It's time to pay close attention as healthcare sector companies are out to educate and try to lure investors at two of the year's key investment conferences. For healthcare/biotech investors there are few stages on which to catch, meet and ask questions of biotech leaders bigger than this week's Rodman & Renshaw 13th Annual Healthcare Conference, Sept 11-13 at the Waldorf-Astoria Hotel and the 2011 Morgan Stanley Global Healthcare Conference at the Grand Hyatt Hotel in New York.
Paying close attention at what some of these companies have to say at these conferences is not only urgently important, but during volatile times like these, crucial.
As one of Wall Street's senior quantitative analysts said this week, "It's getting harder and harder to be a stock picker in this market. It seems stock fundamentals are taking a back seat to the latest Fed speech, jobs report, news from Europe or policy proposal, depending on the day. So, maybe we should all become macroeconomists?" The fact is, a vast majority of stocks move in the same direction as the market the last- with some percentage of those stocks as high as 94-95% in the past week.
To put this into perspective, Quantitative Analyst Rocky White points out that "during the 1980s, the percentage of stocks moving with the market on a daily basis was typically only in the 40s or 50s, and peaked in the 60s during the 1987 crash. The percentage was consistently in the 50s during the tech boom, and then rose pretty significantly when the tech bubble burst. Since then, this metric has remained at a higher level. During this most recent pullback, the number shot higher, reaching just above 80%. Prior to this, the only previous time the percentage jumped this high was at the peak of the 2008 crash".
Why even try to find good picks in markets like these, when about 90% of stocks are moving in the same direction?
It's more important than ever to pay attention to trends and make them your friends. You have to learn to read the technical indicators, find bottoms and buy stocks on some of the pull-backs that we're seeing in the markets.
Big cap stocks are bearish. Some of those firms, particularly with operations in places like Europe where debt finances are in even bigger trouble than they are here, may have nowhere to go but down. Historically, times like these see some of the best performances from emerging company stocks.
As we've seen in some of the small-cap healthcare markets this week, there are plenty of undervalued emerging companies whose stocks can climb once analysts flag them and/or insiders start buying at suddenly cheap prices. You want to look for those. You want to minimize risk and start finding companies that may be on the verge of- or have already started- generating more revenues; are anticipating good news/catalysts and which appear to be growing- particularly during difficult financial times while others are down-sizing, not meeting goals, etc.
In healthcare, you want to find companies with technologies that not only measure up, but realistically have a chance at capturing a nice percentage of their particular market. In some cases, these companies may have the better mouse trap, but take a hard look at how difficult it might be for the market to actually adopt that new technology?
Companies who show up at these conferences are there to convince you that they are the horse to bet on. Spend time looking at the presentations, check the facts and your gut before jumping in. Even if you can't make it to the conferences, most of these companies put up materials and videos from their presentations on their home pages. Go out of your way to look for them.
Schaeffer's Investment Research which actively tracks options activity points out that "there has been a 15% increase in short interest since March, although both short interest and panic levels is still far from the peaks seen during the financial crisis." Cautious crowds are growing, but as White points out, "the technical backdrop is not as supportive to them as it has been in the past." If you're off the sidelines and still trading biotech and healthcare "be open to buying stocks that you like on pullbacks to support, as 'pops' can be equally as sharp as 'drops' in the current environment."
We saw some of those principals at work last week after calling bottom on the overly punished shares of Cleveland Biolabs (Nasdaq:CBLI) and featuring first-look reports about Ampio Phamacetuicals (Nasdaq:AMPE). Both of those stocks were big winners for our readers this past week.
We will certainly continue to pay close attention to SANUWAVE Health, Inc. (OTCBB:SNWV) at the conference. Since finishing and submitting stacks of data from their double-blind Phase III clinical trials of their dermaPACE® device for the treatment of diabetic foot ulcers, Rodman will provide that firm the first opportunity to speak to a large group of investors, brokers and analysts about their pending FDA decision. The firm is still undervalued with plenty of cash in the bank. More importantly, some analysts are starting to notice that may be well positioned for a buy-out given the threat their disruptive medical device poses to industry leaders in the multi-billion dollar wound healing space.
A list of the presenting companies, complete with some of the other new faces we will be monitoring at this week's Rodman conference appear below:
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.