Conservative investors, look away. Don’t read any further. I am considering a trade between two stocks that are so far off the conventional investing radar that the only comfort I have is a familiarity with both of them. MVIS and DNDN are derided for many reasons, with their low stock prices as proof enough for most. And yet, I should pay some respect to my analyses and logic, regardless of cautionary advice. Personal finance is personal, human, and always messy, regardless of the overly rational way we paint it. I might, might, sell some MVIS to buy some DNDN. I can already hear the groans.
The companies behind the stocks have stories that are more tragic mysteries than intriguing adventures. MicroVision has never made a reliant profit, or a reliable product; which may be why MVIS is trading at about $2. Dendreon has a viable product, but was either too ambitious, poorly managed, or improperly targeted by competitors to the point that the company had to file for bankruptcy; which is why DNDN trades at about $0.15 .
The market’s votes are decidedly discouraging.
The news for each, however, is somewhat encouraging.
Personal finance is messy, and many people would point to my current situation as proof. Depending on how you want to calculate it, my household net worth has fallen either 98% or 99%, partly from the actions of the inaction of holding MVIS and DNDN.
I no longer own any DNDN. Parts of that tale are spelled out in a variety of posts ending with Dendreon Bankruptcy. I continue to own the majority of my shares of MVIS, with the latest episode of the saga spelled out in Mysterious MicroVision. Each summary is so complex that I respect my limited time this evening by pointing you to the summary and string of posts in each.
Both companies have disruptive technologies. From what I can tell, Dendreon has the most successful prostate cancer treatment that is FDA approved, with a technology that can extend to enough other cancers to account for the majority of cancer patients – all with relatively benign side effects. MicroVision has a mirror on a chip that can dramatically change a large percentage of the electronic displays sold, and has finally cleared the technical and logistical hurdles that have constrained it for decades. Their solution uses less power, fewer resources, takes up less volume, and produces a higher quality image than any other projector that fits in your pocket – at least as well as I understand the situation.
Rationally, the markets for each are sufficient to rationalize stock prices in the hundreds of dollars for DNDN, and potentially the thousands of dollars for MVIS. Considering their histories, there is evidence to suggest I’ve been wrong. Their markets, however, haven’t diminished. Their technologies have advanced. Dendreon has accumulated far too much debt. MicroVision has yet to provide quantitative assurance that they will profit from the market. Each, however, is poised to succeed at plans that looked far more reasonable in 2008.
The risk of buying a thousand shares in either case is less than what I’ve spent on a single vacation back in better financial times. The potential reward of owning a thousand shares in DNDN is over $100,000 for a purchase price of $150 (assuming DNDN goes to $100 and the shares are bought at $0.15.) The potential reward of owning a thousand shares of MVIS is the incredible sum of $1,000,000 for the purchase price of $2,000 (assuming MVIS goes to $1,000 and the shares are bought at $2.00.)
Have the various IFs dissuaded you yet? Have the various potentials overwhelmed any cautions? The IFs dissuade me, and yet the potentials intrigue me.
I know both companies and stocks as well as is reasonable. In each case, years of research have not been negated by their recent histories. Their products progress. Their markets progress. Their prices languish – except for some recent movements. Within the last two weeks, DNDN popped because the company reported a cash-flow positive quarter; MVIS popped because it may be included in a Microsoft device (highly speculative news). MVIS may pop regardless of Microsoft because in the next few weeks Celluon is launching a series of MicroVision enabled products that could mean people abandoning their PCs and laptops for the convenience of performing the same functions on their smartphones – a computer usage shift with similarities to the introduction of the iPhone.
If you try to buy either of these stocks, your prudent brokerage should display several red flags. I know mine does. And yet, I am considering a simple trade: sell 100 shares of MVIS to buy 1,000 shares of DNDN.
I already have enough MVIS if it pops up to a few hundred; a thousand would be a welcome and unnecessary excess. One hundred shares of DNDN popping to $100 wouldn’t send me back to retirement, but such an event would greatly ease my financial situation.
The range of possibilities is infinite. Will DNDN pop before MVIS? Will MVIS pop before DNDN? Will they both reinforce the market’s expectation and collapse, or will both or either succeed? I’ve sold thousands of shares of DNDN as the market and the price plummeted several years ago. I’ve held almost all of my MVIS shares because they’ve rarely been worth more than my DNDN shares. That situation has flipped. Dendreon is possibly turning towards profitability, or at least avoiding bankruptcy or privatization; but I have no shares of DNDN.
Personal finance and owning individual stocks must be simplified and sanitized as it reaches publication in books. I know. I had to do such editing for my book, Dream. Invest. Live. This blog exists partly to chronicle the messy reality of analyses, history, emotions, necessities, and human nature that don’t fit into the generalization that is a book. I may not follow the writing dictum of the strong declarative statement, but I do hope I provide a picture of the conflicts and considerations behind a decision. Consider this post the before picture. Tune back in for the after – though after what, I am unsure. And that’s reality.
But…if DNDN is bankrupt, aren’t the existing shares likely to become totally worthless? I agree with you that there is still potential juice in their IP…but to invest in that, shouldn’t you wait to see who ends up owning it?
I forgot to mention that: 1) DNDN isn’t bankrupt, it just filed for bankruptcy, and 2) a cash-flow positive company with newly renegotiated debt may not, or possibly will not, proceed with the filing. They may actually be able to withdraw the application. That’s one of the details I will continue to watch.