Good morning, Armchair Army,
Welcome to today's edition of The Armchair Analyst, a 5-minute daily update on the ASX life-sciences sector.
I think I can call it.
The “Tax loss trade” is REAL.
Last year, I met an old retiree at a small-cap conference in Queensland.
He did this one trade every year.
The “tax loss” trade.
It goes like this…
Buy beaten-down stocks in June.
When investors are selling for tax reasons.
Sell them in October.
When the seasonal selling pressure fades, and the stocks recover.
We’re in October now… so let’s see how the phantom trade went.
In June, I nominated five stocks for the experiment.
These were carefully selected companies based on very specific criteria:
First, the stock was “beaten down” (trading at 12-month lows).
Second, the company has a meaningful catalyst in the next few months.
Third, they had to have cash; I didn’t want to walk into any capital raises
Fourth, it had to be a company that I liked (if the trade went wrong, I wanted to be comfortable owning the stock)
So, with that in mind, these were the five stocks that I picked:
DXB, PAR, MVP, AGN and GSS.
You can read the original piece here:
So… how did it go?
Every single one of them traded higher than the June 4 phantom entry price.
Some did much better than others.
DXB nearly doubled at its peak off the back of a US$330 million licencing deal, a new asset acquired and financing to complete its Phase 3 clinical trial.
It was a big couple of months for DXB.
PAR ran strongly into a major clinical catalyst.
Even though it failed its Phase 3 clinical trial… and is now in voluntary administration.
Sigh… that one hurt.
AGN almost doubled.
… on literally no news.
And has since traded back down.
I’m still holding a few, waiting for the FDA to lift the IND hold.
GSS was probably the most interesting.
Right now GSS is the M&A target of two competing companies - Microba and BCAL.
(It’s been a saga I’ve followed closely in this newsletter)
BCAL moved to an 18.5% shareholder and submitted multiple 249Ds against the board.
A merger was also proposed between Microba and GSS.
Messy…
(I got out of this trade at breakeven because I didn’t want to stick around for the boardroom battle… although I’m happy to watch from the sidelines).
Finally, MVP.
The most “straight bat” of the bunch.
Good end-of-year results without being exceptional.
I’m catching up with the CEO, Brent MacGregor, later this week for a company update.
I did notice an interesting “Becoming a Substantial Shareholder” notice.
Payne Media.
Doing some digging, this is a holding company for one of the largest horse racing media networks in Australia.
… interesting.
So that’s how the trades went… but what did I actually learn?
Key Learnings: Tax Loss Trade
FIRST, buying oversold stocks around tax time can be a good way to find a cheaper entry point.
Every single stock traded higher from that June “low”.
SECOND, you can get the trade right but still lose on the binary outcome.
Like with Paradigm.
The stock ran from 15.5c to 28.5c before its clinical result.
So I was right on the setup… just not on the catalyst outcome.
That is why it is important to judge the process, not just the final result.
THIRD, picking the bottom is hard.
Argenica fell from 12.5c at the time of the article to a low of around 9.5c later in June, before later rallying to 21.5c.
The entry point is the difference between a 72% low-high return and a 126% low-high return.
So picking the bottom does make a difference in the overall performance.
FOURTH, you can be right for the wrong reasons.
Genetic Signatures performed…
But I couldn't have predicted that the major share-price catalyst was a board and corporate-control battle that made the company's shares “valuable” to a company looking to take it over.
… so I was right that it was oversold.
I was even right that trading at $10 million under cash backing was “value” in someone's eyes.
I was just wrong about who that someone was.
(I thought it would be the collective “market”... but it turns out it was two opportunistic listed companies looking for a cash box).
FINALLY, I believe in the tax-loss trade.
It’s real.
Especially as a useful hunting ground for companies that are oversold, under-owned or temporarily ignored.
This is because sellers overwhelm buyers at that time.
Not because of the quality of the stock (or even market sentiment)... but because of the structural nature of being around “tax time”.
(when sellers just want to offset their tax gains and are not looking for value in their investments)
So… to my friend in Queensland who gave me the tip for this trade.
Thank you!
I’ll be looking to do another one next tax season.
(and let’s see if lightning can strike twice).
Let’s dive in…
The Pulse Check
Control Bionics (ASX: CBL) receives CE Mark for NeuroStrip. (CBL, held, Armchair Pick)
🪑 Very nice - this completes the registration “trifecta” for the NeuroStrip device.
US, Great Britain and EU.
… Australia application is pending (of course we are last!)
CSL (ASX: CSL) has entered into an agreement with Alentis Therapeutics for a Phase 2 treatment for rare kidney disease & liver disease. US$355 million upfront and US$1.2 billion in milestones. (CSL)
🪑 Big Pharma has spent the past 12 months on an M&A shopping spree.
It’s nice to see CSL join the party.
Interesting asset choice, going after kidney and liver disease.
I wonder how the market will react to Dimerix based on this news. This basically sets the benchmark price for a kidney asset, and Dimerix is trading at an A$132 million market cap.
Optiscan Imaging Ltd (ASX: OIL) submits a U.S. FDA 510(k) application for its InVue™ precision surgery device. (OIL)
🪑 Both devices are now submitted for FDA approval.
Good luck!
Aroa Biosurgery (ASX: ARX) published results showing that its Symphony product significantly improves diabetic foot ulcer healing compared with the standard of care. (ARX)
🪑 Good result.
55% complete wound closure at 12 weeks compared to 35% for standard care.
Mean healing time reduced by 7.8 days.
This isn’t about “approvals”; it's a marketing exercise to get clinicians and surgeons to change their practice behaviour and use Aroa’s product.
Why use the standard of care when this heals 7.8 days better?
Imugene (ASX: IMU) reports four patient 28-day results in Cohort 3 of the azer-cel Phase 1b trial. (IMU)
🪑 One complete response and one partial response among the four patients, which is a good result, now with a 71% overall response rate.
IMU has seen heavy selling since it raised capital at 10 cents a few months ago.
This news appears to have recovered the share price a bit, but it's still a long way back.
Percheron Therapeutics (ASX: PER) announces Dr Michael Baker's commencement as CEO and MD this week. (PER, held)
🪑 Good luck!
Radiopharm Theranostics (ASX: RAD) completes an End-of-Phase 2 meeting with the FDA for RAD101, a brain metastases imaging agent, and commences Phase 3 readiness activities. (RAD)
🪑 Another milestone ticked (full meeting minutes will be ready in about 30 days).
The big question for RAD is who will pay for this trial.
The hope is likely on a larger partner (with plenty of M&A activity in the radiotheranostic space)...
Dimerix (ASX: DXB) has completed four years of its first patient in the DMX-200 clinical program, delivering key long-term safety and efficacy data in the open-label extension study for FSGS. (DXB)
🪑 Milestone ticked.
AdAlta Limited (ASX: 1AD), together with its Chinese partner Shanghai Cell Therapy, has received FDA approval of its briefing pack and manufacturing transfer plan for its CAR-T therapy. (1AD)
🪑 Milestones ticked.
See you all tomorrow,
The Armchair Analyst
