AUPH
I initially purchased 15,000 shares of AUPH at $1.96. Prior to bidding on this company I analyzed several key factors. Initially I began to understand the specific role this company played within the sector. I began to understand that Aurinia Pharmaceuticals developed and tested therapeutic drugs in order to treat autoimmune diseases such as rheumatoid arthritis or systemic lupus across North America. After developing a basic understanding about the business I analyzed the financials. At the time AUPH was trading at around forty-four percent of its 52 week high ($4.49) which immediately indicated opportunity. As I thought this decline was simply a result of delay rather than changes in core technology. I strongly believe that biotechnology as a sector is fuelled by clinical endpoint rather than specific time targets so long as intellectual property remains protected. AUPH is widely regarded within the Biotech community as the lead innovator within the autoimmune disease. Their primary drug candidate, Voclosporin was due for a clinical research update. Many industry insiders predicted modest progress to about stage 1b or 2a. I placed this trade with confidence that this drug had progressed more rapidly as a result of the past two delays. Ultimately, I didn't fear an immediate decline as I understood and believed in the technology. Luckily, It was announced that they were actually in stage 2b which meant they were not far off from qualifying for FDA approval. This resulted in an immediate 7.5% increase in the share price. I then sold all 15000 shares at $2.12. I chose to sell as I felt within the allocated time we have their are stronger areas in which capital could be placed. I continue to hold AUPH in my personal portfolio as I feel that within the the coming year shareholders will see tremendous growth. The current 52 week target price sits at 7.80 which is a 363% increase from todays price.
LULU
Throughout my short trading career I have typically bought, held and sold shares. This past week I was able to experience short selling. (Lululemon Athletica inc). Although I have conceptually understood short positions for a long time I have failed to act as a result of the potential downside. LULU or Lululemon has been something on my watch list for the past 8 months. It's rapid growth over the last 52 weeks truly interested me. After posting 3 consecutive quarters of better than expected EPS LULU grew about 43 percent over the course of the past year. After viewing and analyzing the financials I quickly identified the significant issue LULU faced. Although net revenue continued to rise steadily operating expenses disproportionately increased creating unsustainable future. After creating a financial model assuming a 35% tax rate, a 4 % quarterly rev growth rate, 1% quarterly operating exp growth rate and a 4.5 percent discount rate I was left of a current valuation of $58.65. At the time LULU was trading for approximately $70.04. This seemed like an ideal short opportunity which led me to place a short order of about 1000 shares. Following a lower than expected earnings report their was an immediate market correction of about 5% causing me to cover. Long term I believe that LULU will eventually fall (5-10%) resulting in a fair value in my opinion.
NEXT WEEK
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