Thread for the new year, focusing on portfolio strategy and opportunity cost

In my time as a biotech investor, I think there have been 3 distinct eras

2012-2015: Rise of biotech, driven by key achievements by lg cap names. Valuations are obscene given actual progress

2016-2019: Consolidation as investors begin to question valuations, generalists flee the industry, political concerns remain an overhang

2020+ Significantly less political pressure after the achievements accomplished during Covid, some mind-boggling returns in certain names attracts generalists back in, BP needs growth, near-zero interest rates, extremely high quality IPOs/SPACs, science better than ever...

relating back to my own personal experiences, although I would like to believe I've improved as an investor over the last few years, I recall back in 2014-2018, when I did most of my own DD, I found it much harder to find quality names

now it seems like that is not a problem...there are a lot of high quality names out there, it's hard to keep track of it all. Basically something for everyone.

Tying this all to opportunity cost and portfolio strategy...

most new investors focus a lot on ideas and absolute performance, that is, if a position has made money, they are happy.

I don't think that is how experienced investors view the market.

Veterans view it through the lens of opportunity cost and how it relates to port strategy

There are a lot of ways a person can run a biotech portfolio, and it largely boils down to their own personal risk tolerance and what they are trying to achieve.

I've seen a lot of good ideas this year that I have declined because they don't fit with my portfolio strategy

and on the same line of thought, I've discussed names with some local friends, and the follow-up question is almost always "do you have a position yet?"

My answer was usually no, and it wasn't because I didn't like the company in name

it was because, especially later in the year, I was trying to limit my taxes and/or I hadn't yet determined the optimal way to position it in my portfolio to optimize opportunity cost...it is assumed I would have to reduce positions that I really liked

Keep this all in mind as you determine what portfolio strategy works for you going forward, and then keep an eye out for names that fit that mold...opportunity cost is everything in investing

Finally, remember, even great investors will get ideas wrong, sometimes disastrously so

don't let it get to you mentally, and certainly do not let yourself blow up over one name

It's like craft beer...I've sampled many craft beers and they have overall been a great experience. I've had some that were terrible.

but I don't let the bad apples detract from what has overall been something that I have found very interesting and positive.

That's all, see ya on Monday