Every investor has regrets. Stocks they should have bought, stocks they shouldn’t. Stocks they should have sold, stocks they should have clung onto forever.
Tech hero
It doesn’t do to dwell on might-have-beens. In fact, it’s particularly dangerous for investors, who should learn their lessons and move on. However, sometimes it’s hard to resist.
The best stock I never bought but really wish I had is AIM-listed Hutchison China Meditech (LSE: HCM), also known as Chi-Med. I recently stumbled across an old watchlist, and there it was. There were only two other stocks listed: Sirius Minerals, the exciting but risky polyhalite fertiliser play from North Yorkshire, and energy explorer Tullow Oil.
Out of the bag
I’m glad I didn’t buy Tullow, it is down 79% since I added it to my watchlist. I did buy Sirius, up 60% since I popped it on my watch list (although down 10% since I actually purchased it). However, I really, really wish I’d bought Hutchison China Meditech, because that was up a storming 1,900% to 3,920p, making it a massive multi-bagger. Ouch.
Worse, I remember agonising over it for several months, but never screwed up courage to buy what looked like a high-risk, high-reward play. It would have turned my planned £2,000 investment into £20,000. I’m not bitter. OK, maybe a bit.
China in my hand
Looking at it now, I can see why I was nervous. This is a biopharmaceutical company that aims to become a global leader in targeted therapies for oncology and immunological diseases. As a rule, I don’t invest in this sector. But my initial interest was in its commercial platform, which manufactures and distributes prescription drugs and consumer health products in China. I saw this as an exciting play on growing Chinese wealth and changing demographics.
I didn’t pay much attention to its Innovation Platform, which develops a pipeline of oral drugs for oncology and immunological diseases in North America, Europe, China and Australia.
Bumpy road
Last year, Royston Wild confirmed I’m not alone in looking at this stock. He saw plenty of reasons why earnings may detonate in the years ahead, as Hutchison bolsters its R&D and regulatory activities outside Asia and lays the ground for new product launches.
However, its shares tumbled in November after flagship fruquintinib cancer treatment disappointed in a final-stage Chinese trial with lung cancer patients, although it has subsequently launched for advanced colorectal cancer. It is down 20% over the last 12 months.
Power of 20
In March, it posted an 11% drop in overall group revenues to $214.1m, with a net loss of $74.8m, almost triple 2017’s loss of $26.7m. Revenues were hit by a change in Chinese government policy and an increase in research & development expenses. Cash and cash equivalents stood at a fairly healthy $423m, though.
Chi-Med’s fate now rests on its pipeline as it targets multiple new drug applications in the next two or three years. With a market-cap of £2.67bn, it has its work cut out to grow another 20 times from here. I wish it well, but at today’s much higher price, it still looks too risky for me.