I've bought a lemon now what?

[Minotaur]

I bought Immupharma Plc (IMM) at 1.70 and then got ill. I have just started to get a hold back on things and it closed at 0.057. It looks like I bought it at its highest share price.
I cannot think of anything to do except hold my nerve and wait for their new drug to hit market.
My other shares have worked the way I planned and dividend. Not as well as they were however they have ticked over.
Any ideas or advice?
Maybe even your worst purchase stories as some sort of comfort.

[AccidentialMustache]

Use selling it as capital loss harvesting to artificially push down your income against an important threshold (aca subsidy levels, able-to-contribute-to-roth-ira levels, etc?)

Spitballing, not tax advice.

[Telecaster]

Did the business case change?   That's what you should be looking at, not the stock price. 

[Minotaur]

Did the business case change?   That's what you should be looking at, not the stock price.

No, we are still waiting for the drug announcement that raised the price when I bought it.
This the article that was referenced in the newsletter I think.

[MustacheAndaHalf]

I bought Immupharma Plc (IMM) at 1.70 and then got ill. I have just started to get a hold back on things and it closed at 0.057. It looks like I bought it at its highest share price.

I assumed "got ill" meant days or weeks, but the $1.70/share price of IMM seems to be from 2012 or earlier.  It's been a penny stock (under $1.00) for the past 5 years.
https://finance.yahoo.com/quote/IMM.AX?p=IMM.AX

This looks like a "lottery ticket" stock to me, where if they discover an important new cancer fighting drug the stock pays off very well... and if they don't, the stock winds up almost worthless.  Is that a fair description, or do you have another thesis?

[Minotaur]

I assumed "got ill" meant days or weeks, but the $1.70/share price of IMM seems to be from 2012 or earlier.  It's been a penny stock (under $1.00) for the past 5 years.
https://finance.yahoo.com/quote/IMM.AX?p=IMM.AX

This looks like a "lottery ticket" stock to me, where if they discover an important new cancer fighting drug the stock pays off very well... and if they don't, the stock winds up almost worthless.  Is that a fair description, or do you have another thesis?

I bought just before it dropped and then my life went to rubbish for 18 months and then I got ill so not a good last few years.

[MustacheAndaHalf]

I assumed "got ill" meant days or weeks, but the $1.70/share price of IMM seems to be from 2012 or earlier.  It's been a penny stock (under $1.00) for the past 5 years.
https://finance.yahoo.com/quote/IMM.AX?p=IMM.AX

This looks like a "lottery ticket" stock to me, where if they discover an important new cancer fighting drug the stock pays off very well... and if they don't, the stock winds up almost worthless.  Is that a fair description, or do you have another thesis?

I bought just before it dropped and then my life went to rubbish for 18 months and then I got ill so not a good last few years.

Thanks for correcting that assumption, but I think the concern of a "lottery ticket" stock still stands.  I'd suggest limiting the percent of your portfolio that goes into stocks like this one, in case you have others.

[Minotaur]

Thanks for correcting that assumption, but I think the concern of a "lottery ticket" stock still stands.  I'd suggest limiting the percent of your portfolio that goes into stocks like this one, in case you have others.

Yeah going to stay away from anything like this in the future.

[terran]

What happened in the past doesn't matter. Don't hold on hoping to recoup your losses, that's the sunk cost fallacy at play. The only decision that matters now is whether you would buy this investment right now at the current price. Not selling is exactly the same as buying.

Actually, since you can deduct the loss against any gains and against up to $3000 of ordinary income if the loss exceeds gains (with any additional loss carried forward to future years) you'd be slightly better off selling at a loss than you would be buying the same stock right now even if you decide it's worth owning at the current price.

[Telecaster]

Did the business case change?   That's what you should be looking at, not the stock price.

No, we are still waiting for the drug announcement that raised the price when I bought it.
This the article that was referenced in the newsletter I think.

In that case, if you liked it 1.70 you should love it at 0.057.

That's the proper way to think about it anyway.  What you should really do is re-evaluate the business case and make a model for the effect this new drug will have on future profits, which ultimately translate to the stock price.  If you can't do that, then there is a good case for selling. 

[Dicey]

Hahaha, I thought this thread was going to be about a car.

I thought we liked ETFs around here, not individual stocks and certainly not penny stocks. What'd I miss?

[Minotaur]

LOL it was not a penny stock when I bought it so that the problem.

While I agree with the points made, due to the current value I might as well let it sit there as a future warming and if it still rubbish in the future at some point use the capital gains on it.

[mistymoney]

ho much do you have in it currently?

seems like it might be a permanent loss - would it be better to cash out and try to move forward with the money in like an etf, or call it all gone, and leave and hope to get surprised with good news.

[Minotaur]

ho much do you have in it currently?

seems like it might be a permanent loss - would it be better to cash out and try to move forward with the money in like an etf, or call it all gone, and leave and hope to get surprised with good news.

Think it is a permanent loss however there so little value to cash out that leaving it seems to be the better option as it might be worth it to make me triple check what I am being told.

[Juan Ponce de León]

You might aswell leave it at this point.  Keep it there to sell when you ever need to offset some capital gains.

[Morning Glory]

How much are we talking about here, anyway?

[vand]

What you paid for it in the past doesn't matter.

If you didn't already own it, would you buy it today?

If not, you should probably sell it.

This was not an investment, it was a speculative gamble that didn't work out. You can't invest in this company, butyou can gamble in it. 

There is no reason the shareprice should recover - a quick look at the financials shows that the company lost money in each and every year since its floated, and diluted the shit out of existing shareholders by tripling the amount of stock in circulation.

The stock market's is just doing its in allocating capital to these type of ventures, don't take it personally.

[vand]

Hahaha, I thought this thread was going to be about a car.

I thought we liked ETFs around here, not individual stocks and certainly not penny stocks. What'd I miss?

Yeah, always amuses me that on one end you have the global cap weighted passive indexing mantra, and at the other you have people trying to pick out the next rocketship and hundred-bagger. Nobody seems interested in the sensible middle-ground established bluechips that are the actual backbone of the economy.

[PDXTabs]

Actually, since you can deduct the loss against any gains and against up to $3000 of ordinary income if the loss exceeds gains (with any additional loss carried forward to future years) you'd be slightly better off selling at a loss than you would be buying the same stock right now even if you decide it's worth owning at the current price.

This is what I would do. If you are in the USA that $3k loss can be carried over indefinitely AFAIK. You could even get back into the stock later if you want to (just avoid the wash-sale rule).

[Morning Glory]

Once in a while there will be a class action lawsuit and shareholders will get some of their money back, if someone can prove that the company lied to inflate stock prices. The amount you get isn't very much though.

[Minotaur]

What you paid for it in the past doesn't matter.

If you didn't already own it, would you buy it today?

If not, you should probably sell it.

I completely agree under normal circumstances I would have bailed however it too late now.
It a serious learning experience going forward.

[shureShote]

Before I figured things out and started dumping every dollar into VTSAX, I would buy a couple thousand bucks in individual stocks each year. This was back in 2000-2010. I bought about 25 shares of HOG somewhere close to peak. I leave it sitting there as a reminder. Any time I log on, I get to see a little red entry in the list. There are some ones in there also (twenty total holdings, all dividends got to VTSAX), but that little red one helps keep me grounded.

[MustacheAndaHalf]

LOL it was not a penny stock when I bought it so that the problem.

While I agree with the points made, due to the current value I might as well let it sit there as a future warming and if it still rubbish in the future at some point use the capital gains on it.

In case it makes you feel better, I bought dozens of stocks in 2020 and one of those had similar performance to IMM - just sped up into a 2 year time frame.  But it was one of dozens, with the overall performance being unbelievably good.

Small cap drug companies like IMM are very high risk.  If you plan to continue stock picking, I'd suggest avoiding this entire category (tiny drug companies).  You could also limit stock picking to 10% of your portfolio and use 90% passive index funds as your portfolio's core allocation.

[vand]

An investment is the value of all future cashflows discounted to the present.

If a company doesn't or has never had any cashflows, then how can you "invest" in it? You can't... at least not according to the most widely accepted definition of an investment.

Anyone buying individual companies needs to watch and understand this:

https://www.youtube.com/watch?v=Bxqre8vPYBo

[Minotaur]

Before I figured things out and started dumping every dollar into VTSAX, I would buy a couple thousand bucks in individual stocks each year. This was back in 2000-2010. I bought about 25 shares of HOG somewhere close to peak. I leave it sitting there as a reminder. Any time I log on, I get to see a little red entry in the list. There are some ones in there also (twenty total holdings, all dividends got to VTSAX), but that little red one helps keep me grounded.

Yeah I going to do that with this I think.

In case it makes you feel better, I bought dozens of stocks in 2020 and one of those had similar performance to IMM - just sped up into a 2 year time frame.  But it was one of dozens, with the overall performance being unbelievably good.

Small cap drug companies like IMM are very high risk.  If you plan to continue stock picking, I'd suggest avoiding this entire category (tiny drug companies).  You could also limit stock picking to 10% of your portfolio and use 90% passive index funds as your portfolio's core allocation.

Yeah as I said from now on going to stick to the long term dividend stocks and stay away from recommendations with out a lot of checking.

An investment is the value of all future cashflows discounted to the present.

If a company doesn't or has never had any cashflows, then how can you "invest" in it? You can't... at least not according to the most widely accepted definition of an investment.

Anyone buying individual companies needs to watch and understand this:

https://www.youtube.com/watch?v=Bxqre8vPYBo

Really interesting. I was looking at his fund last night and I had one thought which was that a lot of Apple and historically without Steve Jobs Apple does not do well. Also you factor in an economic down turn with everyone tightening their belts after 18 months of increasing tech experience across the board.
I was really surprised by a lot of his picks to be honest there is not a lot of forward looking stuff.

[Telecaster]

An investment is the value of all future cashflows discounted to the present.

If a company doesn't or has never had any cashflows, then how can you "invest" in it? You can't... at least not according to the most widely accepted definition of an investment.

You're mixing up terms.  The intrinsic value is the value of  future cashflow discounted to the present.   The investment is how much you pay to get that value.   You can certainly invest in companies with no cash flow.   Most start-ups for example.   

[Telecaster]

Really interesting. I was looking at his fund last night and I had one thought which was that a lot of Apple and historically without Steve Jobs Apple does not do well. Also you factor in an economic down turn with everyone tightening their belts after 18 months of increasing tech experience across the board.
I was really surprised by a lot of his picks to be honest there is not a lot of forward looking stuff.

BRK is not a fund, it is a working company, primarily insurance, that reinvests the insurance float into other companies either buying them outright or taking equity positions.   You're right, most of BRK's investments tend to be stodgy predictable companies like railroads and oil companies.   BRK is now so large the stock performance is similar to the broader stock market so IMO its days of red hot performance are over.  But still, BRK has been able to reliably grow earnings a little faster than the broader market itself.   At the moment it is trading near the top of its historical valuation range so it probably isn't a great buy right now, but a good stock to keep an eye on and consider purchasing some if the valuation drops.