One Last BioTech Comment of Caution

I know Saul understands KITE and ZIOP are big risks as they are kept very small. Just want to point out to others what a failed test trial can do to a biotech. Eli Lilly has a 95B market cap and it is dropping 5% at the open today because of an Arthritis drug failure and it dropped 10% in a single day back in November because of an Alzheimer drug failure. That is a drop of $5 to $10B in value in one day due to one test out of hundreds of drugs that Eli Lilly is conducting.

Kite has less than a $5B market cap and ZIOP has less than a $1B market cap. Just realize these are flip of the coin investments - either you win (big) or you lose (big) at the end of the trials. These guys surely do not have the diversified portfolio of Eli Lilly.


Nassim Nicholas Taleb likes bio-tech which he calls a “positive black swan” industry meaning that the few big upside events outweigh the more numerous but smaller (still big) negative events. With that in mind I would think that the safe way to invest in bio-tech is to be widely diversified. I don’t have anything in bio-tech preferring more mundane healthcare stocks like HCSG who wash dirty linen and prepare food for hospitals and other healthcare facilities. Amazing as it may seem, they have seen a 20% growth rate for the past 25 years.

Denny Schlesinger


I just compared its performance since 2004 against Berkshire Hathaway. Quite impressive, despite being quite boring. :slight_smile: Even more boring in that it doesn’t seem very cyclical. Such a boring stock may not appeal to those hoping for a 25-bagger, but I could see buying a bunch, to have something I don’t need to think about very often.

We need a Boring (Growth) Stock portfolio, and I nominate HCSG for a spot in it.

I just compared its [HCSG] performance since 2004 against Berkshire Hathaway. Quite impressive, despite being quite boring. :slight_smile:

Since 2001

Denny Schlesinger

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Here’s another boring company I’ve been checking out - compare HCSG with AOS (A.O. Smith).

I ran into AOS in a couple of places recently, the latest time in a stock screener used by AAII (the non-profit American Association of Individual Investors). I think it was a screener that featured some of Buffet’s criteria.

Water heaters (AOS) are not sexy and neither are air conditioners and heaters (AAON). A ten year comparison:

Denny Schlesinger

From yesterday:

Let’s talk about one of the best stocks on the market for buy-and-hold investors based on both past performance and future potential. When dividends are included, it has outrun some of the market’s favorite growth stocks, having bested the 10-year performance of Chipotle Mexican Grill and the five-year performance of Amazon and Apple.

However, this company doesn’t sell flashy technology like an electric car, or promise the next big consumer product, nor will you find its corporate offices in an overpriced Silicon Valley zip code. While it boasts an illustrious industrial history that ignited the early days of the auto industry and helped the Allies win World War II, Milwaukee-based A. O. Smith Corp’s (NYSE:AOS) business today is driven by a staple of modern living: hot water.

The water-technology specialist achieved record sales and earnings in 2016, but several significant growth opportunities in Asia promise future growth for years to come. Investors who may have been overlooking A. O. Smith should give it a closer look

Read more at…

MasterCard (MA), Nestle (NSRGY), PayPal (PYPL), and Verizon (VZ) Ticker Guide
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I had completely forgotten about AAON. I’m pretty sure that’s the company a friend of mine was holding for years. It was atypical of what he usually bought, which were almost all more glamorous companies from his Stock Advisor subscription. He was surprised by how much he had made on it.