The past few months have certainly been interesting on the ASX and more broadly. There is ridiculous volatility but certainly islands of opportunity to be found. 

As so many fellow Straw people have discussed holding your nerve, understanding your valuations, having conviction and cutting the dead wood are decisions we are all juggling. 

I am going to share a few lessons and mistakes I have made recently and the steps I am taking to hopefully rectify some of these. 

My General Investing Philosophy: 

I am not shy in articulating that most of my investments are made because a company fundamentally aligns with my values. I find that this approach has worked for me in the past and helps me to maintain my nerve during difficult market conditions.  I want to invest in companies that help the world and that simultaneously allow me to profit. 

Volpara Health Technologies (VHT):

I bought Volpara in 2019. I am guilty of falling for the story stock with this one. I also grossly over-payed for this share. I stupidly threw all valuation out the window and Fomo’d my way into this one. 

@Claude Walker not long ago discussed this stock on the Rask Podcast (I believe). He relayed a story about having a discussion with the CEO Ralph Highman about how ridiculous the stock price had gotten. Ralph apparently chipped him about the inevitability that at these sky high prices Claude would likely sell…….This was around the time I took my entry position of $1.67. Yikes!!!!!!!

I don’t know what happened. I thought VHT would storm the USA and that the FDA would enforce compulsory breast density values on all US breast screens- Volpara was the only company that could do this at that stage. It was rigorously backed by science and had such a noble cause (I was in!). 

My goodness I was wrong……I should have known better, that during a Trump administration, with a one man governmental department dismantling mantra, that this was a pipe dream. 

I have sat on a large number of shares since. 

I added further insult to injury and doubled down and participated in the late 2019/2020 capital raise at $1.50 a share. No problems I thought, I will average down and be ahead in no time. 

Well as a long-term investor I could bunker down and accept my fate and revisit this stock in 2023. Enter COVID, a downward spiral in SP, no FDA breast screen density mandates, elusive ARPU increases that are always touted but MIA and compounding opportunity cost. My lesson, I finally called it IRL this past fortnight and sold some of my position at a loss. 

It hurts to do! Not very long term of me. 

My reasoning, opportunities abound elsewhere. Ralph has been shuffled out and the new CEO has zero track record. I initially thought I would hang around with 100% invested and give this new CEO a chance to prove her salt but then the Polynovo SP drop happened. 

So I have reduced my position by ¼ and I have started to invest capital elsewhere. I will give this company another few Qrtlys to see whether they can increase their penetration of the US market and prove that they can increase their ARPU. 

Polynovo (PNV) the new opportunity:

As many investors have identified selling a position, timing it and timing a new share position is essentially impossible. 

This fortnight I have dared to reach for the impossible and sold ¼ of my VHT holdings to buy more PNV. 

Polynovo is a company I know well,  have been invested in and followed closely for many years. I hold positions in my SMSF and my personal portfolio. 

Its leading product BTM has 90% profit margins, increasing penetration of sales globally and increasing and varied successful use cases. There is a flood of medical journal articles in support of this product and it is becoming more broadly discussed amongst not only burns doctors, but oncologists, orthopods, plastics, paediatrics and for chronic wounds. The use cases beyond dermis burn repair has meant this stock has become too compelling to ignore. 

Add to this the increasing short position (10%), Insider buying and the state of affairs in Europe. BTM is a lifesaving and limb saving product that will be helping to save lives. I suspect a $5M -$6 M sales month will be announced shortly. Last month it broke the $4M record. This increasing run rate will ensure PNV is cash flow positive this FY with huge growth of between 60-100% depending on sales increases in Europe and the US. 

I am happy to relocate capital to take advantage of this growth. With increasing interest in this stock and ongoing insider buying I believe an imminent and significant short squeeze will lift this stock to new highs and I am willing to position my portfolio to take advantage of this. 

CBA I am tapping out: 

I was able to take advantage of the COVID storm last year and buy a position in CBA at around $60 a share. I was glad for the safe haven amongst the volatility. 

I have happily ridden this stock to $103 ps today. I have very low conviction in the state of the housing market and I am worried about loan defaults with increasing interest rate rises. I don’t feel comfortable that the interest rate rises on loans will be enough to offset the increasing interest on savings and the mortgage default. 

In addition the scuttlebutt of the possible Metricon Developer collapse is enough for me to pack my bags and leave the banking sector. 

FMG:

I plan to deploy some of my CBA in to my high conviction for future FMG growth. Hydrogen stocks I feel will change the landscape of energy in the not too distant future. I have faith that Twiggy can deliver an efficient and highly successful Hydrogen Energy company. 

Pointerra:

 “The PME of the Geospatial world” wasn’t it Andrew ;)

I plan to continue to build my position in this stock. I believe 20c is a very reasonable valuation for a company of this potential. 

Hints of $50 M ACV 12 month earlier than expected and large possible defence contracts that may be imminent are compelling. 

Neuren Pharmaceuticals:

I will also scrimp and save to find as much capital as possible to pump in to Neuren. The FDA application for Trofenitide should be due in June. I anticipate a successful submission and a commercial product in the next 12 months with significant share price uptick. 

There are golden opportunities in the market and PE’s that are too reasonable too ignore. 

I suspect that risk off bear market won’t last long. Yes interest rates are rising and the global market is tumultuous. However in Aus shares usually stabilize after the certainty of election outcomes. 

I could be completely wrong on all of the above!!!

Cheers

Nnyck777