What do I look for in a stock I don't know?
As you might imagine, people often ask me for an opinion about a stock.
It may be something I know, or it could be a name I have never heard of or looked at before.
And if it is the latter, how do I go about forming an opinion?
I was asked about a stock just like that on Wednesday (20-05-26), a Finnish Biotech company called Nanoform, which trades under the ticker NANO FH.
It’s a real minnow at €70.0 million market cap, too small in fact for Barchart, my usual platform, to have any information on it at all.
Of course, I don't just have one platform, and so I was able to switch to TradingView, which does cover the stock.
I always like to start by looking at a chart, and typically a candle chart, in this instance, a 5-year chart.
As you can see, I have added a trendline, and you don’t need to be a technical analyst to work out what that is telling us. It's been in a downtrend for most of that time.
Source: Trading View
But looking at the far bottom right of the chart, we can see that something's changed.
Instead of continuing lower, the price has started to pick up, which is notable.
Next I tend to take a look at the newsflow, starting with what's on Trading View.
Source: Trading View
That all sounds broadly positive, but the historic price action alone tells us that the business has had “issues,” and the fact that it mentions a cash burn target for 2026 suggests it's a start-up, or start-up type business.
A quick search on the internet takes us to the company website, which tells us that it's a drug development business. Or more specifically, a business that tries to help drug developers to improve their pipelines.
Turns out that the company was founded back in 2008, so it's had a long runway to get to here.
Perhaps it's a slow starter because the US National Institute of Health says this about the lifecycle of Biotech companies:
“The biotech life cycle spans 8 to 15 years, evolving from academic discovery into commercialised therapy. Companies burn through substantial capital over five main stages: Discovery, Preclinical, Clinical Trials, Regulatory Approval, and Commercialisation, often relying on venture capital and strategic buyouts before achieving self-sustaining profitability”
Source Gemini/National Institute of Health
Biotech and biotech drug development are specialist areas requiring expertise that I don't possess, but even a layman in this area can see that things may be changing for this stock.
So, in response to the question, what did I think of Nanoform?
My answer was that it was option money, that is, a speculative play on the upside, with a known and limited downside risk.
Coincidentally, the stock price has risen by +8.0% today ( 21-05-206), which could suggest I read it right.
The power to make predictions
Nanoform isn’t the only stock that I have had to research recently.
Pioneer Power Solutions came to my attention at the end of April, though I cant recall exactly how or why.
Anyway, I was sufficiently impressed by what I discovered to send the following message to members of the Idea Factory chat.
“ Pioneer Power Solutions PPSI US is another one on the watch list and making the right noises”
I also shared the following chart and a brief bio about the business, which you can see below.
Source: Barchart.com
Source: Barchart.com
“Power” is a touchstone in the market at the moment.
Data centres need it, generators don't have it (or enough of it to go around)
And those who need it are prepared to pay up to get it. and the equipment necessary to bring it into data centres.
Consider these quotes taken from an interview with an employee of Siemens, about data centre energy demand:
“An interesting dynamic is that even though the data centre requires 100 MW, the builders are buying N+1 units of gas turbines (so more than just for 100 MW) as backups, as well as having more energy capacity, as they believe they will continue to grow that data centre.”
“Margins on equipment in the sector have gone from 4-6%, where they were 2-3 years ago, to 20-23% and in some cases even 40%. The data centre builders know the margins are high, but they are fine with it because they just want to get it”
Source https://x.com/RihardJarc/status/2056729458170536159
You don't need to know all about a stock to be able to trade it; you just need to know enough to allow you to make a judgment call about where it sits and what could happen.
Pioneer Power Solutions PPSI US jumped by +21.55% yesterday.
Source: Barchart.com