NKTR: A Story Stock still being told

I love this board. For me, one of the great things about it is the detailed analysis of companies and their future potential, and then over time seeing how those actually play out. Saul’s Knowledge Base has lots of good tips and techniques to aid one’s own analysis. I want to learn how to better perform analysis that will help me predict the future of companies.

But, as Saul even admitted (http://discussion.fool.com/this-is-not-to-say-you-ignored-the-fi… ), NKTR was not chosen based on Knowledge Base criteria, but on the story. Please correct me if I’m wrong, but I couldn’t find any posts about NKTR’s rapidly growing earnings or recurring revenue or substantial insider ownership or rapidly growing revenue. Is anyone here looking at its Cash Flow, Operating Margins, or P/FCF ratio, as outlined in the KB?

From the KB: I invest not based on knowledge about the industry, but on the fundamentals and progress of the company itself.
and
I usually won’t touch a “story” company that is losing money, but that “will break even two years from now,” no matter HOW enticing the story is.

But, Nektar seems to be an exception.

Now, look, don’t get me wrong. Story stocks are really hard to resist, especially when they’re in your wheelhouse. My biggest percentage investment right now is a Story Stock - one that is shunned by this board (although some here admit to owning it). I’ve made a CAGR of over 40% on my initial investment in it 7 years ago, but in hindsight I was lucky. Since the company’s business is in my recent wheelhouse, I have had confidence to add to that investment, at higher prices, but with stronger convictions. But, I acknowledge that maybe those convictions aren’t well placed - and that’s the danger of a story stock, and I think one’s own over-confidence if the industry is one you think you know well.

And, if we’re being honest with ourselves, isn’t that what is happening here with NKTR? We have people in or near the “industry” analyzing the news and results and potential. Luckily, we have some knowledgeable contrary voices as well. But, at the end of the day, haven’t those here who are invested in NKTR basing their investments on the STORY and not the FINANCIALS? If so, that goes against the Knowledge Base.

I don’t speak for Saul, of course, but my view of Saul’s recent doubling of his position, then selling all that he added a few days later was him recognizing that Nektar is a story stock, and that he’d rather own a stock that meets his KB criteria instead (which is what he essentially, in my opinion, stated here: http://discussion.fool.com/nektar-where-i-stand-currently-330931… ). Indeed, when I look at the history of NKTR in Saul’s portfolio since Nov 2017, the oscillating pattern that emerges echos what I see as Saul’s struggle with the Story versus the Financials. Again, let me be clear that this is what I am interpreting, and is not necessarily what is actually going on inside Saul’s head.

So this is a valuable lesson for me. Nektar’s story is still being told, but The Saul Method does not help us predict the future for it. I will now go back and look at the Story Stocks I currently own and challenge my conviction in the story and what percentage of my portfolio I want to commit to those stories.

23 Likes

I already got the money I lost selling NKTR back on some others I used the money on. Slight FOMO going on in my head but not worth the wait.

Story stocks are really hard to resist, especially when they’re in your wheelhouse. My biggest percentage investment right now is a Story Stock - one that is shunned by this board (although some here admit to owning it).

Do you mean like a story stock such as Tesla?? I see it’s you best pick with a 1,126% gain. Way to go Smorgasboard, congrats. Not bad for a few years gain.

Dominic
wishes he had invested in TSLA after viewing that old documentary “Who Killed The Electric Car?”

Saul’s Knowledge Base has lots of good tips and techniques to aid one’s own analysis… But, as Saul even admitted, NKTR was not chosen based on Knowledge Base criteria, but on the story. Is anyone here looking at its Cash Flow, Operating Margins, or P/FCF ratio, as outlined in the KB?..From the KB: I usually won’t touch a “story” company that is losing money, but that “will break even two years from now,” no matter HOW enticing the story is.
But Nektar seems to be an exception.

Boy, smorgasbord, you hit the nail right on the head. Nektar violates all my principles of investing. I’ve been wrestling with this all along (but at least I had the sense to point out that it was just a speculation).

Now, look, don’t get me wrong. Story stocks are really hard to resist….But, at the end of the day, haven’t those here who are invested in NKTR basing their investments on the STORY and not the FINANCIALS?… my view of Saul’s recent doubling of his position, then selling all that he added a few days later was him recognizing that Nektar is a story stock, and that he’d rather own a stock that meets his KB criteria instead. Indeed, when I look at the history of NKTR in Saul’s portfolio since Nov 2017, the oscillating pattern that emerges echos what I see as Saul’s struggle with the Story versus the Financials. Again, let me be clear that this is what I am interpreting, and is not necessarily what is actually going on inside Saul’s head.

Again, you are absolutely right! Story stocks are very hard to resist, and Nektar has a very enticing story. I’ve been in and out of it several times (the oscillating pattern you are talking about), and it is down now to about a 1% speculation, which I may or may not hold on to. I keep wavering on this. I know it will be years before they start making any money (if you don’t count the $1.8 billion from BMS), but I know the price may rise when (if) they get close to putting 214 on the market. On the other hand I can put the money into companies that are growing revenue NOW at 40 or 50 percent.

Best,

Saul

26 Likes

My biggest percentage investment right now is a Story Stock

Hi again Smorgasbord. Yes, I think I remember that it is Tesla, which I was in a long time ago for a quite profitable brief ride. A few words on Tesla as The Ultimate Story Stock.

Elon Musk – An incredibly inspiring leader.

The mission – Electric cars, which seems like a great idea.

Tesla cars (when they manage to get them out the door) – Everyone who has one seems to love it.

The stock – seems to keep going up in spite of all reality.

The company – A total disaster! A basket case! Huge capital expenses involved in building cars, constantly flirting with bankruptcy it seems. Big problems in getting the cars constructed. They already bailed out Elon’s cousins whose company (SolarCity?) was going under.

Seems to me like a great story stock to admire from a distance, a long distance.

Note that I make a clear distinction between the car (that everyone loves) and the company (which seem to be a basket case, at least from the headlines that I read.)

Best,

Saul

14 Likes

I realised that subconsciously the earlier KITE success had played a part in seducing me into a quick wager on the horse. Ah, impulse! How fatal, always and worse when it is not.

1 Like

All totally true, it’s no investment but I often think I should give something to support E. Musk, a truly great American regardless, not so much charity as regard. He is an ornament of the business scene (though I feel for those he must lay off). Onward to success. Elon!

I subscribe in full to a low-circulation magazine I never get around to reading because I would hate it to disappear from the landscape of which it has been a valuable feature for so long.

1 Like

The company (Tesla) – A total disaster! A basket case! Huge capital expenses involved in building cars, constantly flirting with bankruptcy it seems. Big problems in getting the cars constructed. They already bailed out Elon’s cousins whose company (SolarCity?) was going under.

From June 12th : Tesla has laid off about 9% of its employees. This is part of the reorganization Musk talked about in May on the company’s quarterly earnings call. The layoffs reportedly started on Monday and will be made official at some point today.

Saul wrote:
A few words on Tesla as The Ultimate Story Stock… The company – A total disaster! A basket case! Huge capital expenses involved in building cars, constantly flirting with bankruptcy it seems. Big problems in getting the cars constructed. They already bailed out Elon’s cousins whose company (SolarCity?) was going under.

You are repeating nonsense you read somewhere. Not your sort of company, so there’s no reason you should know anything about it, but why repeat unsupported lies and distortions?

Note that I make a clear distinction between the car (that everyone loves) and the company (which seem to be a basket case, at least from the headlines that I read.)

The “headlines” you read are pretty much equivalent to just parroting Citron on Shopify. As a respected elder you should do better than that.

Curious though, why were you ever in TSLA? Not your sort of thing, is it?

-IGU-
(have two Teslas, love them, bought them with profits from TSLA)

5 Likes

My comments: A few words on Tesla as The Ultimate Story Stock… The company – A total disaster! A basket case! Huge capital expenses involved in building cars, constantly flirting with bankruptcy it seems. Big problems in getting the cars constructed. They already bailed out Elon’s cousins whose company (SolarCity?) was going under…Note that I make a clear distinction between the car (that everyone loves) and the company (which seem to be a basket case, at least from the headlines that I read.)

Your response: You are repeating nonsense you read somewhere. Not your sort of company, so there’s no reason you should know anything about it, but why repeat unsupported lies and distortions?..The “headlines” you read are pretty much equivalent to just parroting Citron on Shopify.

From Elon Musk’s recent letter to employees: “We have made the difficult decision to let go of approximately 9% of our colleagues across the company. These cuts were almost entirely made from our salaried population and no production associates were included, so this will not affect our ability to reach Model 3 production targets in the coming months.”

So where exactly are the lies and distortions? I’m just curious. I said:

Huge capital expenses involved in building cars - obviously true.
Big problems in getting the cars constructed - You MUST be aware of that.
They rescued SolarCity at the expense of Tesla stockholders. - simply a statement of fact.

The only thing you could be questioning was whether they are flirting with bankruptcy. (I did say “it seems”). If you can’t get your cars produced on time, and then lay off part of your workforce, it sure isn’t good.

And I did hold Tesla from about $65 to $195 as I remember (that’s approximate from memory) and did very well. I wish them all the best. I think Elon’s great. I really do. Everyone who has a Tesla loves the car. But car companies have a tough, tough, row to hoe.

Best,

Saul

27 Likes

Ya
Watch your tone Branmin
You are being disrespectful esp with acronyms referencing sware words.
Saul is in good company criticizing Tesla’s business model and stock valuation including David Gardner and Jim chanos and
others
I made a five bagger on TSLA but i am out now.

5 Likes

Yes you are very correct…apologies for the language.

6 Likes

A few words on Tesla as The Ultimate Story Stock.

I don’t think this board really wants a full analysis of TSLA, which is why I didn’t mention the company by name. If anyone thinks we do, a new thread should be started. I’d be happy to participate.

For this thread, to keep it somewhat aligned with the original subject, I’ll just point out that a major difference between the NKTR story and the TSLA story is that Tesla is far more in control of its own success. NKTR has to wait to see how the tests/studies go and then how they’re interpreted. Tesla just needs to build cars more quickly.

And, I believe one can make a decent assessment of whether Tesla has the engineering chops to speed up production quickly enough, and whether Tesla management (Elon and Deepack Ahuja) has the financial insight and levers in place to keep the company going and growing until then. I don’t know the biomedical world, but what I’ve seen is that there’s strong disagreement on whether Nektar’s drug is in fact even successful or not. And if it proves to be not as successful as the FDA (?) wants, with as small known side-effects as the FDA wants, I don’t believe Nektar has any levers in place to change that and try again, whereas Tesla can tweak their assembly line continuously as long as they have enough money for operations.

Finally, we can run the numbers on Tesla’s revenue, cash flow, costs of operations, etc. We can then factor in expected production rates to see what the company’s financial condition would be under various circumstances, and then choose to rate the likelihood of those circumstances occurring to make our investment decisions. With Nektar, it’s all a bet on whether something already designed and unchangeable will do what they hope it will do. That makes Nektar far more speculative than Tesla (that’s not to say that Tesla is less risky, just that one has to speculate as to the risk in Nektar whereas one can determine the risk within certain boundaries with Tesla).

Tesla was the Ultimate Story stock back before 2014. Back then, no-one knew whether they could engineer an entirely new car on their own (Roadster was a Lotus-produced glider with a Tesla drivetrain), much less knew what the real demand was, much less what the gross margins on the vehicle would be. Today we have much more information and so one doesn’t need to rely on a story to make an investment decision. That’s not yet true with Nektar.

20 Likes

Finally, we can run the numbers on Tesla’s revenue, cash flow, costs of operations, etc. We can then factor in expected production rates to see what the company’s financial condition would be under various circumstances, and then choose to rate the likelihood of those circumstances occurring to make our investment decisions. With Nektar, it’s all a bet on whether something already designed and unchangeable will do what they hope it will do. That makes Nektar far more speculative than Tesla (that’s not to say that Tesla is less risky, just that one has to speculate as to the risk in Nektar whereas one can determine the risk within certain boundaries with Tesla).

Absolutely agree on this ! Don’t want another Tesla discussion as last one on this board had ended on rancor. But will simply say forget the headlines - review the financials and product on its won merit. There is sure risk with Tesla but is far less than what scare mongering headlines in financial press suggests. The odds are still heavily in favor of existing Tesla shareholders

Some months back I had summarized by thoughts on financials:
http://discussion.fool.com/4056/volfan84-both-gaap-and-non-gaap-…

P.S. - I have my money where my conviction is. It is a simple case of tails I will loose some, heads I will win big.

1 Like

So where exactly are the lies and distortions?

Huge capital expenses involved in building cars - obviously true.
Yup.

Big problems in getting the cars constructed - You MUST be aware of that.
No, not really. What Tesla has is big problems is meeting Elon’s estimates. They are actually constructing cars very well, and growing their construction capabilities at an amazing pace. If you look at the actual facts, the numbers, what they’re doing is amazing. To spin that as “big problems” is nonsense. Their “big problems” are only with trying to be even more amazing. Elon is a hyper-optimist.

They rescued SolarCity at the expense of Tesla stockholders. - simply a statement of fact.
Again, no. Solar City’s only problem was their capital structure. They were taking big risks and would blow up in a severe recession if their access to capital dried up. Anybody with deep pockets could have bought them for an excellent return on investment. Tesla did, and has been doing very well off of their purchase. The business synergies are just gravy.

The only thing you could be questioning was whether they are flirting with bankruptcy. (I did say “it seems”).
It only seems that way because that’s what you read about. It’s nonsense. Tesla has easy access to all the capital it wants. Yes, early on there was a time Tesla almost went under (and it turned out that Elon raised money then by just mentioning to a friend that he was in trouble). But since then, every time they’ve raised money, however they’ve done it, people have been desperate to get in on it. And nobody sane thinks there’s the slightest chance Elon Musk will let his company go bankrupt. It’s absurd at this point.

If you can’t get your cars produced on time, and then lay off part of your workforce, it sure isn’t good.
Maybe. Tesla has been growing its workforce rapidly, so getting rid of some employees doesn’t seem like a big deal to me. Financial responsibility, prioritizing profitability, etc.

You know Citron played the same BS game with Tesla as with other companies that you invest in. Go read what Left wrote about Tesla and you’ll see it’s the same sort of stuff you’ve been saying here. That should give you a hint about the quality of the information. Citron deals in plausible lies.

But car companies have a tough, tough, row to hoe.
Yeah, another common mistake. Tesla isn’t a car company. Cars are an important part of their business, but soon the energy generation and storage business will be huge, likely bigger and much easier than cars. Currently valued by idiot analysts at $0 so far as I can tell.

No disrespect intended here. Just a request, given your influence, that you be more careful in what you say. As you well know, truth doesn’t come from media or analysts, and quarterly reports need to be examined with a skeptical eye. Think about where your truth is coming from. Citron’s influence comes not from writing idiot analyses full of lies, but from it getting endlessly echoed and amplified by others.

And I did hold Tesla from about $65 to $195 as I remember…
And congrats on your TSLA profits! That would have been before it was on my radar, and a great runup. I’m always late to the party.

-IGU-
(TSLA = 90% of my portfolio now)

7 Likes

TSLA = 90% of my portfolio now

YOWZA!!!

I wish you luck. We all have our own opinions and mine is that is insane! But to each his own and good luck.

AJ

5 Likes

-IGU-
(TSLA = 90% of my portfolio now)

Well, good luck to you. Hope it works out but having 90% of your portfolio in one stock and a risky one at that, you have some brass ones.

1 Like

TLSA

it seems they are flirting with bankruptcy… why would you disagree with that? and why on Earth would you be so harsh in your rebuttal?? If anything, your harsh reply weakens your case.

Come on… there are NUMEROUS articles and publications out there about Tesla’s financial woes. I think it’s “commonly held fact” that TLSA is on a razor edge… it certainly isn’t a stretch to say “it seems they are flirting with bankruptcy”. If you don’t agree… state some facts… not emotion.

Fact: They have a MOUNTAIN of debt.
Fact: They have been downgraded to junk bond status for future borrowing.
Fact: Model 3 production has been a nightmare.
Those facts certainly indicate they are flirting with really bad things.

If they don’t get Model 3 production rate solved and KEEP IT solved… they are in REAL trouble.

To me, they are very vulnerable. A fire at a mega-factory… a labor strike… a bad day could easily escalate to catastrophic in the situation their in. I don’t think anyone would call TLSA “robust”…

BUT… Here’s my real point… doesn’t matter the stock. As soon as it becomes EMOTIONAL… it’s no longer sound investment. When you can’t listen/read other’s points of view and rationally comprehend and process and learn and respond… then THAT should be a warning to you.

Great… you’ve had success with TLSA and bought cars and love the cars. Good for you. But getting emotionally tied to a company is a recipe for disaster in my experience.

Take it for what it’s worth. Just my opinion.

Mark

25 Likes

People,

In the middle of a multiple year bull market Tesla has been utterly stagnant! The only money made in Tesla has been trading it out in the mid to high $300s, and buying it back in the high $200s, and do that over and over again depending on the news of the week.

What a opportunity cost suffered for investing in Tesla over the last few years. Perhaps things will change when the 3 starts rolling out, but even at 3500 units a week, it will still take nearly 3 years just to fulfill back orders, much less selling vehicles for new owners.

Do you think new owners are going to wait 3 or more years for their 3? They have some real issues. But it will at least save the company.

Tesla is the perfect example of a great company, great stock, but there comes a time to move on. Qualcomm is another such example, of even a greater company, and even greater stock, but the time to move on was around 2006 (which is when I sold out with another triple - reason was apparent at the time. 3G had run its course and Qualcomm did not have the same lock on 4G technology that it had on 3G, and the stock price, except for a recent run up on acquisition rumors (that were not just rumors) fueled a price increase, that then fell when Qualcomm fought off the acquisition tenders, has been stagnant. Qualcomm does pay a dividend however, which may make it worthwhile to hold for that.

I love Tesla cars. I took my son out of school one day to go test drive one. I then took both him and my daughter another day to test drive a Tesla. It was a cool experience for both of us. But I was not going to pay $20k as a downpayment on an automobile. A recent quote from Jerry Jones (owner of the Cowboys) to a young Emmitt Smith, when Emmitt bought a $100k Mercedes, and which every NFL players should be given, treat your money as if there is a large front door and a very small back door, sucking in as much money as you can through the front door and letting escape out the back as little as possible.

I believe Emmitt did not buy such a car again. I decided to get a high end Ford Edge instead, and quite happy with it to this day.

Tesla would be great, Tesla is a “chick” magnet. I recently stopped dating a woman who wanted me to get a sports car convertible (because my full roof sunroof in my Edge was insufficient). Nope, if a woman needs a convertible sports car to get excited to be with me, I figure I don’t need the woman. Not that kids or dogs are much cheaper, but at least they are not demanding convertibles!

Hoping that Tesla breaks out again after a long, long, slumber. Not real high on my confidence level that it will at this point.

Tinker

8 Likes

Today we have much more information and so one doesn’t need to rely on a story to make an investment decision. That’s not yet true with Nektar.

Absolutely true!