I bought a stock. Boring, some will say. DNDN has never been dull. Years ago I held more than enough shares – if it reached my price estimates. Since then, the company, Dendreon, has lived a story of trials, triumph, turmoil, and possibly that financial tragedy called bankruptcy. One story hasn’t changed since they received FDA approval for their cancer treatment; the technology works. Financial fundamentals tell one story. Technical fundamentals tell another. The risk versus reward comparison is almost at lottery levels; but, great analyses aside, I was able to buy a lot of stock for less than some people will spend on dinner tonight. Personal finance is personal, which means it is always a story, or it isn’t about a person’s finances.
My history with DNDN is long enough for a book, but for the most recent episode read the most recent post. Follow the links or click on the tag, for the details. The quick story is that, as usual, I followed my investing strategy by buying into a local corporation with a disruptive product or service before it met the market, held the stock as it rose – and then watched it implode counter to logic. As it dropped I had to sell to pay bills, first in the $40s, then closer to $4. Almost had my house go into foreclosure. And, am now working my way back out of my financial insecurity. I have reached the point where some untouched cash could be touched. I bought a bit.
Dendreon developed a technology that helps the body’s immune system recognize there is work to be done against cancer. The first treatment approved by the FDA was for prostate cancer. The last time I checked, the treatment worked, and was demonstrating improving efficacy as more data came in. The company should be massively profitable considering a success in the War Against Cancer. Instead, through mismanagement, bad luck, malevolent forces, or over-enthusiasm, the company took on too much debt while the revenues didn’t meet expectations. The stock went from about $5 before approval, to over $50 after approval, to $0.152 as it sits on the cusp of bankruptcy. And then, they had a quarter where they had positive cash flow. That got my interest.
Buying and selling stocks benefits from prudence. Rarely does a trade have to happen within minutes. Even stocks that are rising or falling, usually do so slowly enough that there are days when they languish. I’ve been considering this trade for days based on the recent news about the cash flow. I wrote about it, listened to comments and advice, and welcomed the focus that such a consideration brings to my normally passive trading. The amount of effort for these few shares is nearly the same as when I was investing months of living expenses. The same logical questions must be asked. The analyses of the company’s value don’t change. The main difference is the impact it has on my cash. There’s a longer pause whenever I spend any money after my Triple Whammy that was partly triggered by DNDN’s initial collapse.
I bought shares of DNDN; actually, DNDNQ because of its diminished status.
Check your emotions. Taboos and conventional wisdom are ingrained and can trigger effects out of proportion to the causes. I spent less on DNDNQ than people will spend on dinner, or a smartphone, or a pair of shoes, or even groceries. My holiday grocery bill was larger than my new position in DNDNQ and it didn’t induce days of analyses and consultations. It took me longer to realize that than it did to analyze the company’s potential.
My style of investing, Long Term Buy and Hold (LTBH), is not for everyone. The stock markets since 2009 are evidently not for everyone, because the total number of investors is down. People don’t trust the market. The markets are setting records, but have left many of individual investors behind.
Historically, investing in the financial markets has been essential to a retirement plan; yet, fewer people are buying stocks and bonds. Unfortunately, many people I know don’t trust the other markets, either, like real estate and jobs. Housing may be coming back, but attitudes about a house as an investment have changed. Mortgages are treated with more caution. Biggest isn’t always best. Jobs may be coming back, but many are finding that hard work means stagnation instead of elevation.
With fewer appealing options, I wonder if lottery ticket sales are up.
DNDN(Q) and other such stocks are attractive to many people who are on a financial edge. If working hard means standing still, and if buying lottery tickets is more likely to provide daydreams than security, then maybe there’s something in the middle. That’s where I am seeing people investing. If your reaction is somewhat of a revulsion, good. Their actions, however, aren’t driven by greed but by necessity. If a few hours of work, or their monetary equivalent, won’t make a difference; and if buying the equivalent in lottery tickets is most likely to produce worthless paper; then buying a very risky stock can seem attractive. The fact that such stocks are attractive is a commentary on our current financial situation more than a reason for personal judgments.
It feels good again to be invested in something that is making lives better. I invest in disruptive companies because there are many ways life can be made better, and if I have that attitude I should see if I can profit from my optimism. Check back next month to learn if I should’ve spent the money on groceries, or if I’ll be able to feed myself for a long time based on the value of the stock.