Media Coverage Of Biotech: News Flow Pessimism For Affymax

Based on a recent sentiment analysis performed by the Contextuall team, it has become clear that the financial media and blogosphere are very gloomy on the outlook for Affymax, Inc. (AFFY)

But is this extreme negativity a contrarian buy signal?

Importance of Extreme Investor Sentiment
Several behavioral finance studies have shown that investors tend to over-react to the most recent events. In other words, they overweight the the importance of recent information.

This means that investments may drop below fair value during periods of negative news, or rise above fair value during periods of positive news.

Contextuall is built on this idea. We try to identify cases of extremely one-sided media sentiment, and offer tools to our users to profit from investor herd behavior.

Sentiment Stats: Affymax, Inc. (AFFY) Compared to the Biotech Industry
Contextuall’s news sentiment algorithm analyzed recent Affymax, Inc. (AFFY) headlines, classifying 15.0% of headlines as Positive, vs. the Biotech industry average of 25.83%.

43.0% of headlines have been classified as Negative, vs. an industry average of 13.17%.

Considering the extreme pessimism behind the stock, and our note on herd behavior, what do you think of the stock’s outlook? Have investors become too negative? Is the upside potential greater than the downside?

Let us know what you think–the comment section is towards the right.

Links: Charting News Sentiment Trends
The chart can be used to explore sentiment trends for other major companies, where each dot represents a clickable link to a company page (hover over any dot for summary info).

Positive sentiment percentages are plotted on the vertical axis, while negative sentiment percentages are plotted on the horizontal axis.

In other words, companies in the top left have more optimistic news sentiment than companies in the bottom right.