will happen with Stem Cells. Let's investigate the technical aspect a little closer. Check out the chart below:
This happens to be a 2 year chart of Canadian Solar (CSIQ). I chose this solar stock because it isn't an industry leader and its market cap was "middle of the road" compare to the other names in the sector. Notice the explosive first move of this stock in September 2007. There was over a 300% gain during the course of 4 months. What was interesting is that if you look at most of the other solar names, there first explosive move lasted between 3 and 7 months. The smaller market caps tended to run closer to 3 months and the larger caps ran closer to 7.
So, what does this all mean? If form holds true, names like Geron Corp (GERN) and StemCells (STEM) will have a continuous climb for 5 to 6 months before a multi-month pull back occurs. Although we have been spotlighting 1/23/09 as the key turning point with most stem cell stocks, GERN and STEM actually began to move a couple of weeks after the Presidential election. As a result, I would begin to get out of these names by April 2009. Practically all of the penny stock names in the sector began their run on 1/23/09. I wouldn't stay in them any more than 2 or 3 months tops.
In summary, the move in Stem Cell stocks, so far, have paralleled the solar names. If history is any indication, you may want to exit the relatively larger cap names after a run of 5 to 6 months and the smaller cap names like CBAI.OB and MCET.OB in 2 to 3 months. To a certain extent, you are taking a calculated risk by holding these names long term in the first place, but you're really gambling if you decide to hold beyond the time frames suggested. Basically, the figurative "bubble" could burst for most stem names by April or May of 2009, but you can sure make money online until then.
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Unlike with solar stocks there are no competing technologies for stem cell research that would lessen the investment in stem cell research.
ReplyDeleteWhy then would we expect a burst bubble so soon after federal funds become more available? Won't attendant publicity and continuing press releases also serve to sustain interest and investment in this sector?
Good point dhippe. As continued progress is acheived and results are obtained it can't help but to only boost the stems higher.
ReplyDeletedhippe & M, thanks for your comments. Both of you make good points and I don't totally disagree with you. I too think that stem cells research has the potential to the wave of the future. However, I've been burned quite a bit by staying in "hot" sectors too long. No stock has ever gone straight up like these have without some sort of multi-month pullback. Fundamentally, I think you guys are spot on, but be careful. There are quite a few technical hurdles to cross.
ReplyDeleteCard,
ReplyDeleteThat said, perhaps it's best to view these investment as long holds and less as short term trades. If the fundamental trend is sound and long, and one has the resources and the fortitude, perhaps averaging down when the plunge comes is the best strategy.
You mentioned an imminent analysis of CBAI, in which I am heavily invested and long. Pasted below is a thoughtful take from one of the posters on the Google Finance CBAI post. You can also find a letter to dhareholders that has just been posted by the CBAI CEO on their web site.
"The debt reduction announcement and this letter just welded me to my
shares. I had emailed Matthew Schissler weeks ago with questions about
their and he mentioned their priority at the time was growth AND debt
reduction. He said a new website is on the horizon but I would need to
hold a bit as they're very busy. The recent increase of the stock
(roughly 8 times higher than the first of the year) has brought a lot
of attention and scrutiny to CBAI and I think they welcome it. The
exchanges I've had with CBAI show me a positive, competent management
team growing a company. They're having growing pains and have not
spent money where it is unnecessary in expanding their business. Some
posters have described inadequacies as shady, I see it as being frugal
and NOT having the resources of a company that trades in the dollars.
If they keep on this track they will be worth all that and more. I've
held off posting about these exchanges as I needed to see some proof
in the pudding: this mornings announcement proves to me that this guy
is all about his word and doing the right thing for CBAI and the
shareholders. I think we'll be seeing more news of this kind over the
coming months. The financials will eventually show they're doing the
right thing for the long-term growth of the company and not just
bending to the discussion groups passionate but sometimes short-
sighted views."