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Why Funds Missed Facet Biotech


Biogen's bid for micro-cap stock was essentially ignored by money managers.

Editor's Note: This content was originally posted on the Buzz & Banter (click for a free trial). It's being published here for the benefit of the Minyanville community.

Now that Biogen (BIIB) has gone public with its $14.50 bid for Facet Biotech (FACT), the standard commentary is: "Well, of course, it has $14.50 in cash, so Biogen will pay more."

Just out of curiousity -- if this was all so obvious, why was the stock allowed to languish below $9 until the bid came out? Whatever happened to efficient markets?

I think there are two answers, both related to the institutional (and I mean that in both a literal and pejorative sense) approach to money management.

First, this was a micro-cap company. Big, index-return-seeking money managers can't be bothered with a $500 million company. They can't invest enough to move the needle, even if they want to.

But, you should ask, what about mutual funds that specialize in micro-caps? How did they miss out on this?

There's only one answer: They didn't buy because the other guy wasn't buying. They were still trying to match their own micro indexes. Independent analysis be damned.

This is why the individual who's willing to do their homework, who's willing to be accountable to themself, has such a huge advantage over the so-called professional money managers.
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