Except for the lottery, much of life’s success and progress takes time. For planning purposes, we live in a linear temporal universe. Maybe cause doesn’t have to precede effect. Maybe there’s a way to know how this will all turn out. My intuition tells me that I’ll exceed my expectations and I should just relax and enjoy. That’s an assurance that is hard to believe when it is tough paying the bills. So, I wait, maybe for only a couple of days, maybe longer. It is Saturday. On Monday, Dendreon (DNDN) and Microvision (MVIS) report earnings. Maybe on Tuesday my financial situation will be much improved.
Investor Village‘s message boards are my favorite sources for community commentary about DNDN and MVIS. Some other sites have too much traffic. Spam and flame wars rule. Other sites are so sedate that weeks go by without a cough echoing the empty posts. The DNDN group is talking about earnings, analyzing projections, and performing sensitivity analyses – with a side of speculation of expansions and acquisitions. The MVIS group is talking about the opposite. Specifics about Microvision are hard to find, because their financial data are somewhat moot. Their recent earnings are so far from the levels projected for some future product release that most investors ignore the details and spend more effort considering product and supply scheduling, intellectual property value and infractions, and the probabilities of buyouts or bankruptcy.
I look forward to writing about the results, but there’s nothing else to do but wait. But watched pots do eventually boil – as long as there’s enough heat and the pot doesn’t leak.
Long Term Buy and Hold (LTBH) is an investment strategy that requires patience. There’s another version that requires ignorance or apathy called Long Term Buy and Forget. That sounds silly but so many have taken that to an extreme that estimates of the value of forgotten shares are in the billions. LTBH takes advantage of the fact that good or bad news can happen at any time and that generally, good companies are eventually valued appropriately.
“Generally” because it doesn’t always happen, or happen in time.
“Eventually” because when it does happen, there was no guarantee that it would happen before, with, or after the good news.
Three years ago DNDN was trading at less than $4 while Dendreon awaited the FDA decision about Provenge, the first prostate cancer vaccine. Provenge could revolutionize fighting cancer because it was more effective, cheaper, and had fewer side effects than the traditional cancer treatments. It is a vaccine, so it cleverly retrains the body’s immune system to do the work. It is also a technology that could work against many other cancers. The present value of all of those future revenues (discounted for risk of course) produced very high valuations for DNDN. Everyone guessed but no one knew if the FDA would approve Provenge. Everyone guessed and no one knew what would happen to DNDN. Two years earlier a scandalous FDA reversal popped and then dropped the stock. The possible felonious actions are still debated, and maybe someday prosecuted if you listen to the Deep Capture people. The FDA did eventually say yes. By mid-summer DNDN was over $24. A year later it doubled past $48. I looked forward to having “enough” and maybe more. And then, one earning report last August dropped the stock 80%. So much for having “enough” – at least for a while. Yet, the treatment looks like it works better than expected, and the main growth issues are logistical rather than medical. Maybe Monday’s news will rebuild confidence within the investment community. As I sit here, I don’t know.
Until their stock split last week, MVIS was trading at less than $1. Now, after a 1-for-8 reverse split, MVIS is trading at about $4. As I wrote and cross-posted to The Motley Fool, Investor Village, and Silicon Investor (sometimes I like to shout a little louder and see who’s out there listening);
“Microvision’s value is unchanged, with a modification each day as we creep closer to that hoped-for significant event that is countered by daily cash flow and encroaching competition. I think Microvision should be valued much higher based on present value of future revenues discounted for risk, but apparently the market is using a much higher risk discount; otherwise, the price wouldn’t have dropped so low to prompt a delisting notice.”
The stock price changed by a factor of 8, for a while. The company value remains the same, or at least its valuation. The valuation is the guess of the company’s value, which is supposedly reflected in the stock price, generally, eventually. I’ve been watching Microvision since I bought shares in 1999. The demand, the heat, seems to be potentially great. A radical technology that revolutionizes electronic displays can have global consequences and immense profits. But the pot couldn’t get near the fire for a while because the technology hadn’t been invented. Now the pot may be ready and may be getting closer to the fire, but the entire process is taking so long that too much money has leaked out in the process. At last year’s stockholders meeting the CEO announced that eyewear was the foundation of the company’s first strategy, but it has slipped because finding appropriate transparent content is difficult and it needs a better user interface. Last week Google’s eyewear hit the news. It isn’t using Microvision technology. But Monday, maybe Monday, pure speculation from me is that the report will bring news that someone else will use Microvision technology to compete. Maybe we’ll finally hear about a major product being released into the public and from under the secrecy wraps of an NDA. Maybe we’ll get quantifiable news and my stock will allow a more quantifiable response to my bills. Or, maybe it will be more of the usual generalities and projected eventualities.
Within my own business sometimes I have to wait for the boil and sometimes I can turn up the heat or find a different pot. I’m expanding my Modern Self-Publishing class by teaching over in Seattle (feel free to pass along recommended venues). I’m having fun creating more exposure by uploading videos to YouTube. I continue to give talks and exhibit art. But as a writer I also know that some things can’t be rushed. I can write quicker, but books are sold by readers reading and then telling their friends to read. I can’t rush that process. Word-of-mouth, the most powerful advertising tool, runs at its own speed; and I let it because it is so powerful.
LTBH is powerful too. Maybe other strategies can make more money. I think the various strategies overlap so much that luck can explain many performance differences. But LTBH spends the least time, and time is valuable, and time is powerful, and time can’t be rushed. This morning I boiled some water and made some tea. That boiling is complete. I guess now I’ll take a break and enjoy its result, a cup of tea, while I wait for my other pots to boil.
Aren’t boils supposed to be lanced? 🙂
Looks like that’s what’s happening – at least as I type this.