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Following Biotech Stocks After Price Declines Of Greater Than 50%
- Biotech companies previously featured after precipitous price declines are re-visited.
- A few have recovered on the strength of revenue growth, a few on speculation.
- None are conviction buys in my opinion. Some are worth following.
Anika Therapeutics: A Recent Greenblatt Small Cap Biotech Pick
- Greenblatt's Magic Formula based on ROIC and EBIT/EV can be used to build a diversified portfolio that outperforms.
- A Magic Formula screen for drug companies with market cap >$500M 2 years ago identified Exelixis, Momenta, Pozen, and Questcor.
- Anika was identified on a screen this week - this company looks like a bargain.
Transgenomic's Niche In Illumina's Universe
- Transgenomic Inc has become one of the least expensive stocks in Biotechnology and Life Sciences after loosing 93% of market cap since the IPO in 2000.
- TBIO's CEO believes "our ICE COLD-PCR technology has transformative potential and we expect it to play a key role in our personalized medicine strategy".
- TBIO's market cap is 1/1,000th that of industry leader Illumina because core competencies have been shaken, fundamentals weak. I recommend following the turnaround story as it develops.
Reasons To Accumulate Shares Of Novavax
- NVAX genetically engineers vaccines to prevent diseases which have a great impact on the public health.
- NVAX has a technology platform for the development of multiple vaccines, a robust R&D budget, growing revenue, its own manufacturing capability, and trial results published in NEJM.
- NVAX financial performance is improving but the stock is not cheap at a P/S of 33.
Biotechs With Insider Buying
- Inside ownership is one of many considerations in stock selection, and certainly not the primary one.
- It is nevertheless discouraging to make a high risk:reward investment, then find out management is selling - I prefer to partner with management that is also buying.
- Ariad is my top pick among the seven biotechs featured below with recent insider buying.
Square Root Sign Of Micro-Cap Stock Price Manipulation
- Everyone knows it goes on, but not much is said - can't prove it, and it's embarrassing if you're duped into selling.
- Too much information out there on large caps like Apple to know for sure if irrational price movements are self-inflicted by the fearful, short sales, or deliberate manipulation.
- Simpler stories, less liquidity, less short interest, and less visibility make micro-caps the best case studies of deliberate price manipulation. Great American Group price action looks like an example.
How Long Can A Good Stock Remain Undervalued?
- FAST Graphs is well known to SA readers as a highly visual and useful research tool for putting valuations on stocks, and identifying a margin of safety.
- Some SA readers have wondered how long a good stock can remain undervalued, a question which arises when viewing a stock's underperformance over a period of time on FAST Graphs.
- Many stocks undervalued by more than 20%, even when undervalued for periods of 3 years or more, still outperformed the market.
Buy An Unprofitable Company That Will Use Your Capital To Become Profitable
- A company that is profitable enough to pay shareholders dividends and repurchase its own shares obviously doesn't need your capital, but may be a good place to deposit your cash.
- A company that is unprofitable but is continually reinvesting revenue and shareholder capital in its research, development, and growth offers opportunity for real investment.
- Capitalizing R&D expenses in the analysis of returns on investment may help identify unprofitable companies that will use your capital to become profitable in the near future.
Largest Cap Techs Undervalued, Consumer Goods And Utilities Large Caps Stretching Market Valuations
- SPDR ETFs can be used as a broad guide to stock performance by sector and may be tracked on Google.com/finance. Technology sector ETF (XLK) has by far the highest P/E.
- FAST Graphs is a stock research tool that provides a 2-dimensional fair value reference for a stock's price based on current, historical and projected earnings.
- FAST Graphs 2-D snapshots show technology large caps to be the most undervalued, consumer goods and utilities are most overvalued.
Some Elegant Biotech Platforms I Read About While Looking For The Next Regeneron
- Discovery and development platforms can efficiently multiply a drug pipeline. Regeneron leveraged its platforms to become a biotech paragon over the 5 years prior to 2014.
- Bluebird bio, Epizyme, Sangamo, and Benitec are among companies with platforms that could not only be force multipliers, but also change the way diseases are treated, i.e. be disruptive.
- Placing valuations on biotech companies is difficult; confidence in the platform is therefore essential.
Basket Of Biotech Bargains To Buy And Hold
- Nearly 20% of biotech stocks remain more than 50% off 18-month highs. Most of these companies have a market cap below $1B - some might be bargains.
- To make the cut as a potential bargain, I required the company to have TTM revenue growth, market cap-to-revenue less than 15, and R&D budget at least 50% of revenue.
- Eleven candidates are presented and briefly discussed.
Mentor Graphics' Peer And Market Beating Valuation Metrics
- Mentor Graphics (MENT) has strong-buy ratings from Eva Dimensions and Zacks which is an uncommon consensus.
- MENT combines features growth and value, i.e. GARP.
- MENT valuations beat its peers, Synopsys and Cadence, and the current fear of small cap tech stocks may enable investors to beat the market if they buy now and hold.
If You Want GARP, Look Into Biotech, Not Utilities, But Do The Valuations
- If there is a rotation in stocks, it is more apparently from high growth into low growth than into quality.
- Just look at revenue growth versus multiple expansion over the past 2.5 years among top biotechs being sold off, and you'll see what I mean.
- The biotech selloff is at best indiscriminate, at worst contrived to rock others out of the boat.
Retail Investors Should Be Doing Valuations On Their Biotechs - The Market Is
- Valuations on profitless biotechs are difficult. One method puts R&D expenses back with operating profits in the numerator of ROC, and capitalizes them as an asset included in the denominator.
- Amgen, Gilead and Pharmacyclics returns using R&D-adjusted ROE and ROC are presented along with ROIC data from New Constructs and from Morningstar.
- Investors in a biotech with reliable returns on capital that exceed its cost, or that are rising rapidly, can ride out negative volatility with more confidence than speculators can.
The Biotech Sell Off Is Largely Indiscriminate And The Best Stocks Are Not Over-Valued
Mon, Mar. 31 • 11 Comments
- The biotech sell off has affected the best of them: the top 10 FBIOX stocks fell 16% in the month of March.
- While P/S, a misnomer for market cap-to-revenue, gives a only a snapshot valuation, it is one way to compare stocks and to look for inflation of valuations over time.
- Valuations of most of the FBIOX top 10 had not become inflated between early 2012 when prices began to soar, and late February 2014 when the sell off began.
Looking For Value Among Biotechs After Precipitous Declines In Stock Price
- Recent, precipitous price declines in some biotech stocks highlights big risk.
- However, when the herd stampedes out, it sometimes leaves a bargain behind.
- Fallen stocks of biotechs with a novel drug approved or a multi-drug pipeline, growing revenue, and reasonable valuations make interesting prospects.
FDA New Molecular Entities - Finding Them Ahead Of Approval But Also Ahead Of The Herd
- The development of novel drugs that will have a large impact on the public health is a worthy investment.
- Investing ahead of the herd but safely requires the most reliable source of information: trials results are often published in expertly peer-reviewed journals ahead of approval.
- As a single, reliable source of important clinical trials results for novel drugs ahead of FDA approval, New England Journal of Medicine is unparalleled.
- If the herd has already stampeded a stock on preliminary data ahead of expertly peer-reviewed publication and approval, just wait.
Geron Is A Speculative Buy Even After The Precipitous Price Decline
- Geron stock's precipitous decline highlights the risk in some biotech.
- Half of the precipitous stock price declines among biotech in the past year have been followed by a substantial recovery.
- Don't invest unless you believe in what the company is doing.
- Exiqon Is A Safe Way To Play The Renaissance In Antisense
- Be Glad You Didn't Sell Affymetrix's Earnings Miss. Its Returns Are Evidence Of Its Recovery
- Seattle Genetics Will Exceed And Immunogen Will Meet Market Expectations
- Forecasting Earnings Growth And Profitability In The Biopharmaceutical Industry
- Isis Ally Alnylam - Trying To Understand Its Astounding Valuations
- Life Sciences Offer Good Growth With Much Less Risk Than Biopharmaceuticals
- Ballantyne Strong: Beacon Switching To Technology Services
- Understanding Air T's Low Valuations In Relation To Its Big Daddy
- S&W Seed Co. Stock Price Marked Down From $11 To $7: A High Risk But High Reward Long-Term Buy
- Delicious Fresh Del Monte: Growing More Than Produce
- Armanino Foods Of Distinction: A Rich-Too-Quick Microcap?