a day or 4 ago, some mkt newbie suggested that blackrock’s ownership of a ticker was “institutional ownership.”
after a brief attempt to explain russell indexes fell on koolade plugged ears, while i was bemoaning the brk buybacks that made brkb unattractive to me, it occurred to me that perhaps a simple, 4th grade arithmetic lesson is again in order.
for the exercise, 2 proven profit generators, blackrock and berkshire hathaway, and a well constructed narrow field player specifically in the stem cell sector, cirm.
for the exercise, biotime, amex, btx. amex is selected.
no way in creation that buffet would ever own btx.
buffet was willing, at 2008 prices to put 12% of his dry powder into ge–as long as he was guaranteed 10% yield on that “weak” an outfit. buffet was recently willing to to put 12% of his dry powder into bac, under terms that get him 10%, unless bac bounces back to 1/3 of its 2 year high, in which case buffet makes more.
this gives the prudent speculator some tools for thought on what is worth going after, and under what terms.
blackrock does in fact “own” some biotime, since, as a result of some m&a activity, runs a pile of funds based on the russell and various baskets of “biotech.”
but this one can be clearly measured.
blackrock owns apx 1.5 million shares of biotime.
those shares price apx $7.5 million.
that sounds serious until you add one 4th grade fact:
blackrock has $3.7 >>trillion<< assets under management (aum).
so blackrock’s ownership of biotime is like 0.000000002% of its aum.
so, on a $100,000 port, how much biotime would somebody as smart as blackrock own?
2 mil. 2/10 of a penny. no more.
that leaves cirm, california’s own investment fund 100% in on “stem cells.”
as i noted 122209, cirm had 1.6% of its bets on biotime, in a rigged game which it cannot lose, since it will be taking a house edge at every level.
putting n the same $100k port, that’s $1600 in biotime, amex. on a $10k port, it’s $160.
as noted in that cirm analysis
http://baltbear-on-finance.com/uncategorized/dancing-with-w-stocks
if you make that move, you are working at 3x higher risk than cirm.
as derived from btx’s 10k, the “buffet price” for btx is no more than 2 1/4…if you believe the full btx sales pitch.
can the prudent speculator do that?
can someone buy 400 @ 4, sell 300 @ 6?
maybe.
the cronies and insiders have been doing it sall along to a basis well below 5/8.
bottom line? act like the smart institutions do regarding story stocks.
in the proven, measurable case of biotime, no more than 1.6% of your port, unless you feel you were born to lick the boots of the players.
Posted under business
This post was written by admin on October 18, 2011
