Corvus Pharmaceuticals and Two Types of Stock Picking

My investment strategy is really two pronged. These prongs are completely different from one another, polar opposites in fact.

One prong, which makes up most of my portfolio, consists of buying “undervalued” stocks. These are not necessarily cheap stocks. They can be. ie. the containership companies a few months ago, but no one could have said Caribou Biosciences was “cheap” at a $900 million IPO market cap.

If I see the stock as undervalued on some metric – in Caribou’s case because they hold patents to CRISPR Cas12a, have Jennifer Doudna on their board and are run by Rachel Haurwitz – then I buy and I wait for others to see the same thing.

So that is the first prong, and it make up most of the stocks I own.

The second prong is to buy the news.

While this is not as material to my portfolio, the situations tend to be much more fun to write a blog post about. So while I have been buying immunology stocks through September on the expectation of news someday, the ones that are most interesting to discuss are the one’s that I bought today on news yesterday.

Corvus Pharmaceuticals. Here is their story.

So after the market closed last night I am perusing my Twitter Biotech lists (lists are great on Twitter, and you don’t have to create your own, just join others that have a good swath of fintwits) and I see this bit of news.

Now I don’t know Patrick, but I do follow his comments on the list from time to time and he seems like a good chap. Doesn’t seem to be one of these biotech pumpers on twitter that runs from one pump and dump to another.

As it happens, because I have been researching immunology stocks for the last month or so, I know a little bit about one of the companies mentioned – Corvus.

I don’t know a lot about Corvus. In fact, I don’t believe I know a lot about immunology. Which is why I haven’t posted at all in the last month. I keep thinking, I really should write about these immunology stocks I’m buying. And then I think, but I don’t really know what I’m talking about, so what if I am just the sucker at the table?

Well there are a couple of things I remember about Corvus from having looked at them about 3 weeks ago. First – I know they are cheap. Prior to today they were worth only about $30 million ex-cash. So the market gives them no respect.

Second, I know they have a anti-cd73 antibody. In fact, I remember that they listed the AZN drug in their presentation.

Third, I know that they are going after NSCLC in their trial, they just expanded that trial, and that data will be announced very shortly (November).

Fourth, I have done enough work in the field of immunology now to realize two other things:

1. The D+O arm of the AZN study is showing very good results (albeit on a very small sample size).
2. An EV of ~$100 million for a potentially successful therapy is nothing.

Now keep in mind that I would consider myself to be in the “no clue if I’m the chump” category of investing in immunology. There is still SOOOO much I don’t understand. But I bought Corvus this morning in premarket and again after the open. I also bought the company who owns the “M” in the above study – Innate Pharma.

Somebody, I can’t remember who, said that you do the work so you are ready to act when the moment comes. It is a bit like muscle memory. But with the brain – all that research up front so that you can recognize a situation that is mis-priced and jump on it when it happens on you. That is what this second prong strategy is.

Let me emphasize one last time that I am a newbie to immunology. I could get creamed on both of these. But at least they make for an interesting story.