Many sectors (especially energy) have seen huge gains over the past several months. However, most stocks in the healthcare sector have been laggards recently, so it's a good time to take another look at these stocks. I believe it's time to rotate out of the energy stocks and into laggards like healthcare. I wrote about this a few days ago, and you can read that article and learn about other stocks to rotate into here. What makes the names below very interesting is that these companies have reported substantial insider buying. The fact that insiders are buying these names could be a sign that there is significant upside potential in these names.
Healthcare companies typically do well in times of inflation as they are more able to raise prices than most companies. We are seeing signs of inflation and a weakening of the U.S. dollar, so it makes sense to allocate a portion of your portfolio towards this sector. Some of these companies are trading near their 52-week lows, which might mean bargain prices as well as the possibility for further weakness, so I would buy in stages only. I have provided links for each stock which verifies the insider buying filed with the SEC below. Here are the stocks:
Synergetics USA, Inc., (NASDAQ:SURG) is trading around $5.46. Synergetics is based in Missouri and makes medical device equipment. These shares have traded in a range between $1.55 to $6.01 in the last 52 weeks. The 50 day moving average is $5.29 and the 200 day moving average is $3.83. Earnings estimates are 23 cents for 2011. The book value is stated at $1.87. You can see the insider buying here.
What Synergetics insiders and other investors might be seeing: Financial results have been improving for this company. This company announced that profits jumped about 50% in the last quarter due to cost cutting and better margins. You can read about that here. These shares have seen a huge run in the past few months, so I would wait for pullbacks if you buy these shares.
Celera, Inc., (NASDAQ:CRA) shares are trading at $8.04. Celera provides diagnostic and other services to physicians, and is based in California. These shares have traded in a range between $5.35 to $8.42 in the last 52 weeks. The 50 day moving average is $6.98 and the 200 day moving average is $6.52. Earnings estimates are for a loss of 10 cents per share for 2011 and a profit of 11 cents in 2012. You can see the repeated insider buying here.
What Celera insiders and other investors might be seeing: This stock is in a clear uptrend. These shares look ready to hit new highs soon, although I would only buy on pullbacks to around $7.50 or less. The book value is currently at $6.91. This company has lots of cash and basically no debt. According to Yahoo Finance, CRA has about $327 million in cash which is equivalent to about $3.98 per share in cash.
Tranzyme, Inc., (TZYM) is trading around $4. Tranzyme is a newly public biopharmaceutical company, based in North Carolina. These shares have traded in a range between $3.95 to $4.20, since it began trading. There is limited information on this company since it just recently went public. Earnings estimates, book value and other information was not available for this company on Yahoo Finance and other financial websites. You can see the insider buying here.
What Tranzyme insiders and other investors might be seeing: TZYM just went public and priced shares at $4. You can read about this deal here. I would hold off on buying these shares since there is such a limited trading history. Tranzyme has partnered with several big players in the pharmaceutical sector. You can read more about those partnerships here.
Rexahn Pharmaceuticals, Inc., (NYSEMKT:RNN) is trading around $1.20. Rexahn is a biotechnology company, based in Maryland. These shares have traded in a range between 97 cents to $3.68 in the last 52 weeks. The 50 day moving average is $1.45 and the 200 day moving average is $1.28. The book value is stated at 12 cents per share. You can see the repeated insider buying here.
What Rexahn insiders and other investors might be seeing: This company is working on treatments for cancer, central nervous system disorders, sexual dysfunction, and other medical problems. There are plenty of opportunities in these areas and the company decided to raise money recently to fund more research and development. You can read about the share offering here. With shares way below the 52 week high of $3.68, these shares look like (at least), an easy trade from $1.20 to about $1.40.
Auxilium Pharmaceuticals (NASDAQ:AUXL) shares are trading at $21.08. AUXL is a specialty biopharmaceutical company, based in Pennsylvania. The 52 week high is $38.50, so these shares are almost 50% lower now. The 50 day moving average is about $22.38 and the 200 day moving average is $23.16. Earnings estimates for AUXL are for a loss of 77 cents per share for 2011 and a profit of 18 cents for 2012.
What Auxilium insiders and other investors might be seeing: According to Yahoo Finance, AUXL has about $128 million in cash (which is equivalent to $2.68 per share in cash) and basically no debt. Baker Brothers Life Sciences Capital, LLC., has been buying shares of AUXL repeatedly. You can see the recent insider buying here. With these shares trading at nearly half off their highs, it might be time to do some bargain hunting.
The data is sourced from Yahoo Finance and Stockcharts.com. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I may go long RNN, AUXL, and CRA.