For the last two weeks I have looked at five stocks that I thought looked poised to trade higher in the following week. Last week was less than stellar, as my top selection Repros Therapeutics (RPRX) traded lower, showing that the market is not too confident in its late phase data or might be expecting an offering of sorts. Now, with job growth believed to be slowing, following very weak March nonfarm payrolls data, there are many who are anticipating a large pullback. With that being said, I am looking at five stocks that look strong heading into next week, and might trade higher regardless of the overall market.
At this point, it's sounding a bit repetitive to call the bottom of Apple or to predict a rise in shares. However, as a fundamental investor, I simply cannot fathom the level of value that is being presented. This is a company that is still seeing growth, at minimum 15% year-over-year, and is trading at an unprecedented 2.44 times sales. I think it's fair to suggest that in regards to Apple, this downtrend is more related to fear, speculation, and not so much fundamentals.
Currently, I have given up on trying to call the bottom in shares of Apple. I believe it is fundamentally cheap and I have a long position in the stock at an average buy price of $471, and I look to add another 20 shares at some point in the next week. The stock is trading near 52-week lows at $422.50, and therefore, next week will be very telling. Right now Apple is trading with a 1% loss over the last month, a month in which it crossed its 50-day moving average for the first time since October of last year. Looking ahead to next week, there is speculation that the company could strike an iRadio deal, conversations regarding the iPhone 5S continue to heat up, an iTV announcement is always positive, and a new line of i-accessories has been making waves continuously. With that being said, I think Apple is a stock to watch next week, and if it can hold above $419 (52-week lows) then it is very possible that new-launch speculation could drive the undervalued shares higher.
If the markets begin to sell off and trade lower, investors are going to seek security in low beta, mid-to-large cap stocks. One of my favorites, which trades 36% as volatile as the market, is Actavis . Actavis is involved in one of the most secular businesses in the market, generic drugs, and during its most recent quarter, saw growth of 13%. The company is once again expected to see double digit growth throughout 2013 and is also cheap, trading at just 10.75 times next year's earnings and 2.07 times sales; both much cheaper than most big pharma names with less growth.
After a 45% gain over the last year, Actavis is now trading just $1.50 from its all-time highs. This is a company that has seen much of its boost over the last four years as big name drugs come off patent, therefore the company has seen a boost in sales. I am especially excited about the potential for its generic to the drug Suboxone, a drug for opioid abuse that the company began manufacturing last month. It is a product that produced sales of $1.4 billion last year, continues to see explosive growth year-over-year, and has barely scratched the surface of its sales potential. With the company having 12 months of exclusivity and pricing power, this is one product that could lead the company to greatly outperform expectations in 2013.
In the last month, the $100 million company NeoStem has rallied 25%. This is a company that significantly underperformed its key developments over the last year, but now looks to be pricing in its potential and the fact that data for AMR-001 is just around the corner.
In the last year the company has found a threshold dose for CD34+ cells, developed VSELs into clinical trials, formed a partnership with the Vatican, grew revenue by 100% in its manufacturing business, and is now very close to full enrollment of its Phase 2 trial, which could significantly change the valuation of this company. The stock is trading above its 50-day moving average and looks to have seen a reversal higher. It will be interesting to follow this stock over the next several weeks to see if it breaks out even higher, a possibility that I think could occur next week.
Alcatel-Lucent had one of the best December and January performances of any stock in the market, but has since fallen lower, reaching $1.28 on Wednesday. However, the stock is now trading at $1.40, following an upgrade to "Buy" from Deutsche Bank. Therefore, after a large downtrend, perhaps the trend has reversed? All of the catalysts that had originally pushed the stock 75% higher all exist, in fact we are now closer than ever to seeing these ideas being put into action. The company has the funding from Goldman Sachs, it has one of the largest patent portfolios in the space, and has billions of annual sales that it could divest in order to operate more efficiently. Of course it is hard to determine at this point if the stock has simply popped off the bottom or if it will reverse to trade higher, but I view the 10% gain on Thursday following an upgrade very encouraging for the trend of the stock.
Santarus is my favorite biotechnology stock in the small/mid cap growth category, having seen gains of 185% over the last year. Since Tuesday, the stock has lost more than 6% of its value, although there has been no news and this occurred after the stock reached new all-time highs. Right away, a lot of investors panicked, but these investors should remember that the stock is still cheap and it is quite common for stocks to see mild pullbacks after reaching new highs. The stock's trading at just five times sales with top line growth of more than 50% and has a forward P/E ratio under 15.0. Therefore, with the stock reversing the trend to trade against the market on Friday, I'd watch it closely to trend back towards all-time highs next week.
Just because a stock looks as though it could rally to trade higher, doesn't mean that it will actually occur. With the markets in Europe being so volatile, the effects from sequestration, and earnings fast approaching, it is hard to know what next week may bring. Accordingly, invest with caution, and while you may explore the possibility of short-term gains, try to become a better-rounded long-term investor that uses price to capitalize on value.