We have tried to analyze the situation with ”hype trends” in drug development in several previous articles in order to understand (predict) what will be the next Big Thing. One very relevant question is: how this information can help for making profit?
In investment it is like in a comedy – timing is everything. A competitive advantage is to invest in an undervalued company right before the company is re-valued to a higher price, in simple words – to buy lows and sell highs. If somebody argues that it is one kind of speculation – my answer is yes, this is a definitely a speculation. Investment is about making profit, otherwise one could simply donate.
So let’s take a look on a hype graph once again: in what stage of a technology development it is the most profitable to invest? I guess that the majority will prefer companies with Technology Triggers, but according to the efficient-market hypothesis – the stage of innovation is not relevant at all. The share price reflects the fully available information only, and it is almost impossible to “beat the market” – they also know what you know. What is really relevant is the insider information – in order to be sure of buying lows or selling highs you need to know the details about things. But playing this kind of game one can be establishing an interesting and lasting relationship with financial inspection authorities…
If I would invest myself I would invest in a team, not just in a technology. You sort of get the insider information indirectly in this way by looking on what are the people made of that work with the project. But here it comes again – we have the same situation with efficient-market hypothesis, i.e. the team-advantage is often already included in the share price.
Investment without insider information is just as buying a lottery ticket, as betting on black or red in casino: investment in a particular technology or a team is as relevant as investment in a company with certain (odd) numbers of letters in its name or in a company which develops green-colored pills. It must take balls to invest if the efficient-market hypothesis is correct. Regardless of whether it is correct or not, the reason I like those investors who believe in Double Bond Pharmaceutical – is that they know that we do all that is takes (and more) to develop superior medicinal products. In other words, we help those who really need our products and simultaneously making glad those who bought our shares (at lows or highs).
[To be continued]