Many of the best performing stocks in my portfolio in the first half of the year were from the biotech area. I believe this sector still offers some interesting opportunities. The outperformance in this space has been driven by some key approvals at the FDA and by solid M&A activity throughout the first six months of the year. The sector has also benefited as it is not impacted by the ongoing crisis in Europe. I believe all of these trends should continue to drive good performance in the second half of the year. I recently came across an interesting company that provides molecular testing tools: GenMark Diagnostics (GNMK). It has impressive projected sales growth and some recent insider buying as well.
6 reasons GNMK is a good speculative buy at under $5 a share:
- Several insiders have picked up $750K worth of new shares at the end of June. They were also active buyers in the second half of 2011.
- Only two analysts cover the stock. One has a price target of $7.50 on GNMK and the other is at $12, both substantially above the current stock price. TheStreet upgraded the stock to "Buy" in June.
- The company has over 20% of its market capitalization in net cash and more than a year of funding at current burn rates. It is about to raise more than $40mm with a secondary offering as well.
- Revenues are increasingly exponentially. The company had revenues of just over $4mm in FY2011 and analysts expect sales north of $15mm in FY2012 and $25mm in FY2013.
- Consensus earnings estimates for FY2012 and FY2013 have improved significantly over the past three months. In addition, the company raised revenue guidance for full year 2012 substantially recently.
- The stock has good technical support at just under these price levels (see chart).
Disclosure: I am long GNMK.