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Author: ripley Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 3880  
Subject: YABF - Yet Another Biotech Fiasco Date: 4/9/1997 12:32 PM
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You always hear that buying stock on a tip from your brother-in-law is about as dumb a move as you can make. Well, I bought 2000 shares of Biocontrol Technologies (BICO) for $0.22 each on a tip from my sister-in-law. And you know what? She gave me a good tip. It was my own greed, ignorance, and stupidity that made this my dumbest investment ever.

BICO was pushing a laser-based technology which purportedly allowed human blood glucose measurements to be taken in a non-invasive fashion - that is, without breaking the skin to obtain a blood sample. It was touted as a boon to diabetics, who have to test their blood sugars many times each day, as well as a boon to hospitals and even (rumor had it) police departments, because as an extra added bonus, this technology could also measure blood alcohol levels.

Over the next year, BICO stock went up to around $8.00 a share. Holy cow, I thought (I'm a Phil Rizzuto fan), all I have to do is hang on to these shares and I can pay for my kids' college! Well, the bad news started breaking just about then. BICO was getting competition from other companies and details about their product were starting to emerge. In any case the stock went down to about $2.00 a share when I finally bailed. Not bad, I thought. Pretty damn good, actually. Not what it could have been (Bulls vs. Bears vs. Pigs and all that) but I'll take that kind of return any day.

But I wasn't done yet. No, BICO climbed back up to about $4.00 a share on rumors of impending FDA approval. Also, during this interlude, my oldest son, then only seven years old, developed insulin-dependent diabetes and was having to do blood glucose tests 4 times a day minimum. His fingers hurt. My brain hurt. Stupidity kicked in big time. I took the money I had from the first sale and plunked it into 1000 shares of BICO at $4.00 each.

The stock swung back and forth between $2.00 and $4.00 for awhile, before one day hitting $6.00 a share on news that BICO had an an upcoming FDA hearing where they would be presenting the results of their testing in an effort to get their product approved. And do you know what those turkeys did? They went to the FDA with numbers based on a some statistically insignificant sampling (something like 38 people) ! The FDA, which I think really wanted to approve the product in the US, was so taken aback (and I'm sure, more than a little insulted at the audacity of BICO management) that they sent them packing. You can imagine what happened to the stock.

I ended up selling the thousand shares at about a buck apiece. I had turned about $500 into $4000, then turned that $4000 into $1000. After all was said and done, I had actually made money. But it was still my DUMBEST investment ever. I had to watch this stock like a hawk (not easy with a small-cap stock in the days before widespread Web-based quote systems). I didn't trust the company; heck, I didn't even research the company. The first annual report I received from them came after the FDA fiasco, and when I read it, I was shocked - this was not a company I wanted ANYTHING to do with. And yet I owned 1000 shares. I had made my decisions for all the wrong reasons - greed, emotion, and wishful thinking.

I suppose it's normal to be "once burnt, twice shy," but I'm happy to say that I did NOT run away from stocks in general after this particular bad experience. I actually learned a lot from it.

So began a Foolish life. I'd like to think that the stocks I now own I own for the right reasons and with the right intent. They're all great companies.

Regards,

Rip
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