OFF THE WALL: What are the odds stock picking can make one a millionaire?

By Rene Pastor

One of my students in junior college said the stock market reminds her of a casino. She may have a point.

How many investors out there think they have found this hidden nugget of a stock which could make them millionaires down the road? A lot of guys dream of buying a stock really cheap and then just sit back and see it shoot up, say, five years from now.

Anyway, I found this biotech stock called Rexahn Pharmaceuticals. You can buy it for 51 cents, 52 cents a share. The company has a couple of cancer drugs in their pipeline and one looks especially promising. Look at their message board, and there are a lot of excited investors who are bullish on Rexahn.

One stock blogger with the handle luiirigi5aaa wrote: “RNN might have a 50 dollar share price in 5 years based on what they are working on now. RX-3117 if proven to be safe and effective will be very valuable. Don’t laugh, the bio-stock JAZZ was only 59 cents per share on April 30, 2009 and JAZZ is now ABOVE 81 dollars per share WITHOUT doing any reverse stock split and WITHOUT any other artificial means to raise its share price. From 59 cents to 81 dollars, JAZZ.”

The guy is right about Jazz Pharmaceuticals. The stock closed on April 30, 2009 at 55 cents a share. It did not trade over $20 until late in 2010. On October 9, 2013, it finished at $84.28 a share.

But for every biotech that made it big, there are 5, 10, 20 others who flopped and folded. Like buying the lotto, the odds of hitting the jackpot are very long indeed.

The drug Rexahn is developing has not been tested but the clinical data looks very promising. For one, it is a pill, which would be great and would save one from painful chemo. The studies show it may be effective against 50 different cancers. An article in the stock market website said those cancers “include lung, kidney, colon and pancreas, representing combined worldwide markets of over $30 billion. RX-3117 has also overcome resistance to certain chemotherapy drugs, enhancing its value as a companion treatment.”

Rexahn’s other cancer drug, Archexin, is in Phase II trials and looks just as promising against pancreatic cancer, which is notoriously tough to treat.

There are roughly three steps before a drug can win approval from the Food and Drug Administration here. A lot of drugs fall by the wayside before they can even get to Phase III.

In a word, it is not going to be a slam dunk for Rexahn to travel from a micro stock trading at about 50 cents to the investor nirvana of a stock that would trade at $20, much less $50 per share.

Micro cap stocks are companies whose total value or market capitalization stands between $50 million and $300 million. Rexahn’s market cap is about $60 million. Apple’s would be at over $400 billion.

But you do not get involved in stock market investing if there isn’t a bit of a gambler in you. I have most of my portfolio invested in solid stocks like Apple or Google, Visa and Goldman Sachs.

You need to set aside some money to invest in a pure speculative stock just to see if you can catch lightning in the market. I want to throw the dice on Rexahn and see if I can roll a 7.

‘Off the Wall’ is a weekly column on the stock market. The comments expressed here are the author’s personal views and are not meant to recommend the buying or selling of stocks.

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