noun
- pride or arrogance
- (in Greek tragedy) an excess of ambition, pride, etc, ultimately causing the transgressor’s ruin.
Slack Investor possesses all the human frailties – try as he might, even after decades of investing, some of these failings will occasionally surface. Recently flushed with pride with his good performance figures for the past 15 years, he let a few stock plunges go too far – on the mistaken premise that the market will quickly correct itself to reinforce Slack Investor’s view of the world.
A bit of history here … Slack Investor is disciplined in his investing in many ways. However, a trait that he struggles to shake is the sin of hubris. So convinced is Slack Investor of his magnificent stock picking abilities – he sometimes will persuade his inner self that, after a stock price fall, the ‘market’ has got this one wrong! He was so happy while his healthcare stock prices were going up that he brushed aside the unmistakable signs of decline over the past 6 months.
Slack Investor waded into Telix Pharma last year on the strength of its very impressive projected growth figures which led to a very high Slack Factor score. What he didn’t account for is the huge effect of any regulatory problems on potential growth. During reporting season, just the suggestion of problems with the regulators causes great panic.
The Telix share price plunged 18.8% on the day after the company revealed it had run into a snag with the United States Food and Drug Administration (FDA). – From Motley Fool, reporting on just one of the TLX shocks that has led to a 30% stock price drop in August 2025.
With hindsight, Slack Investor wishes he had acted more quickly with his stop loss levels, but the falls were so dramatic that only the day traders would be able to get out with some dignity. Slack Investor is not a day trader and looks at his stocks weekly.
What to do about Telix now?
The FDA concerns with TLX were about some future products in the pipeline and the actual 2025 reporting season results were quite good – hopefully, all the bad news is already priced in! It is time to rationally have another look at the stock to decide whether to dump TLX and look for other opportunities. I go to the Market Screener Finance tab for TLX.
Slack Investor first looks at the Income/Projected Income chart to ensure that the income over the past few years and the projected income are showing a rising trend. The next chart down is the Balance sheet. He is looking for debt levels that are well covered by sales. No red flags here.
He then collects a few numbers. PE levels at 170 (December 2024) are frighteningly high … but, if the projected sales growth comes to fruition, the predicted 2027 PE Ratio is a more comforting 21.
A look further down the financial page reveals the predicted profitability (ROE). The forecast ROE for 2027 is a healthy 21.53%. Further down on the page is the predicted Earnings Per Share (EPS). Slack Investor is interested in how these earnings are predicted to grow. For 2025, 2026 and 2027, the forecast EPS growth is 26.04%, 97% and 91.62%
Combining all this data together with other healthcare stocks in my portfolio that had big falls over the past few months helps me determine whether to hold onto these stocks – or not!
Lessons?
‘Markets can remain irrational longer than you can remain solvent‘ – John Maynard Keynes
There is no doubt that Slack Investor should have parked his hubris and let his healthcare stocks go at a much earlier stage in their decline – but for all sorts of human reasons, Slack Investor has found this very hard to do.
However, we are here now … and what should he do? Would he buy these stocks now at the current price? Given these forecast growth figures above … probably! So, for now, I’m being patient and hanging on.
Healthcare stocks often seem to have heroic growth estimates that are easily thwarted for regulatory reasons or the efficacy of competing products. These forecast growth figures can distort simple measures like the Slack Factor.
Mental note to Slack Investor … weather this crisis … and then, reduce exposure to speculative healthcare stocks.
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Without inside information or a deep knowledge of FDA determinations what are we to do? What was openly known at the time of the sudden July fall? You’ve mentioned stop losses so I’ll look into your thinking on using them. I know some small-cap investors use 30% as their line in the sand. They also have many positions, often 50+ to easily keep their initial risk on any one position to no more than the often recommended 2% – which you’re closing in on with Telix 🙂
As to hubris, I have held to my conviction on Calix from an entry at $3.70 in 2021. Pre-earnings positive, I’ve even bought more, though never exceeded 1% of my portfolio. Check their chart! I do like their business, which is focussed on de-carbonisation solutions including for cement processing (LEILAC proprietary) and now ZESTY and ZEAL zero-oxygen smelting for steel and aluminium. They have success is establishing pilot and demonstration plants with large international players as well.
Is that hubris on my part? I’m calling it an unintentional speculative development.
That really doesn’t make sense, perhaps better is “an un-anticipated speculative progression”.
Hi Trevor, naturally I think your right to limit exposure to these speculative stocks – and, I wish I had regarding TELIX! Particularly those stocks that show “an un-anticipated speculative progression”. I had a look at CALIX (CXL), and it looks an interesting company. Hopefully on the verge of starting to make some money. At last, the price chart is showing signs of price support and a ‘Wedgie’ has developed on good sales projections from Marketscreener.com. I might have a bit of a lash at this myself. Cheers, Slack Investor.
And today some ZEST added by RIO!
A demonstration plant of 30,000 tonnes sounds serious, and it is for Australia! The Global Iron and Steel Tracker (GIST) tells me Australia produces just over 4,000t pa in pre-retirement plants today. The big story has to be what does China do. It produces over 800,000t pa of iron today.
Now for some ZEAL!