The small cap biotech and medical device space holds a fascination for me as the right positions in these sectors can lead to outsized rewards if the selected company develops a viable product and/or receives a lucrative buyout from a bigger player in their business. I believe in the "shotgun" approach of taking small positions in a lot of different stocks as the failure rate is high. One stock I picked up during today's sell-off, EnteroMedics (NASDAQ:ETRM), seems to have exponential sales growth ahead of it as well as some substantial and recent insider buying.
7 reasons to pick up ETRM is a good speculative play at just over $3 a share:
- Net insider buying in the second quarter amounted to more than 2mm shares.
- The company has net cash of 10% of its market capitalization on its balance sheet.
- The three analysts that cover the stock have a median price target of $5 a share on ETRM. The low target is $4.50 and the high target is $6 a share. Northland Securities initiated the shares as an "outperform" in late July.
- The company beat earnings estimates last quarter and the consensus losses projected for FY2012 and FY2013 have narrowed slightly in the last two months.
- EnteroMedics' revenues are projected to soar more than 700% in FY2013 and it just had its first successful implants of its Maestro Rechargeable System.
- The stock was just added to the Russell 2000 and 3000 indexes and will be presenting at the upcoming JMP Securities Healthcare Conference.
- The stock has momentum after a very long bottoming process and is now solidly above its 200 day moving average (see chart).
Disclosure: I am long ETRM.