(This commentary originally appeared on Real Money Pro at 11:30 a.m. ET Friday, March 31. Click here to learn about this dynamic market information service for active traders.)
After college I gravitated to Las Vegas for a year, where I may a respectable living playing $10 to $20 limit Hold'em poker -- way before television had made no-limit Hold'em what it is today. This decision did not exactly sit well with my late father, even if it was he who taught me the game, but it was one of the best training grounds on my long path to becoming a much better investor.
Playing poker for a living taught me many things that later became attributes in investing. Critical items such as learning to manage a bankroll and how to pick a profitable table, avoiding Mondays and Tuesdays when it is just the local sharps, playing all day Friday through Sunday when the tourists are in town, looking for action and ordering adult beverages.
Most of all, the experience taught me at an early age to manage my emotions, always calculate the odds and avoid going on "tilt." These are many of the traits necessary to being a successful biotech investor while avoiding tearing your hair out in one of the highest beta parts of the market.
These types of emotional reactions seem to happen every day in the market, especially in the small-cap part of the biotech sector. Yesterday, Acadia Pharmaceuticals (ACAD) dropped some 5% in trading. Acadia announced its chief commercial officer was retiring and was being replaced by the former president of Janssen Biotech.
Investors must have felt this change made a buyout less likely, and I had three people email me wondering why Acadia's CEO was retiring, misreading the announcement. Based on going through the announcement in detail, this transition sounds like a planned retirement and Acadia did well to bring in an experienced hand from a much bigger outfit to replace him. It certainly should not have impacted the stock the way it did. Look for the shares to recover in the near term as investors digest the lack of meaning in this change.
Meanwhile, the stock of Progenics Pharmaceuticals (PGNX) dropped about 12% in early trading on Thursday. Progenics posted key trial results for its compound Azedra before the bell. The results were not quite as impressive as earlier data. However, the results successfully met all the endpoints laid out in the Special Protocol Assessment criteria, when the drug candidate was granted Fast Track and Breakthrough Therapy status for treating a couple rare adrenal gland tumors.
Progenics plans to file its new drug application (NDA) for Azedra as planned by midyear. Given there are no approved treatments for these rare afflictions and that the trial met its goals, the compound still seems marching toward approval sometime in early 2018. By the end of the day, the stock had recovered half its early losses as calmer heads started to prevail among investors.
I always have found it wiser to read through the details of the event and calculate any probable longer-term impacts they may have before making any trading decisions. This way, one avoids making decisions based on headlines like so many in the market.
Thirty years ago, I learned that emotions have little use at a poker table; they don't in the stock market.