An Eczema Stock That Keeps Breaking Out

Dec.19.13 | About: Anacor Pharmaceuticals, (ANAC)

It was only after my long career as a pharmacological scientist that I decided to pick the biotech and pharmaceutical stocks as the hottest sector of the year.

That, of course, is not true - the part about my career as a scientist, that is.

But I have been talking about, writing about, and - most importantly - investing in stocks for my clients and myself for a long time. And you do not have to be a scientist or doctor to invest in scientific or medical progress.

Of the nearly 3,800 stocks I cover in my database, most do not get white hot overnight. Neither do they lose all their value overnight.

So I look for industries first, then companies within those industries, when I am selecting investments. And I use the database that I created to select the Best Stocks Now.

That is how I found Anacor Pharmaceuticals (NASDAQ:ANAC).

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Data from Best Stocks Now App

I didn't hear about ANAC from a televised talking head. Nor did I read about it in the Wall Street Journal or Barron's. I found it while scouring the database that I created.

ANAC is in the Atopic Dermatitis business. Eczema. One of their products is getting some good results and some even say it could be a new standard of treatment for this disease.

But just because something is a good company in a good industry with a good - even great - product, it does not necessarily mean it is a good stock.

ANAC became public in 2010 at $5 per share. I noticed it three months ago when it hit #23 based on my proprietary grading system. Looking at the chart, we see it has done a powerful saucer pattern from April until Mid-August of this year when ANAC broke out and rose up the ranks in my database.

Let's look at the company a bit more closely:


ANAC has a market cap of $665 million. It's no Merck (NYSE:MRK) or Johnson & Johnson (NYSE:JNJ). If it were, we would not be talking about it right now. Smaller biotechs have been ruling the market this year.

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Data from Best Stocks Now App

Over the past three years ANAC has delivered 49.4% per year to investors.

And over the past year, ANAC has returned an incredible 247% to investors.

Now, these numbers do not make ANAC an automatic ticket to Bill Gunderson's top 300 Best Stocks Now. However, a stock does need to have the performance numbers. And ANAC gets an 'A+' momentum grade.


Because ANAC is so new, it is difficult to do a valuation on this stock. Of course the potential is huge. I have an assistant who insists his potential for meeting and marrying Angelina Jolie is huge.

But performance counts more than potential.

Stock Chart

A breakout may not sound good when you're referring to eczema but when you're looking at the stock chart, it's great. I'm long the stock and I've already had some huge gains.

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You want to know what a great chart looks like. Just look at the ANAC chart.

Because it is a small cap with a relatively short record of performance, this is not a stock for widows and orphans. This is part of an aggressive portfolio.

A lot of people misunderstand what it means to be aggressive: Yes, of course it means you are going to put a portion of your portfolio down on stocks with a lot of volatility.

But that is only half of it. The other half of is time. Aggressive investors have to watch their stocks and the market every day.

That does not mean you have to be a day trader. Or should be. It only means that just because you want to take three weeks off to bicycle through France, your stock is not going to take off with you.

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Data from Best Stocks Now App

ANAC comes in at #52 out of the 3,769 stocks in my database, and it is a stock that I own in my aggressive portfolio.

But investors should realize something very important, the biggest winners I've had this year have been in biotech and pharmaceuticals. So have the biggest losers.

I always emphasize how important it is never to put more than 2-3% in any one stock. And I always emphasize having a diversified portfolio. When you look at the stocks that fill my portfolios, you will find a collection of stocks that are all over the place in terms of location and risk.

And I watch them every day.

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Data from Best Stocks Now App

Please follow me on Twitter or at my website for a change in opinion of the stock or for information on my management services.

Disclosure: I am long ANAC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.