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Yet Another Value Podcast
Chris DeMuth's State of the Markets October 2023
Oct 24, 2023
Chris DeMuth discusses problems and opportunities in biotech, tax loss selling, closed-end funds, big spread arbitrage, Albertson's / Kroger merger case, and predicts upcoming Liberty Day.
38:09
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Quick takeaways
- Failed biotech companies often trade at low valuations due to tax loss selling and management teams' reluctance to divest resources, but activist investors are working to unlock their value.
- Wide spreads in closed-end funds present attractive opportunities for investors to acquire discounted shares, benefit from chunky spreads, and use the discounts as data points for selecting more promising funds.
Deep dives
Failed Biotech: A Promising Overview
The podcast introduces the concept of failed biotech companies, which are those that have invested heavily in developing a drug that ultimately fails. These companies often trade at low valuations, relative to the cash they have remaining. One reason for this is tax law selling, where investors who bought into the company's earlier hopes and dreams decide to cut their losses. Another reason is the management teams' refusal to consider the value of the cash on the balance sheet and divest resources to find new opportunities. However, activist investors are attempting to unlock this value by engaging with these companies and pushing for effective capital allocation.
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Discover
highlights
Listen to the best highlights from the podcasts you love and dive into the full episode