The following is a paraphrased version of a bulletin that was published yesterday for subscribers of The Wagmore Advisory Letter…
Though the market overall has been struggling for the past couple of days to figure out what it actually wants to do as 2014 gets underway, I am very pleased to report that our real-life account is off to a good start, with the strong performance of MannKind offsetting the weakness we have seen in some of the other stocks.
And, while it is generally more fun to own stocks that only go up, not only is the market overdue for a pullback of some sort (and thus the recent profit-taking we’ve seen in a few stocks is not at all unexpected now that a new tax year is underway), I also want to remind you that, in an ideal world, our stocks will always find a way to dip back below the strike prices of the covered calls we’ve written against them so that we can keep the premium we received for writing the options AND hold on to our stock as well.
As it stands, I remain quite comfortable with all of our positions… including my decision to not only be overweighted in MannKind (MNKD – $5.55) at this stage of the game, but to also hold off writing any calls against the position for the time being.
As those of you who also subscribe to Nate’s Notes were reminded in the Inter-Issue Commentary that was published over the weekend, I believe very strongly that the odds are slowly sliding more and more into our favor with this stock as the shorts realize that all they really have left to hold on to is a hope that Afrezza sales fail to materialize down the road… and a lot of good things (i.e. catalysts that could move the stock higher) could happen between now and then that would make them painfully wrong over the short-term even if they turn out to be right over the long-term (in other words, the risk-reward ratio is becoming extremely skewed against them now that the clinical trials are out of the way).
To be sure, many of the sorts are also still hoping that the FDA will deny approval of the drug later this year… and while this is admittedly a very real possibility (and it is why you should only invest money in the situation that you are willing to possibly lose!), given how closely MannKind worked with the FDA in designing those clinical trials and defining the clinical endpoints that needed to be met, I believe the odds of that happening are fairly low (but after following biotech stocks for 25 years now, I can attest that you should never call them “zero” when it comes to the FDA!).
That being said, I have been pounding the table pretty hard on this stock in both Nate’s Notes and The Wagmore Advisory Letter in the time since the uncertainty of the clinical trial results was removed (and putting my money where my mouth is via the real world account set up to track the performance of The Wagmore Advisory Letter… as well as a number of personal accounts as well), but if you still are not convinced (and like to read!), I want to refer you to a great article that was posted on the Seeking Alpha website earlier this morning:
Yes, it is just one writer’s opinion, but if my “condensed” version of the story hasn’t won you over yet, I believe the “extended” version might (the author of the piece truly leaves to stone unturned as he explores the story from just about every angle you can think of).
Again, don’t invest more capital than you’re comfortable losing in its entirety, as the FDA has disagreed with my assessments before – but if you have not yet done so, please do consider establishing a position sooner rather than later, as I believe all it will take is one piece of good news (or perhaps even just a little more movement to upside without any news?) to help get an honest-to-goodness short squeeze underway… and once that happens, you’ll be kicking yourself for not buying any “when it was still in single digits.”