argenx SE has a close gain ahead, based on market maker coverage (NASDAQ:ARGX)
You just read it verbally, now watch it work in practice on a comparison of portfolio choices, evenly between argenx SE (ARGX) and like biotech stocks.
Description of the company concerned
“argenx SE, a clinical-stage biotechnology company, is focused on the development of antibody-based therapies for the treatment of autoimmune diseases, hematology and cancer. It is developing its lead product candidate, efgartigimod, for the treatment of patients with myasthenia gravis; phase III immune thrombocytopenia; and other similar ailments. The company has a strategic partnership with AbbVie S.Ã€.RL and LEO Pharma A/S; and collaboration agreement with Cilag GmbH International, Staten Biotechnology BV and Shire International GmbH. argenx SE was incorporated in 2008 and is based in Breda, the Netherlands.
Source: Yahoo Finance
Risk-reward comparisons of biotech stocks
(used with permission)
The trade-offs here are between short-term upside price gains (green horizontal scale) considered worth protecting by market makers with short positions in each of the stocks, and past actual price declines experienced during of the holding of these shares (red vertical scale) . Both scales are percent change from zero to 25%.
The intersection of these coordinates with the numbered positions is identified by the stock symbols in the blue field to the right.
The dotted diagonal line marks the points of equal upward price change predictions derived from Market-Maker [MM] hedging actions and actual worst-case price declines from positions that could have been taken as a result of earlier MA predictions like today’s.
Our primary interest is in ARGX at the location . A standard “market index” of reward~risk trade-offs is offered by the SPDR S&P500 index ETF at .
These predictions are underpinned by the self-protective behaviors of MMs that typically need to put company capital at temporary risk to balance the interests of buyer and seller by helping capital-intensive portfolio managers adjust multi-billion dollar portfolio volumes. The hedging measures taken with real money betting daily define the magnitude of likely expected price changes for thousands of stocks and ETFs.
This map is a good starting point, but it can only cover some of the investment characteristics that must often influence an investor’s choice of where to invest their capital. The table in Figure 2 covers the above considerations and several more.
Compare alternative investments
(used with permission)
The column headers in Figure 2 define the items for each rank stock whose symbol appears to the left in the column [A]. The elements are derived or calculated separately for each stock, depending on the specifics of its situation and the current forecast of the MM price range. Data in red numbers is negative, generally undesirable for “long” holding positions. Table cells with a pink “fill” background signify conditions that are generally unacceptable for “buy” recommendations by our standards. The yellow fills are data for the main stock of interest and all shows in the ranking column, [R].
Readers familiar with our methods of analysis may wish to skip to the next section displaying the price range forecast trends for ARGX.
The purpose of Figure 2 is to attempt universally comparable answers, stock by stock, of a) how SIGNIFICANT the price gain might be, b) how likely is the gain to be a profitable experience, c) in what timeframe this may occur, and d) what A RISK of a price decline may be encountered during its holding period.
Column price range prediction limits [B] and [C] be defined by MM’s hedging actions to protect the firm’s capital which must be exposed to the risk of price changes from volume trade orders placed by large $”institutional” clients.
[E] measures the potential upside risks for the short MM positions created to fill these orders and rewards the potentials for the buy positions thus created. Past forecasts like this provide a history of relevant risk of lower prices for buyers. The most severe actually encountered are found in [F]during the periods of maintenance in the effort to reach [E] earnings. This is where buyers are most likely to accept losses.
[H] indicates what proportion of the [L] sample of similar past predictions made gains by causing the price to reach its [B] target or be above sound [D] cost of entry at the end of a maximum holding period limit of 3 months. [ I ] gives the net gains-losses of those [L] experiences and [N] suggests how much [E] can be compared to [ I ].
Other reward-risk trade-offs involve the use of [H] win odds with loss odds 100 – H as weights for N-conditioned [E] and for [F]for a combined yield score [Q]. The typical job retention period [J] to [Q] provides a symbol of merit [fom] ranking measure [R] useful in portfolio position preference. Figure 2 is arranged by row on [R] among the candidate titles, with ARGX at the top.
In addition to candidate-specific stocks, these selection considerations are provided for the averages of nearly 3,500 stocks for which MM’s price range predictions are available today, and 20 of the top-ranked (per of) of these forecasts, as well as the forecast for the S&P 500 Index ETF (NYSEARCA:SPY) as a proxy for the stock market.
Recent Trends in MM Price Range Predictions: ARGX
(used with permission)
This picture is do not a “technical sheet” of past prices for EW. Instead, it’s the last 6 months of daily price scale forecasts upcoming market actions in the coming months. The only past information is the closing price of the stock on the day of each forecast.
This data divides the opposite predictions of the price range into bullish and bearish outlooks. Their trends over time provide additional insight into upcoming potentials and help keep perspective on what might be to come.
The small image at the bottom of Figure 3 is a frequency distribution of the daily appearance of the Range Index over the last 5 years of daily forecasts. The range index [RI] indicates how much the decline in the forecast range occupies that percentage of the entire range each day, and its frequency suggests what might appear “normal” for that stock, in the eyes of evaluators.
Here, the current level is close to its least frequent and least expensive occurrence, encouraging acceptance that we are looking at a realistic valuation for ARGX. With almost all past IRs above the current IR than below, there is more room for an even more positive outlook.
Prospect of past profitability of investment candidates
This comparison map uses an orientation similar to Figure 1, where the most desirable locations are bottom and right. Instead of being limited to price direction, the questions are more qualitative: “how big” and “how likely” are the price change expectations now?
Our main interest is the qualitative performance of ARGX, particularly in relation to the choices of alternative investment candidates. Here ARGX is at location the intersection of the horizontal and vertical scales of +19% gain and +90% insurance (chances of “winning”).
As an industry standard, SPY is at the location  with a gain of +7% and an assurance of profitability of 83%. ARGX tends to dominate all others in this comparison.
Among these alternative investments explicitly compared argenx SE seems like a logical buying preference now for investors looking for short-term capital gain.