Our Best Virus Stock up 331%

"52% of American households are invested in the stock market...

4-in-10 U.S. workers (41%) have access to an employer sponsored

or union sponsored retirement investment plan"

- Pew Research Center

​​The Portfolio

The portfolio is UP +28.5% YTD.

Our benchmark index, the S&P 500 is up about 1.4% YTD.

The Quote Above

There are many, particularly in politics, who want the narrative to be, "Wall Streets Evil People vs. Everyone Else". Generally, I believe there should be no 'Us vs Them', but let's face it, Us vs. Them is how politicians get elected and how political parties stay in power. With more than half of American's invested in the stock market, and no good alternatives exist to save and grow your savings for the future, it seems counter-intuitive to attack the very institutions that make our saving possible. Our politicians have a duty to do what's best for all the people. To that end, shouldn't they be incentivized to direct all people to the best ways to save. Shouldn't they be focused on what's best for all of us, instead of perpetuating the 'Evil Wall Street CEO' narrative? That narrative only serves to discredit the public markets and instill fear in anything 'Wall Street'. As individual savers we all need to look past those sound bites and just do what's right for ourselves and our families.

"My biggest concern about that 52% statistic is that the number is much too low. Every American should have an individual account

with a basic allocation to index funds, gold, bonds

or bond proxy stocks that pay reliable dividends."

If you don't like the PEW Research poll, maybe you'll like the rosier Gallup poll better. So far in 2020, Gallup finds 55% of Americans reporting that they own stock, based on polls conducted in March and April. This is identical to the average 55% recorded in 2019 and similar to the average of 54% Gallup has measured since 2010.

At least one trend seems clear: The increasing dominance of pension and mutual funds, university endowments and insurance companies in the stock market, and the declining role of individual investors as direct market participants. In this arena, the numbers do seem to tell the story. An alternative way to look at stock ownership is as a percentage of personal financial assets. In 1998 the New York Fed looked at stocks vs. real estate and found that stock ownership was surpassing real estate as the most owned asset class.

In 1969, shares of common stocks represented 36 percent of personal financial assets. By 1979, the figure was 25 percent; by 1989, the percentage had fallen to 20 percent. What's taking the individual investor out of the market? At a high level, confidence is low. Just think back on the insider trading scandals; program trading; a number of products individuals were sold quite aggressively that haven't worked out, packaged products like closed end mutual funds in particular. They have approached it more like a casino then like a long-term investment vehicle. And that is a very difficult game. The SEC could have done more to protect individual investors but every action the SEC and Congress takes toward that goal just makes the situation worse.

After the DOT COM bubble burst Congress enacted legislation that made it far more difficult for small companies to go public. That's another way of saying, small companies had to turn to traditional lenders to raise capital instead of selling stock to the public. This reduced the number of publicly traded companies, took valuable stock and options out of the hands of middle and working class workers and consolidated investments in stocks to an ever smaller group of people and a shrinking number of shares. This is why the gap between the 10th percentile and the 50th percentile keeps widening. As the central bank reduced interest rates, savers found that even their savings accounts couldn't grow. Now what? Where can anyone turn to save for the future? Excuse my rampant paranoia but it all feels like a design to get the masses dependent on government aide and to direct their votes to 'the champions of the people' who will fight against those evil people who were lucky enough to work at companies that could go public and provide shares to their employees.

"There is a simple set of stocks, index funds and exchange traded funds

that anyone can use to save and build a nest egg for the future.

I might just create a model portfolio like this and give it away free on this site."

VBI Vaccines Up 331% For Us VBI Vaccines has been a big gainer in the Stay Invested portfolio. Congratulations to any of my readers who have held the stock. Since adding VBIV to our portfolio at $1.32 per share, the stock closed today at $5.82 for a 331.11% gain. Are we greedy for not taking this profit? I don't think so, because the valuation of the individual drug candidates have much greater potential.

VBI Vaccines is a biopharmaceutical company that develops and sells vaccines for the treatment of infectious diseases and immuno-oncology in Israel, the United States, and internationally. It's hard to invest in a company with no revenues so we have to look toward the future prospects and how good the company is at raising capital to keep research and development moving forward.

The companies product pipeline includes:

  • Sci-B-Vac: a prophylactic hepatitis B vaccine for adults, children, and newborns.

  • VBI-2901: a preventative pan-coronavirus vaccine candidate targeting COVID-19, severe acute respiratory syndrome (“SARS”), and Middle East respiratory syndrome (“MERS”). This is the most viable multivalent vaccine candidate in development.

  • VBI2701: VBI has applied its eVLP Platform in the development of a medulloblastoma (“MB”) therapeutic vaccine candidate. With its novel approach, VBI intends to create a MB immunotherapy that will stimulate the patient’s own immune system to identify and attack MB tumor cells, while sparing the vulnerable surrounding brain that is still developing in children.

  • VBI-2601 (BRII-179): an immunotherapeutic candidate for a functional cure of chronic hepatitis B. The company's enveloped virus-like particle (eVLP) platform technology allows for the development of eVLP vaccines that mimic the target virus to elicit a potent immune response.

  • VBI-2501: VBI is applying its eVLP Platform in the development of a preventative Zika virus (“Zika”) vaccine candidate.

  • VBI-1901: is a glioblastoma vaccine immunotherapeutic candidate, which is in Phase I/IIa clinical study.

  • VBI-1501: a prophylactic cytomegalovirus vaccine candidate that has completed Phase I clinical trial.

  • In addition, the company engages in the development of vaccine platforms and products for licensing to pharmaceutical companies and biotechnology companies. It primarily serves physicians and pharmacists through direct sales. VBI Vaccines Inc. has collaboration and license agreements with Brii Biosciences Limited; and GlaxoSmithKline Biologicals S.A. It also has a collaboration with the National Research Council of Canada to develop pan-coronavirus vaccine candidate targeting COVID-19, severe acute respiratory syndrome, and Middle East respiratory syndrome.

To arrive at my valuations I used a fantastic Discounted Cash Flow Model with a Probability of Success Variable built in. The model was built by equity analyst Mikael Rudolfsen specifically to analyze VBI Vaccines. At the current prices in the range of $5.50-$6.00 VBIV in my opinion is fairly valued, not expensive or under valued, as such I would endorse a new position at current prices for investors who are taking a long-term view (2-5 years). The model assumes no revenues in 2021, though I would update this if substantial grant funding was acquired.

When I apply a probability of success (i.e: commercial launch and revenues) to each of VBIV's drug candidates, I get substantially higher valuations that are in line with the target returns that growth investors demand. At current prices I've assigned a 50% chance of success for Sci-B-Vac. If Sci-B-Vac launches I would change the probability to 100% and track the revenues in the model. Assuming conservative sales growth the stock should trade in the $10-$15 range with a successful Sci-B-Vac launch.

Due to the urgency and competitive landscape for a COVID-19 vaccine, we would assume that VBI-2901 for Pan Coronavirus to be next to market. That's a big IF since its still pre-clinical but we can all make the assumptions that allow for this drug to advance faster. Right now I have a 10% probability of success on 2901, but if the drug is commercialized over the next 12-24 months we would expect just those two drugs to push the stock into the $30-$40 range.

VBI-2601 is in Phase 1b/2a as a therapeutic treatment for Hep B. If launched this drug would improve revenues enough that along with 2901 and Sci-B-Vac, VBIV stock should be trading in the $42-$54 range. These are all fair value estimates. My personal opinion is that selling and trading on minor gains in this stock at these low levels is not the way to maximize returns in this name. Traders will take profits to build their own war chests, but much larger returns over the next 5 years are there to be had by simply holding the position and adding on significant pull backs.

"Markets don't go to zero, Portfolio's do.

Buy quality, be patient...and look twice for motorcycles."

- Clay Baker

Stay Invested,

Clay Baker

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Keep Me Honest 2020

  1. Today is a good time to carefully leg into stocks again (3-20-2020).

  2. Worst Case: S&P 500 decline further to around 2,100 - 2,150 (3-28-2020).

  3. Middle Case: S&P 500 level out around 2,650 - 2,700 (3-28-2020).

  4. Best Case: YE S&P 500 eventually rise to around 3,000 - 3,200 (3-28-2020).

  5. Market bottomed March 23, 2020 at S&P 500 2,237.40 (4-17-2020).

Clay's Rules

Rule #1: Don't lose money

Rule #2: See Rule #1

Rule #3: Portfolios go to zero, markets don't, Stay Invested

Rule #4: When good stocks you own drop 10% below your cost basis, add shares

Rule #5: Bull markets aren't sustained without the Transports

Rule #6: When Forward P/E is lower than TTM P/E, expect earnings to increase

Rule #7: When an investment bank sells below book value, buy it

Rule #8: Tips are for waiters. Do your own homework.

Rule #9: Don't sell a stock because you're bored with it. Do your own homework.

Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:

VBIV

I am invested short in these securities mentioned in this post: GSX

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.

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This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice.
This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities.

© 2016 by Clay Baker all rights reserved