Recap
Hey guys! If you’re new here, I am running a 6 month long experiment to see if a Large Language Model (like ChatGPT) can be a skilled micro-cap portfolio manager. I give it daily closing data at the end of every trading day and it has full control over its assets. Also, once every week it gets to use Deep Research to completely reevaluate it’s account. Can ChatGPT carve consistent alpha in the dangerous world of micro-cap stocks? Lets find out.
Overview
The week started off promising. After Tuesday’s close, FBIO’s key update hit: the FDA cited manufacturing issues during inspection and issued a rejection. The stock fell ~30% on Wednesday, and the position was liquidated at the open. Modest gains followed over the next two days, but the portfolio still finished down week-over-week. This marks a new low for ChatGPT, driven by concentration risk and limited diversification.
Performance Graph
Current Portfolio
[ Risk & Return ]
Max Drawdown: -42.81% on 2025-10-01
Sharpe Ratio (period): -0.5159
Sharpe Ratio (annualized): -0.5864
Sortino Ratio (period): -0.5693
Sortino Ratio (annualized): -0.6470
[ CAPM vs Benchmarks ]
Beta (daily) vs ^GSPC: 0.6119
Alpha (annualized) vs ^GSPC: -48.64%
R² (fit quality): 0.004 Obs: 67
Note: Short sample and/or low R² — alpha/beta may be unstable.
[ Snapshot ]
Latest ChatGPT Equity: $ 81.42
$100.0 in S&P 500 (same window): $ 108.23
Cash Balance: $ 20.33
[ Holdings ]
- ALDX
- Shares: 6.0
- Buy Price: $4.9475
- Cost Basis: $29.685
- Stop Loss: $4.00
- SPRO
- Shares: 13.0
- Buy Price: $1.8900
- Cost Basis: $24.570
- Stop Loss: $1.65
Portfolio Review
To see the full report: Click Here
The portfolio now holds four micro-cap biotech stocks, each driven by clear upcoming catalysts and balanced by risk controls (stop losses, position sizing). The strategy aims to capitalize on FDA or clinical milestones while maintaining downside protection.
1. Aldeyra Therapeutics (ALDX) – High-Conviction PDUFA Play
- Catalyst: FDA decision (PDUFA date: Dec 16) for dry eye drug Reproxalap.
- Thesis: Strong chance of approval supported by positive trial data; potential partnership upside with AbbVie.
- Action: Trimmed position to manage binary FDA risk; retained core for major upside.
- Target: ~$9.50 average analyst price.
- Role: Near-term catalyst cornerstone.
2. Spero Therapeutics (SPRO) – Low-Risk Value with Medium-Term Catalyst
- Catalyst: NDA filing and acceptance (expected late 2025) for tebipenem HBr in complicated UTIs.
- Thesis: Backed by GSK partnership; Phase 3 success largely de-risks program.
- Valuation: ~$2/share, ~$110M market cap—seen as undervalued.
- Role: Steady compounder with limited binary risk and steady upside potential.
- Risk Control: Stop at $1.65.
3. OKYO Pharma (OKYO) – Early Catalyst with Asymmetric Upside
- Catalyst: FDA meeting outcome or partnership deal after strong Phase 2 results in neuropathic corneal pain.
- Thesis: Novel treatment in an area with no approved drugs; potential for partnership or buyout.
- Risk Control: Moderate position, stop at $1.60.
- Role: Early-stage high-upside play; limited loss, multi-bagger potential if progress continues.
4. Tiziana Life Sciences (TLSA) – High-Risk, High-Reward Pipeline Bet
- Catalyst: Ongoing trials in MS, ALS, and Alzheimer’s using intranasal foralumab immunomodulation.
- Thesis: Novel delivery mechanism with early promise; multiple upcoming data readouts possible.
- Positioning: Smaller size, wider stop due to risk.
- Role: “Multiple shots on goal” speculative play; any positive interim data could drive major gains.
Next Week & Overall Strategy
- Catalyst Timeline Mix:
- Immediate: ALDX FDA decision
- Medium-term: OKYO (partnership/FDA update), SPRO (NDA news)
- Long-term: TLSA pipeline progress
- Approach: Diversified catalyst exposure, disciplined risk management (stops, trimming), and readiness to pivot.
- Goal: Outperform S&P 500 by capitalizing on biotech catalyst-driven upside while containing downside risk.
My Thoughts
With no major catalysts immediately on the horizon, the portfolio’s performance in the near term will likely be driven more by momentum and sentiment rather than binary event outcomes. ChatGPT has shown strength in navigating momentum-driven setups before, particularly ATYR’s run, so the next few weeks will test whether it can capture a similar trend within this new lineup. The focus now shifts from reaction to anticipation, as we wait for the next wave of biotech catalysts.
This project is purely educational and research-focused. Nothing here should be taken as financial advice. Full disclaimer: Here
GitHub Page and Email:
To see all past deep research reports and summaries: Here
Full chats: Here
Have a question? Check out: Q&A
If you’d like to see the raw logs and full portfolio simulation code: GitHub Page
If you have any suggestions or advice, my Gmail is: [email protected]