CHEMGENEX & THE STUPID INVESTOR HYPOTHESIS
October 16th 2008 08:38
Wednesday October 15, 2008
Daily news on ASX-listed biotechnology companies
* ASX DOWN, BIOTECHS UP: VIRALYTICS UP 32%, CYTOPIA DOWN 31%
* ANTISENSE ATL1101 SUPPRESSES HUMAN PROSTATE TUMORS IN MICE
* GENERA CLAIMS SUPERIOR HPV TEST
* CSL FOREX WINDFALL; AGM DIVIDES ON REMUNERATION REPORT
* BIO-GUIDE BRIEF: CHEMGENEX’S TRADING PRICE GAP
* GENETIC TECHNOLOGIES VOTES ON COMPANY’S FUTURE
* IDT’S GEOFFREY LORD BUYS HIS MARGIN SHARES AT 22% DISCOUNT
* CIRCADIAN VOTES ON DIRECTORS’, VEGENICS SHARES
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MARC SINATRA’S BIO-GUIDE BRIEF: CHEMGENEX
According to the efficient market hypothesis, all relevant news is instantaneously factored into asset prices, such that current prices are the best estimates of their real value.
Among others, Warren Buffet questions the validity of this hypothesis in the short term, so I have come up with my own hypothesis: the Stupid Investor Hypothesis.
My hypothesis states that every investor will be made to look stupid by the market at some point in time.
It can be difficult to spot the stupid investors because of the swirling mass of speculation in which they swim and their ability to lie.
Where Chemgenex Pharmaceuticals is concerned, however, two camps based on geographical boundaries are likely to define the stupid biotechnology investors.
Chemgenex shares closed today at 60.5 cents on the ASX, while they closed at an equivalent price of $1.75 in the US last night. Someone is wrong by $1.145 a share.
Given the lack of liquidity, this gap may close rapidly, but it has been around long enough and grown to such a size that it is beyond ridiculous.
I am very bullish on Chemgenex and would argue that America’s longer history and better understanding of drug development will show the US price is much closer to the mark than the Australian one.
One group of investors, either the Australians or Americans, will find it difficult to hide that they were victims of the hypothesis as the Chemgenex story plays out.
Marc Sinatra and David Langsam own shares in Chemgenex.
Chemgenex climbed half a cent or 0.83 percent to 60.5 cents.
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