I think it is really important to consider a stock carefully before making a purchase, but a lot of people are not sure how exactly they should be evaluating potential buys. For me, the easiest way is to consider what is important to me before buying. For example, I am going to evaluate a company differently if I am looking to make a quick sale versus wanting a long-term steady earner. I will also look at things differently if I am interested in a particular field. Obviously, investors should use a different assessment when considering biotech stocks versus a different industry. To make things a little easier, I have broken three of my favorite stocks into three different categories, so it is easier to see what it is I like about each of the companies.
My vote for best overall value in a stock is Vertex (VRTX). If there was only one stock I could buy it would be this one. The company is a reasonable investment and offers everything I could possibly want in a biotech stock. The earnings are reliable and steady. It already has two products on the market, as well as a healthy pipeline, and a broad focus that offers plenty of no-miss opportunities
Vertex has attenuated its overall FDA-approval risk because two of its products are already on the market. Kalydco is a prescription medicine used for the treatment of cystic fibrosis in patients who have a certain mutation in their CF gene called the G551D mutation and Incevik is a prescription medicine used to treat chronic hepatitis C infections in adults with stable liver problems, who have not been treated before or who have failed previous treatment.
The company's pipeline runs deep. Vertex has eight products in its pipeline, including one drug in Phase 2 trials and two drugs in phase one trials for treating hepatitis C, two drugs in Phase 2 trials for treating cystic fibrosis, one drug in Phase 2 trials for treating immune-mediated inflammatory disease, one drug in Phase 2 trials for treating epilepsy, and one drug in Phase 1 trials for treating influenza. It is one of the most affordable higher value biotech stocks compared to choices such as Johnson & Johnson (JNJ) at $65, Baxter International (BAX) at around $60, and Becton Dickinson (BDX) at $78.
My pick for best low cost stock is Arena Pharmaceuticals (ARNA). Arena is set to make a major splash in the weight loss industry, which until very recently, seemed to be a dying industry. The FDA has been reluctant to approve new weight loss products, but that tide seems to be turning with companies such as Arena developing weight loss products. Arena is currently selling for just under $3 a share, but I do not think this low price is going to last for long.
Arena's weight loss drug is Lorcaserin and it is well into Phase 3 clinical trials. Arena is addressing specific concerns from the FDA with the drug and the company's ultimate goal is to receive approval for the United States market, as well as select markets outside of the United States. Arena has several other products in its pipeline including a drug to treat pulmonary arterial hypertension and one to treat type 2 diabetes, but I am most excited about Lorcaserin.
Successful and safe weight loss drugs are a no-miss opportunity and the reason I am picking this one is because it is still early and the price is so low. The weight loss industry is a huge earner and makes a great investment. According to the Centers for Disease Control and Prevention, approximately one-third of US adults are considered obese. A recent report issued by the Organization for Economic Cooperation and Development (OECD) predicts at least 75% of Americans will be obese by the year 2020 and many of them will be looking for fast solutions to lose weight and improve their health. Arena and Lorcaserin is not the only option, but I believe it is the best.
My pick for best comeback stock is Dendreon (DNDN). The company's flagship drug Provenge has faced a lot of difficulty, but it continues to fight back and overcome the challenges. It is the main reason I believe Dendreon is still a quality investment and I consider it a quality comeback stock.
Dendreon is focused on creating a cancer therapy that aims to do more good than harm. Unfortunately, common treatments such as chemotherapy bring negative side effects by destroying healthy cells and creating other problems, such as anemia and immunodeficiency problems. Patients face a myriad of problem indirectly related to their primary disease including nausea, exhaustion, and hair loss. Some chemotherapy treatments are even carcinogenic, creating unhealthy cell growth in parts of the area not directly treated. Dendreon's goal is to create a safer treatment with fewer side effects.
The downside of Provenge is the fact that it is expensive and tends to scare off some investors. However, Provenge is effective and can be covered by Medicare, so I do not see the price as a problem. It continues to earn and has proven it will be sticking around in the cancer treatment industry.
Dendreon faced another challenge when Johnson & Johnson released its drug Zytiga. The drug is different than Provenge, but the sales of Zytiga have already exceeded Provenge, even though it only recently received approval. The drugs can be used in conjunction with one another, but many view Zytiga as a threat to Provenge.
Dendreon is selling for around $9, which is great value compared to Johnson & John's $64 price tag. Dendreon also seems to have the killer instinct, helping it stick around and making it my pick for comeback stock choice.
The important thing to remember when choosing stock is your ultimate goal. Do not only look at price or performance because you also need to consider the future and what lies ahead.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.