2023-03-29 22:59:14 ET
Summary
- Since LSD is not patentable, the company will have to find something else to generate revenue that would bolster the bottom line.
- With the company being a Meme stock in the past, it could present an opportunity for those getting in at an attractive entry point for a short-term play.
- It's going to take some time for the pipeline of the company to move forward, and in the near term there aren't any visible catalysts associated with fundamentals.
- There are three things to take into account if considering investing in the company, and they represent how traders view the company.
I am coming in from a little different angle with Mind Medicine ( MNMD ) in this article, as I'm not going over the variables associated with psychedelics, the IP challenges of the company, and the length of time it'll take to know whether or not some of its pipeline has a legitimate chance of being approved.
Some of my colleagues at Seeking Alpha have already covered the majority of the fundamentals of the market and the challenges MNMD faces in the years ahead. Among those not impressed with the company are Edmund Ingham and Stephen Tobin there being better options in the sector and the lack of value in the firm.
With the company focusing primarily on unpatentable LSD, it's difficult to see where the value in the company resides as it stands today. It appears that it's just throwing a lot of stuff at the wall to see if it'll stick in relationship to R&D, and even if it's able to find something that has potential that it can patent, it'll be years after that before it would be ready to release to the market, assuming it's approved.
With that in mind, I'm going to look more at other factors affecting MNMD stock, including its past Meme status, its potential as a day trade or swing trade stock, and as a speculative long-term play.
In this article we'll look at those three aspects of the stock and why taking a small position in the company could position investors for a potential upward move that could reward them in the short term.
TradingView
MEME stock
There have been several times when MNMD has made big upward moves over the last couple of years, with one starting in September 2020, another after it corrected from that move, and last, when it traded as a MEME stock in August 2022.
After hitting its all-time high of approximately $86.00 per share on April 26, 2021, the stock has been in a free fall, plunging to its 52-week low of $2.12 per share on December 29, 2022, before rebounding to about $3.00 per share as I write.
The main point I want to make here is the stock has the inherent potential, based upon its share price movement over the last three years, to make some huge moves on either side of the play.
While it has been trading in a tighter range since early October 2022, it did break out as a MEME stock starting August 8, 2022, when it was trading at around $8.00 per share, jumping to approximately $20.00 per share on August 18, 2022, before resuming its long, downward trend.
The catalyst behind the MEME stock move was related to Jake Freeman and a report from the Financial Times (paywall) that pointed out his investment of $27.00 million in Bed Bath & Beyond, which produced $100.00 million from the position he took.
So when he took a position in MNMD, the assumption from various social networking sites was he was going to engage in another activist campaign which had the potential, in the mind of traders, to produce similar returns as he received from Bed Bath & Beyond. That resulted in the MEME rally that more than doubled the share price of MNMD in ten days.
Day trade or swing trade stock
When looking at the share price movement of MNMD, it offers a consistent number of opportunities to either day trade or swing trade the stock, especially when taking into consideration its modest share price.
A recent example of a solid swing trade was when the company hit its 52-week low mentioned above. After hitting $2.12 near the end of December 2022, by January 18, 2022, it has soared to around $3.76 per share, pulled back a little, and went on to hit $4.25 per share on February 8, 2023.
Looking at the volatility of the stock, there are quite a few opportunities like this to make similar, profitable trades over time. They are more recognizable when looking at charts of shorter duration, with the couple exceptions of the wild, upward moves.
What goes up must come down of course, so a trader could take the short side of the trade as well, with a high-percentage chance of making money on both sides of the play because of the lack of support that would keep the share price from significantly pulling back.
Speculative long-term play
For those that don't like to watch a stock on a daily basis, MNMD could be traded as a long-term speculative holding. With the company not expecting to get final results from its pipeline anytime soon, there aren't going to be any catalysts associated with the fundamentals of the business itself, which means when the company does take big dips, it would represent a high-percentage chance to buy-and-hold for the long haul.
The key to limiting risk there is modest position sizing. This isn't a stock that should reflect a significant portion of any investor's portfolio. It should be considered a highly speculative holding that may produce asymmetric results. It also needs to be understood that the stock could just as easily collapse and remain under downward pressure for a prolonged period of time.
When thinking in terms of MNMD having been a MEME stock in the past, a possible day or swing trade stock because of volatility, and a speculative play that could be held for the long term, it reflects three different ways to trade the stock that have the potential to generate meaningful returns.
If an investor looks at the company as a long-term, speculative holding, it means it would include the MEME status of the stock and the trading aspect of the stock as well. The reason that's true is because of the lack of any meaningful catalysts at this time. It's going to move up or down on sentiment, and that can happen at any time.
Conclusion
With the company having cash and cash equivalents of $142.00 million at the end of calendar 2022, it should have more than enough capital for the next couple of years, which means, at least from the point of few of the company being able to continue operations, that it is here to stay for now.
I think the best way to look at MNMD at this time is as a speculative, long-term holding, because with that mindset, it provides the potential benefit of what a MEME stock or trading stock offers. While the past doesn't almost repeat itself, it does point to investor behavior and how it drives the share price of the stock over time.
It appears to me that without any catalysts from its pipeline having near-term approval potential, the stock is almost totally trading on sentiment and emotion, which means it's likely to remain volatile and offer consistent trading opportunities.
As for holding for the long-term based upon fundamentals, being a pre-revenue company, there really aren't any fundamentals outside of its balance sheet and expenditures.
If an investor thinks there is potential in MNMD, I think the best way to trade it is to consider it a long-term speculative play, which has the additional benefits of being a trading or MEME stock, which offers three different opportunities to make money on the holding.
All that said, the stock could easily fall further, and under that scenario and the above-mentioned lack of catalysts in the near term, the share price could remain in a low-price holding pattern for a prolonged period of time before it moves in either direction based upon the results of its pipeline process.
My conclusion is if an investor psychologically considers MNMD a speculative, long-term holding, they have positioned themselves to potentially make money on a day trade, swing trade, or a Meme trade if it's once again triggered by online influencers.
For further details see:
Mind Medicine (MindMed): Killing 3 Birds With One Stone