Last week served as proof to how fast this market can change. During the first half of the week, it looked as if we were finally going to see that pullback everyone has been talking about. Then, with strong jobs data, the markets reversed. Nonetheless, there were stocks to rally, and in this article I am moving forward with my weekly piece to look at five stocks that could trade higher next week, regardless of the market.
New Blockbuster Generics To Push This Cheap Stock Higher
When the Dow Jones began to fall from over 15,500 to under 15,000, the healthcare sector saw significant loss; it had been one of the best performers in the market. Yet, I do still believe that healthcare is one of the safest sectors in the market, due to various industries being a growing and secular space. One of my favorites is Actavis (ACT).
I chose Actavis as my Value of the Month back in April, and it has since increased by more than 35%. Despite these large gains, I still think there is a great deal of value in the stock. Most of its gains have been accumulated as a result of acquisition and merger rumors, but the company has new generic drugs that I believe will produce excellent growth.
Actavis expects revenue of $8.1 billion in 2013. The company produced revenue of $5.9 billion in 2012. Thus, there aren't many large pharmaceutical companies producing greater growth - with new blockbuster generic drugs such as Suboxone and Oxycontin -- I think the company could exceed its own optimistic expectations. Furthermore, it is trading at just 1.95 times 2013's sales and has a forward P/E ratio of 13.20. Hence, the stock is cheap!
After an exceptionally strong year, Actavis fell from its all-time highs of $133 to below $120. On Thursday and Friday, the stock rallied and is now priced over $124. I would watch it closely next week because, with such rapid growth, this is a stock that won't stay down for too long.
Finally Starting Breaking Out
Last week, I wrote an article looking at Alcatel-Lucent (ALU), discussing its trading similarities to Sprint Nextel in 2012. Alcatel-Lucent was my "Value of the Year" for 2013 (along with Rite Aid), and Sprint was my selection in 2012. While Rite Aid has been strong all year -- Alcatel just recently began to rally -- much like Sprint last year.
Prior to May, Alcatel had traded higher by about 10% in 2013, but since May the stock is higher by almost 40%. The strong performance is in part due to the strong quarter from Ciena Corporation, where it referenced increased spending among telecom companies; which bodes well for telecom equipment companies.
Alcatel has since traded higher as many anticipate a strong quarter -- but also as the company's restructuring program gets into full swing. Alcatel is higher by about 85% since announcing its financing with Goldman Sachs, and its plan to divest unprofitable segments and monetize its patents. Once this occurs, Alcatel will be able to focus on the profitable and growing segments of its business. And since the company trades at just 0.21 times sales (compared to the 1.25-2.0 of its industry) there is a great deal of upside in the stock.
Now, with telecom equipment stocks on the rise, and a restructuring plan in progress, Alcatel could very well continue to create new highs. On Friday it closed at new 52-week highs, and I would watch for those gains to carry over to next week.
Repeating History To New Highs
On June 4, I tweeted "$RAD $2.85 in late April/early May's $2.50 expect breakout to $3.25 within month". What I was trying to say is that Rite Aid (RAD) is in rally mode, but every once in a while the stock finds a patch of resistance. Back in April, the stock shot higher from $1.80 and then trended to a high of $2.65. The stock then fluctuated from $2.50 to $2.62 for about three weeks. In late May, the stock shot higher to $3.03 and has continued to trade between $2.85 and $3.00 ever since.
On Friday, new highs were created at $3.08, which is similar to what happened when the stock surpassed $2.65. Last time, Rite Aid barely surpassed $2.65 on one day, and then flew higher with strong gains of $0.25 on the next day. Looking ahead, the next leg of this rally could be $3.25-$3.30, and right now, the stock is looking mighty attractive. Over the last six months, Rite Aid has increased in value by almost 200%, which has been a result of the company introducing new high-margin generics; thus improving its profitability.
It was an unusually busy day for Rite Aid on Friday. The company issued a new $500 million second-lien term loan in an effort to reduce its interest expense. In addition, the company tightened its full-year profit guidance above Wall Street's expectations. The company also said that it expects Q1 EPS between $0.08 and $0.09, which is $0.01 better than estimates. This is a company that continues to exceed all of its own profit expectations -- and I have no doubt that it will trade higher due to being so cheap, but the question is "when" will it trade higher? Personally, I think the next pop comes early next week.
If The Trend Holds, This Stock Will Rally
Santarus (SNTS) is trading with gains of 210% over the last year, but is currently trading about $3.00 off its all-time highs. This is a $1.4 billion hyper growth and extremely cheap company. It is expected to generate growth greater than 60% in 2013, is trading at 4.0 times 2013's expected sales, and just 16.44 times next year's earnings.
In the past, Santarus has been driven by the success of its glycemic control drug GLUMETZA for adults with type 2 diabetes mellitus. During its most recent quarter, total sales grew 73%, and GLUMETZA contributed slightly more than 50% of sales. However, the company has another drug, GLUMETZA, which is seeing 20% growth. The company recently re-launched a drug that produced $24.6 million in the last quarter, ZEGERID. Not to mention, Santarus also just launched the newly approved drug UCERIS, which accumulated sales of $6.6 million in six weeks.
Santarus is a diversified biotechnology company with five marketed products. Throughout all of 2013, Santarus has followed a trend: After a pullback period it has trended to new highs following its first day of notable gains. Santarus peaked at $24 in mid-May and then fell below $20 last week. On Friday, the stock gained over 4% to surpass $21.20. If its trend holds, then this should be the beginning of another trend higher. Thus, I'd watch the stock closely next week.
Following The Footsteps Of Last Week's Breakout Stock
Last week, ACADIA Pharmaceuticals (ACAD) saw a large move higher on Thursday with no news; in what looked like a technical pop. The stock had been trading volatile since mid-April - but after a slow-and-steady trend higher -- the stock broke out.
Celldex Therapeutics (CLDX) is often compared to ACADIA, as both companies have seen tremendous gains over the last year behind clinical data, and both have similar market capitalizations. Much like ACADIA, Celldex has traded volatile since mid-April -- but created new highs this last week. While Celldex slightly broke-through to create new highs, it is yet to see the next leg of its rally. After gains of nearly 8% on Friday, I think it's highly probably that Celldex sees an ACADIA-like move next week to breakout into a new level.
Celldex Therapeutics is a company with two late-stage products in clinical trials. The company has Rindopepimut for front-line and recurrent glioblastoma and then it also has CDX-011, which treats breast cancers expressing the protein GPNMB. Both products have been highly successful in testing. The company's brain cancer drug continues to show a continued survival benefit in comparison to independent control datasets. The company's breast cancer drug was closely watched last year -- and proved itself to be highly effective. Back in December, the company proved that the drug delayed tumor growth and prolonged survival in patients with advanced breast cancer. As a result, with two effective cancer drugs, I expect Celldex to run higher in the months ahead, and I would watch it closely for a breakout next week.
Last week, I wrote an article that correlates with this series, and I ask that you take a look. It will show you how these "picks" play out over a longer period of time, and goes hand-in-hand with my statements (every week) when I say that I am not a technician, but rather believe that my selections present value and are priced attractively for short-term gains. Therefore, I believe that each presents a favorable trend and is cheap in a market that could grow significantly more volatile.