Over the last year, we’ve watched several of our small-cap stocks explode.
- VOXX International (VOXX) for 112% in six months
- AVEO Pharmaceuticals (AVEO) for 204% in a year’s time
- Halcon Resources (HK) for an 82% win in a month
- McDermott International (MDR) for 181% in eight months
In many cases, each was wrongly ignored by Wall Street, despite underlying fundamental strength.
But as we’ve learned over the years, ignoring a stock can be costly, despite what other analysts and investors may think of it.
Look at Verastem (VSTM).
In 2015, the stock plunged from a high of $12.35 to less than $1.20 a share on news that it had halted Phase II enrollment for patients with mesothelioma in 2015.
However, by July 2016, there was reason to be bullish again.
For one, the company had just announced two new clinical collaborations with Merck KGaA and Pfizer, as well as with the Washington University in St. Louis and Merck to further identify the potential of VSTM’s focal adhesion kinase (FAK) as a potential treatment for cancer.
In addition, at that time, VSTM was trading significantly less than its $2.70 per share cash, and $2.60 per share book value. The Loss had improved to $8.29 million from $15.18 million, year over year. Net loss per share improved from a loss of 46 cents to 22 cents, year over year.
Yet most investors ignored the stock.
We, however, found it worthy of recommendation in the July 2016 issue of The Cheap Investor at $1.34 a share. By July 2017, the stock hit a high of $4.67 for a potential return of 249%. Every $5,000 invested in this stock was now worth $17,500.
Better yet, the stock could continue moving up, especially after its Duvelisib treatment for patients suffering from double refractory follicular lymphoma and small lymphocyctic lymphoma met its primary endpoint in an overall response rate.
Such news could boost the company’s position in a very lucrative $9.2 billion market.
At The Cheap Investor, we pride ourselves on uncovering opportunities like Verastem. That’s why our track record has been so successful for the last 36 years.