In an uncommon move, I’ll start with a passage from my book, Dream. Invest. Live. This is part of one of the case studies in the book, my experience with America Online, their stock, and what the pundits had to say.
“Over the next few years, I listened as the pundits changed their tune. Their volume and level of confidence remained as high as ever, but instead of saying that the company would never become profitable, they said it would be too long before profitability;
oops, the profitability would happen, but it wouldn’t be worth the investment;
oops, the profit growth wouldn’t justify the stock price;
oops, the market isn’t big enough for growth to continue for very long;
oops, oops, oops.
They said all of that except for the oops. Pundits rarely say oops.”
AOL wasn’t the only time that happened. (And yes, the longer story is more complex, but life is always that way.)
This week Dendreon (DNDN) had a conference call to talk about progress with their first treatment, Provenge, a vaccine for fighting prostate cancer. They met their revenue target for 2010, look to meet their tenfold increase in revenue for 2011, are aiming for expanding into Europe in a year or two, and can now begin working on other cancers like bladder cancer. A tenfold increase in revenue, or expanding into Europe with it’s market that is larger than the US, could produce billions of dollars in revenue shortly. The stock was up about 8%, which is still in the range of where it’s been for over a year. You see, the pundits saw that news and said things like, “Ah, but it will take more testing”, and “EU approval is not certain”, and “We still don’t know if Medicare will pay for it”.
Before that they said, and I am paraphrasing, “It doesn’t cure the disease. It only lets them live longer.” Or step back further. “Surely it doesn’t look like it has bad side effects, but that’s because they haven’t used it on enough people.” Or step back further. “It’s too novel. The FDA won’t approve it.” I could keep going, but who would still be reading?
DNDN has gone from below $5 a share to as high as $55. Some estimates of where it can go are much higher. “Is Dendreon a $360 Stock – Or Is That Too Low?” Not all pundits are negative. Yet throughout the tale, the negative pundits get the best press. It seems to be the way the news is edited, designed to highlight every possible fear while bypassing positive potentials.
DNDN might make the pundits look silly in retrospect and it may not be the only current example.
Microvision (MVIS) showed off some progress this week at the Consumer Electronics Show (CES) in Las Vegas. They have a prototype of a projector that fits in a cell phone, an improved game controller that greatly simplifies navigation and makes the game more real, and demonstrated new equipment for rich displays in cars.
Their detractors point out that the units are too expensive, too dim, are limited by supply, and that the company is always experiencing delays and always on the financial edge. They are right – for now, or about what was true in 2010. They may be right in the long run too; but it is also possible that any one of those devices, or something similar that hasn’t been revealed yet (they have a lot of NDAs), could launch the company into massive profitability. No one knows. Time will answer those questions. For now, MVIS languishes below $5. I’ve seen $360 estimates for it too. I won’t know if they are right, just like I don’t know if DNDN will reach that level.
Waiting that long is why long term investing isn’t emotionally easy for many people. Patience measured in years amidst persistent pessimism is taxing in private and can be grueling in public.
I don’t know how this will play out. Logically, I see a good probability that Dendreon and Microvision will succeed. Their technologies are protected by patents, and their competitive positions are protected by their head starts. Back in 2006, both had lows below $5. DNDN rose. MVIS hasn’t, yet.
If you want my views, see my end-of-year review of MVIS that I posted on the Motley Fool, Silicon Investor, or Investor Village. I’m holding on as long as I can, but alternate between enthused and cautious.
I pick on the pundits, but I remind myself to look in the mirror. I wonder about how my life will progress. Will my portfolio sustain my desired standard of living? Will my books, art, and other businesses sustain themselves and me? Regardless of money, will I be happy and healthy? It is too easy to drop into the litany of aches, pains, complaints, and worries about every aspect of my life. It might have something to do with what I learned as a child. My memories of Catholicism aren’t exactly upbeat.
Yet here I sit, in the nicest home I’ve ever owned, healthier than I’ve been for months, with chores out of the way, a vacation coming up soon, and remembering last night’s party while preparing for this night’s dance with the deepest network of friends that I’ve ever experienced.
Maybe when I was worrying about what I might be doing wrong, I was wasting time, and didn’t recognize that I was actually doing something very right.
I guess I’ll lighten up on the pundits, and I might even listen to what they say, but that doesn’t mean I have to only hear that side of the story. The right thing to do is remember that there’s good news too, and I won’t forget it.