Investment Advice From Industrial Biotech Insiders
Industrial biotech is in the middle of a pivotal year in development. If you have been keeping up with press releases in the past month or so then you are keenly aware of that fact. Solazyme has risen on hedge fund accumulation in anticipation of commissioning and start-up activities at facilities in Europe (any day now), Brazil (2H13), and the United States (1H14). Codexis and partner Chemtex finally opened a demonstration facility -- the first of its kind -- for producing second-generation detergent alcohols. And Gevo began commercial operations at its Luverne, Minn., biorefinery, which is the first step to a successful future.
These are certainly developments worth watching, but don't rush into a position thinking time is running out. While it is true that Solazyme and Gevo will likely blow away prior sales figures in 2014, it will take years for each to become profitable. It is important to remember that a lot of (risky) work is left unaccomplished. I am not advising against an investment (quite the opposite), rather, I am cautioning investors not to buy into unsustainable pops. Better entry points await patient investors.
Don't take it from me though -- take it from the handful of individuals at the helm. Here's a look at all insider transactions at these three companies that occurred during the week of June 12-18:
Source: SEC. * Denotes total dollar amount.
These six insiders made almost $500,000, or a little over $80,000 per person, in just one week. What did you pull in?
Now, insiders buy and sell shares for various reasons. Many have automatic sales set to trigger at certain share price targets or once options are redeemed. The point here is that directors are taking advantage of recent short-term run-ups to sell shares. They are not trying to time the top or the bottom, but they know that the real news is still months and years away. Essentially, they are telling you to be patient.
My advice is to take the emotion out of investing in the industry. I know it is exciting. I know that you may firmly believe -- as I do -- that it will one day change the world and make your retirement a lot easier. But just because a stock on your watchlist shoots up overnight doesn't mean you need to act. Relax. These firms are all still classified as developmental companies for a reason. I'll be back to remind you next quarter.
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Editor's note: A previous version of this article incorrectly mentioned that Codexis CEO John Nicols sold about 8% of his company shares. Nicols had 70,463 vested shares withheld for tax liabilities and no shares were sold on the open market by Nicols or Codexis. The Motley Fool regrets this error.
The article Investment Advice From Industrial Biotech Insiders originally appeared on Fool.com.Fool contributor Maxx Chatsko owns shares of Codexis. Check out his personal portfolio, his CAPS page, or follow him on Twitter @BlacknGoldFool to keep up with his writing on energy, bioprocessing, and biotechnology.The Motley Fool owns shares of Solazyme. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.