Min Thang: Biotechnology and Pharmaceutical Expert with Nearly 200% Annual Return

We often hear about the potential of biotechnology companies and their stock performances .  With homework, patience, and maybe some luck, the chances of running into a big biotech winner can be improved.  Min Thang does just that while mitigating risks.

As one of the kaChing’s Genius investors, Min stands strong at the top of the hill.  With a kaChing IQ of 172, he is now the top kaChing Genius performer generating nearly 200% annual return (as of October 2009).

Probably by now, there are many spectators following Min wanting to ask more questions.  Well, now you get to learn more about him, thanks to Min and his insights he shared with us.

“Min, you currently hold the highest kaching IQ and the highest return amongst the Geniuses.  You also stick to your strength in healthcare consistently, and it certainly pays off for you.  How did you get to where you are today?”

It is definitely flattering and exciting to hold the top spot at the moment, especially knowing I am up there with a group of other very talented Geniuses, many of whom have decades of experience and manage millions of dollars in assets professionally. I am grateful for the opportunity to help others looking for a better and cheaper alternative to invest their money away from the typical mutual funds and brokers, while hoping to significantly beat market indices.

For the past several years I’ve worked in healthcare IT for a major medical institution. Being surrounded by medical practitioners and academicians, witnessing life-saving therapies being applied, and directly being involved in advancing IT infrastructure technologies and Clinical applications due to my job role, I developed a keen interest in the healthcare sector.

The real turning point was a few years ago when a small biotechnology company I owned got acquired by Pfizer. I originally purchased the stock deeming it was severely undervalued and the company was ripe as a takeover candidate. Seeing the actual fruits of my labor and realizing a lot of money can be made further sparked my interest, and it was at that moment when I started focusing solely on biotech and pharma companies, and here I am today.

“You look for undervalued stocks in biotechnology and pharmaceutical sector.  You then trade on momentum while investing on fundamentals.  We clearly see the end result of your strategy, but what are some of the resources you utilize to make that happen?”

An important aspect of any investor’s success is having an open mind and willingness to engage with other investors, either bullish or bearish on your stocks, to gather rational opinions. In the healthcare sector for a non-MD and PHD especially, there are complexities in understanding  a company’s drug mechanism and translating published clinical trial results. I am fortunate however to have a network of investors I talk to, many of whom are MDs, PHDs, statisticians, and investment professionals. They are not always right, but their insights and knowledge are priceless.

Outside of my close-knit group of contacts, the Internet obviously contains a wealth of information as long as you can pick the good ones from the bad. Let me give you a few of my regulars:

Investorvillage.com – This is a moderated stock message board with a mature audience base coming from all backgrounds. Now, the tricky part about message boards is that people are usually free to say anything, albeit following the website’s posting rules.  Therefore, you really have to judge their true agenda.  When you interact with a group of investors bullish on a particular stock for example, the individuals will suffer from “groupthink” oftentimes.  Furthermore, they will ignore differing or challenging analysis, and oftentimes even call you a “basher”.  A good investor should always evaluate both sides of the story and should never “fall in love” with a stock.

TheMarkets.com – Here you will find sell-side and macroeconomic research reports from thousands of institutional brokers, such as Goldman Sachs, Morgan Stanley, and Deutsche Bank. I am mentioning this website because I utilize it, but most non-industry individuals will not have access to this unless they have deep pockets. Subscription to this website is $2,000+/month, but fortunately for me a nice contact of mine granted me access.

Sumzero.com – Jeff Borack also mentioned this site. This private website caters to industry professionals like portfolio/hedge fund managers and analysts, but they do accept a small amount of private investors, me being one of them. You will need to send them a compelling research report and tell them why you deserve to be a member. What I like about this site is access to interact with investment professionals owning the same stocks you do, and the opportunity to compare each other’s financial models.

“What exactly do you look for in these companies?”

Biotech companies are very tricky to evaluate because most are cash-flow negative, and my analysis is based on perceived future value. I dissect the company and analyze every aspects of it, such as financials, management background and vested stock interest, institutional buys and sells, drug’s clinical efficacy and safety data, market potential , and competitive landscape. I compute a discounted cash flow model on my own to try to estimate what a stock would be worth if it were to reach the marketplace.

In an article piece interviewing Joseph Edelman, a prominent healthcare hedge fund manager, he stated “biotech stock prices are governed by the disparate forces of perception and reality.”  The binary events, or what he calls the “reality points”,  for these stocks are news of the clinical trial results, FDA advisory panel meeting review or approval, and quarterly financial results once the product has been approved and launched for example.  In between those “reality points” I try to exploit the stock’s momentum, up or down, and after much due diligence I may also let the stock sit through an anticipated clinical data release or FDA approval date only if I think it will be successful.

The key is always to find the best risk/reward profile of a stock. I do not invest in a stock I think will have a 20% upside potential when the downside risk is an identical 20%. I’ll give you an example. Let’s talk about DNDN since everyone always asks me about this stock, even though I’ve had many other big winners like VNDA, which I bought at $1 and sold at $13. I bought DNDN stocks around $4/share on kaChing and traded options on my personal portfolio. After much research, I evaluated that the upside potential for DNDN was $20/share, with downside risk a conservative maximum of $1 ($3+ cash/share with no debt, not even including any other assets) and heavy short interest (short sellers will naturally becomes buyers when covering) , so 500% upside and 25% downside. Yes, a 25% downside is significant for a large cap stock especially, but not for a small-cap speculative biotech stock with a MUCH larger upside potential, and in this case 500%! Remember, this is all about finding the best risk/reward.

“How has your experience been since the trade mirroring launch?”

So far it’s been phenomenal, even though trade mirroring only started a week ago. It’s exciting to see my portfolio shown on CNBC and talked about on Internet news articles.  I also receive a lot of questions on my wall post but I am willing to answer them to the best of my abilities, as long as people are not asking for personalized advice (due to legal restrictions).

“What do you enjoy doing with your personal time?”

Outside of my regular job and doing daily stock homework to maintain my portfolio on kaChing, it does not leave much room for playtime.  At the same time, I try to squeeze in as much activities as I can.  I’m down to earth and like simple things like just laying on my couch or bed and watching TV shows, oftentimes needing to play them back from my Comcast DVR.  Some of my favorites are 24, Entourage, Californication, Dexter, Top Chef, Man vs. Wild, and The Office (the fourth episode this season was hilarious and should’ve been the ending instead!). I don’t watch much sports but love watching the UFC, with favorite fighter being Quintin “Rampage” Jackson due not only to his fighting acumen but also likable personality.

Outside of the house I like to dine out with friends and try out different restaurants and visit local attractions. I live in the San Francisco Bay Area so I never run out of places to go. I also like to visit the race tracks and track my car, a modified Nissan 350z, around a circuit. This Winter I plan to visit Lake Tahoe a few times to go snowboarding.

“Lastly do you have any advice to those who want to follow your footsteps? I know it’s not as simple as investing in bio/pharma stocks hoping for the big surge.”

I actually don’t recommend beginners to start investing in biotech or pharma stocks with real money on their own. My field is a niche focus, and really only for those with experience and the right contacts, or who are willing to spend hours a day researching and understanding the stocks in the sector.