We made 6x to 12x what we paid for SAVA in just two months


We just updated our one-month, three months, and twelve months return and were pleasantly surprised to see an eye-popping return of 137% for the trailing 12 months ending March. Some of that return can be credited to the general market.  The S&P 500 was up 56% but 81% of the Fund’s return was the excess return, in other words-alpha.

The Insiders Fund performed admirably without taking excessive risks. We did this by concentrating our investment funds on our best ideas, not diversifying across dozens of stocks like most ETFs or mutual funds do with a near similar percentage amount invested in each asset.  None other than Warren Buffett himself said, your 4th 5th, and 6th best ideas are not likely to be as good as your 1st, 2nd, or 3rd best ideas.  The Insiders Fund, though, is not likely to invest more than 10-12% in any one idea, nor more than 20% in any one sector.  If you have 20 oil and gas stocks, they are all likely to move lockstep with the price of oil and gas and provide no real diversification if all the stocks are in the same sector.

Most of this excess return was attributable to Cassava Sciences, SAVA.  We first blogged about Cassava in our September 29th, 2020  post on The Insiders Report where we identified it as a possible 200 bagger.  Peter Lynch first popularized the expression about talking about his 10x returns from some of his best ideas at Fidelity’s Magellan Fund. I like to refer to Fidelity as the house Peter built. The Magellan Fund is the most successful mutual fund in history. Its returns for a decade exceeded even the best performance period of Warren Buffett.

We first noticed Cassava over the summer when insiders were starting to buy the stock.  After analyzing and watching the trading performance, we started to buy SAVA under $8 in September.  We never had more than a 2% position as we thought it was risky, highly unlikely to succeed in combatting Alzheimer’s where so many others had failed yet; the “what if’s” were amazingly skewed to the upside.  If SAVA’s drug, simufilam, actually got approved by the FDA, the stock could be worth 200 times what we paid for it.  Cassava rocketed on some early good news and we sold all of the stock within just two months for 6 to 12 times what we paid for it. If anyone has any doubts about the value of “insider information”, they should go back and read that post.  Cassava is now trading in the low $40’s with a long row ahead in the Alzheimer’s race. We hope to get another shot at it but for now, the party is over.

Great ideas in the stock market don’t happen every day.  Sometimes the best an investor can do is go “skiing”. This is my excuse when I take off in the middle of the day and hit the slopes. Now that ski season is done, I’m going to have to substitute heading off to the gym as my retreat from looking at flashing symbols on the screen.  Investors should remember that sometimes the best thing to do is nothing unless of course, you stumble upon a Cassava.

The Insiders Report is a weekly email newsletter and Twitter feed with timely trading ideas based in great part on the knowledge I have gained over 20 years trading the stock market. It’s free to the partners of  The Insiders Fund and 50% off to clients of the firm, Alpha Wealth Funds.  To find out more information, go to https://www.theinsidersfund.com/memberships/ Please make sure to read all disclosures there.