Taking a Second Look at 3D Bioprinting Stock CELLINK
The fifth biggest country in Europe by area also happens to be both innovative and productive. The 2020 Innovation Index ranks Sweden as second in the world for innovation (trailing the Swiss), and her per capita gross national product (GNP) is among the highest in the world. Now the country that brought us the zipper, the adjustable wrench, and the pacemaker, is also bringing us 3D bioprinting.
Back in April of 2019, we first wrote about A 3D Bioprinting Stock That’s Not Organovo and turned our readers on to an interesting Swedish firm called CELLINK (CLNK-B.ST). The company’s long-term strategy is to become a leading player that “satisfies the entire workflow and the entire value chain within bioprinting and single-cell analysis.” Their stated goal is to grow organically by at least 35% per year, and even more through acquisitions. Given what they’ve been able to accomplish so far, there’s no reason to think they can’t keep that growth streak going.
CELLINK Stock Soars Alongside Revenues
In a nutshell, CELLINK is a 3D bioprinting firm that came out of nowhere and has a revenue growth trajectory that would make Organovo investors salivate. The red arrow below is when we last checked in with the company, and look at that beautiful consistent growth they’ve managed to achieve since then, with consumables becoming a bigger percentage of overall revenues as time goes on:
We love it when a firm makes it easy to access their key metrics. Investors in CELLINK should just keep an eye on this chart which graces their regular investor updates. As long as they can keep growing revenues and increase the percentage of consumables, they’ll be an increasingly attractive bolt-on acquisition.
When we last looked at CELLINK, we commended their profitability as it meant they wouldn’t have to sell shares to raise capital. That’s changed. As any good company would, they’ve decided to sell shares and raise capital in the face of their soaring share price. It makes sense to raise capital – through debt and equity – to fuel their aggressive growth targets and capture as much market share as possible. Profitability can come later.
When to Buy CELLINK Stock
A few weeks ago, we published a piece on Why We Only Buy Tech Stocks That Are Unicorns. In other words, we won’t consider investing in companies with a market cap less than $1 billion. As of today, CELLINK is a $1.5 billion market cap company having blown well past our $1 billion minimum requirement. We’re now moving from just liking the stock to wanting it in our portfolio. The question one of our premium subscribers raised a few weeks back is, at what price should we be buyers?
Market cap appreciation is a proxy for share price appreciation, and shares have been on a tear. After a 4:1 split in October 2020, shares continued their upward climb having appreciated +120% over the past year compared to a Nasdaq return of +40% over the same time frame. Over the past month, shares have been consolidating, so today we drew a line in the sand and opened a small position.
How to Buy Shares of CELLINK Stock
To buy shares of CELLINK properly, you need to open an account with Interactive Brokers. It’s a brokerage firm we have mixed feelings about. We’re less than impressed with their you-promote-our-stuff-for-years-and-then-we’ll-give-you-the-runaround-when-it-comes-time-to-make-a-payment affiliate program, but we can’t live without their trading platform. That’s because it allows you to easily pick up some Swedish krona at spot price, which you can then use to buy shares in CELLINK on Nasdaq Nordic. You’ll then be invested in a foreign stock that’s denominated in Swedish krona so you’re getting some real diversification effects here.
It’s not just about diversification, it’s also about minimizing risk. You should always buy shares on the native exchange if you can. That’s because ADRs are sometimes composed of dubious legal structures, or they’ll charge fees which aren’t that transparent. In the words of another broker we use religiously because they do nice things like refund all our ATM fees:
The next thing to consider is the transaction costs you’ll incur making this trade. Interactive Brokers talks about how much you’ll pay to buy or sell shares on Nasdaq Nordic, but it’s difficult to translate that into the actual numbers that come out the other end. Depending on how big of a whale you are depends on how much you’ll pay. Rates are around 0.7% in the worst-case scenario, so nothing too bad. In other words, a $1,000 punt will set you back $7 in transaction fees, which is about what everyone paid before the Americans brought us free trading.
Buying CELLINK Stock
What price would we be buyers of CELLINK stock? The answer is today’s price, so we had one of our fresh-faced MBAs log into the company brokerage account and buy some shares. What transpired went something like this:
- Market opens and shares are up +1.3% and starting to climb. Rather than wait to buy shares at an arbitrary time of day as we advised, he panics, and pulls the trigger at 248 per share.
- Hours later, the price falls -3% to 240 per share, and he panics even harder, questioning every single decision he’s ever made in his life.
- Towards the middle of the day, shares are hitting new highs – up +3.2% – and now he’s on cloud nine, telling his husband over lunch that he’s the second coming of Nostradamus.
- At the close of the trading day, shares are up +6% from the 248 purchase price, and our MBA breathes a sigh of relief. The day’s trading is over, and he hasn’t lost any paper money – yet.
That whole emotional process we just described is exactly what you want to avoid. We’ve all been there. Do not torture yourself over paper losses or gains. Pull the trigger on some shares and draw the line in the sand. If shares fall over the coming weeks, buy more. If they rise too rapidly, take some gains. Stop checking the market every five minutes during trading hours. The sooner you learn to separate emotion from investment decisions, the sooner you’ll be an expert investor. Sometimes, being too busy to check the market all the time is a good thing. Let us know when you manage to do that because we still haven’t been able to after 20 years of trading in the markets.
Buying More CELLINK Stock
We’ve looked at the key metrics and see consistent revenue growth, no impact from The Rona, an increasing percentage of consumables, and much-needed currency and country diversification. So, we’ve entered a position around the 248 mark. It’s about one-sixth the size of our target position (equal weighting), and just a line in the sand that we can use to base further purchasing decisions off of.
We should have been accumulating back when CELLINK broke through our $1 billion market cap cutoff, but we completely missed the event. (That whole “don’t watch the market too much” advice backfired.) The stock has been consistently gaining over time, and appears to be on a growth trajectory that even The Rona can’t shake. We’ve now learned the importance of paying closer attention to small stocks as they rise so that we can start investing when the time is right. Our newly created Nanalyze Tech Stock Catalog now makes the task of monitoring market caps much easier.
There was a very clear temptation to pull the trigger on a much larger position. That’s emotion getting involved. We regret having not been in earlier, so we overcompensate by accumulating a much larger position to start. We also look at that beautiful stock chart and want to have skin in the game. Both these emotions are “fear of missing out,” FOMO as the kid say. We’re fine with having a small amount in the game right now. As with all our positions, we’ll be accumulating on dips. We’re proceeding very cautiously in a time that can only be described as the best of times and the worst of times.
Trying to time the market is not only nerve-wracking, it never works. Trying to wait for dips can also represent lost opportunity as some stocks steadily appreciate for long periods of time. The best approach is to get some skin in the game so that the stock is on your radar. If the stock soars to the moon, you’re happy you have skin in the game. If it sinks, you’re happy to buy shares at bargain prices. Taking as much emotion out of the process as possible helps you sleep well at night when you’re investing in volatile tech stocks.