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The Secret Broker
After 35 years of stockbroking for some of the biggest houses and investors in Australia and the UK, the Secret Broker is regaling Stockhead readers with his colourful war stories — from the trading floor to the dealer’s desk.
According to the internet, ‘It’s a blast’ means ‘an enjoyably exciting experience, occasion, or event’.
Well it wasn’t a blast last week for the holders of the ASX listed Mesoblast (ASX:MSB), when their shares fell 50% in a day.
Falling so much in a day is a real mean feat and it is not something you see (or wish to see), in a day, that often.
I’m never sure if you pronounce Mesoblast like you do with ‘Miso soup’ as in ’misoblast’ or, like its share price ‘messoblast’.
Either way, I know their ASX code is MSB and that the company was listed on Thursday 16th December 2004 and their opening price was 91c, having raised money at 50c, in their IPO.
So, some lucky investors got an early present from trading Santa and ever since their listing day, they have always been a punter’s favourite, in the good times and the bad.
In case you want to know all about what the company does, all you have to do is go to their website, for an explanation.
Are you ready?
‘Mesoblast is using its proprietary mesenchymal lineage cell technology platform to develop and commercialize (yes they used the ‘z’ and not Oxford English me) innovative allogeneic cellular medicines to treat complex inflammatory diseases resistant to conventional standard of care.
If what they do is not that clear to you, then they expand it a bit more for you and for this bit, you will need to sit down.
The Company’s portfolio of Phase 3 product candidates are:
As I am just an old broker and when seeing big words that are used to explain things (and for this one you need at least 8 years of medical training), then I start to immediately lose interest.
My loss of interest is from early experience, when you are young and keen and ready to find that magic stock which will become a 100 bagger and not just a boring old 10 bagger.
Normally, some broker who was close to the company would get into your ear and paint such a rosy story, that you would run back from the pub to your office, just to get yourself set before anyone else.
Once set, you would wait and see, whilst dreaming of how your five grand will become five hundred grand and what you are going to do with all that cash.
Now, most of you will recognise the next steps you take, when your investment doesn’t quite do what it is meant to do.
You start doing some research and you start to become even more knowledgeable. You start to ask around and see what others know and in the case of Mesoblast, you would even question your doctor, just before finishing your appointment.
They do medical things, right? They should know.
You wait for them to say that they know all about the company and that, so much so, they have their entire super fund invested in just that one stock.
Plus their entire family and even their sister’s new born has got some.
If you don’t hear this and get ‘I’ve got no idea what you are talking about’ then it is the doctor who is ignorant and now they are the fool.
So much so, that you now go out and search for a new doctor.
One who understands these things.
And so it goes on.
Only then do you start to do the research and put in the hard yards.
Each announcement that the company makes, now gets properly read (at least 3 times) when the stock goes down instead of going up.
If the stock goes up, it’s you that becomes the investment genius but if it goes down, then it is the company’s fault for not explaining things correctly.
Hence the share price fall.
It’s after many announcements and many more downs than ups and after your then ‘short term’ punt has now turned into a long term investment, that you start to become even more involved.
You are now going to attend the company’s AGM!
This way you get to hear and see the directors but even more importantly, you get to meet fellow shareholders, over free tea and biscuits. These freebies tend to be the only dividends that you will ever see.
You all agree to share email addresses and you all agree that the ‘down rampers’ on the stock markets forums have it all wrong.
You will even boast about how you had taken them on and how you hate ‘@ASXdave’ and ‘@buffetjunior’ for being the worst offenders and non holders.
Unfortunately, things have gotten so bad in stock forum land for Mesoblast, that they are now asking for the founder of the company to be sacked.
He has 68m shares, so he has felt the pain the most, but that doesn’t matter.
When you first got in he was your hero, but now years later he ‘clearly doesn’t know how to run a company’ so he must go.
Who will replace him, no one knows but you don’t care. JUST SACK HIM!
One of the other parts of losing 50% of your investment in one day, is that family and friends will also point this out to you.
They will go out of their way to phone you up and ask ‘how you are going’ and ‘did you see that Mesoblast fell heavily the other day. Do you still hold them?’
As if you didn’t know!
Putting Mesoblast to one side for a second, have a go at AVZ, who have been suspended since May 2022 (on a A$2.6bn valuation).
The long and wrong can’t get off the forums, thus leaving long trails of dribble and made up assumptions, even though not one share has traded for 15 months.
Over 200 messages a day and not one trade!
Frustrations are pent up so much, that at their next AGM (if they have one), all of the directors may need to have police protection or at the very least be required to have bulletproof jackets strapped on their suits.
So, as you can tell, I have been there, done that and learned the hard way, so I can offer some tips on what to do and not do and hopefully save you a few grey hairs.
That way you have an interest and can now do some research.
If they go up, you can take a profit and if they go down, you have 90% left with which to claw back your losses.
If you do find yourself caught though, try to avoid the forums and just watch the stock. If a good announcement has come out and the stock has a bounce and then falls away, then that is not a good sign.
If you are holding on for a do or die result, just like Mesoblast’s last one which led to its 50% plus fall in a day, then don’t.
The risk reward for holding on to something ahead of major results is just pure gambling. I now wait till the results are out, especially for junior oil and biotech plays.
I have witnessed how a major oil find can lead to a three day re-rating of the stock and how buying in the next day can be pretty lucrative. The same goes for Biotech companies.
Just remember a stock can only fall 100% but can gain many 1000’s of %, so you get more chances on the upside.
The day you sell a dud stock, means you have losses to carry forward for years to come, plus you never have to look at it again. The market doesn’t care what price you got set at. You do but the market doesn’t.
Also and for me this is a very good one, don’t tell anybody about what you just bought.
No boasting or spruiking as this will lead to not having to answer any pesky family and friend inspired questions.
If you take on board some of these tips, then they may save you from a few grey hairs and help you put your time and energy into better things.
As we would say on the floor:
With research you gain knowledge. Without it you gain experience.
Trust me. It doesn’t work the other way around!
The Secret Broker can be found on Twitter here @SecretBrokerAU or on email at [email protected].
Feel free to contact him with your best stock tips and ideas.
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