Entering text into the input field will update the search result below

Small Cap Stocks: A 1,300% Return In A Year

Jun. 10, 2018 3:58 PM ET
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Sometimes, the greatest investment opportunities are those left for dead.

Look at Mirati Therapeutics (MRTX) for example.

MRTX is an oncology company that targets genetic changes in tumor cells that typically result in uncontrolled tumor growth and begin to spread. The company is creating drugs that target specific genetic mutations that cause cancer, such non-small cell lung cancer (NSCLC), as well as genomic tests that identify patients with driver mutations.

After the stock fell from a 2017 high of $6.40 to just $2.70 a share on earnings losses and word of a public offering of 4.35 million shares, not many investors would touch it.

But we did. For one, the stock had a fundamentally strong balance sheet at the time.

The company had $106 million ($4.25 per share) in cash, a book value of $2.42 per share, and no debt. Like most development-stage biotech companies, the company had no revenues to speak of. However, it did have a large amount of cash that we believed could fund operations through late 2018.

So, we recommended the stock at $3.30 a share in the June 2017 issue of The Cheap Investor.

By September 2017, the stock exploded after reporting that an ongoing Phase II trial of sitravatinib in combination with nivolumab in non-small cell lung cancer patients demonstrated confirmed some partial responses in evaluable patients.

"We are evaluating sitravatinib in combination with nivolumab in this checkpoint resistant population and are very encouraged by the responses observed, since responses would not be expected from re-treatment with a checkpoint inhibitor alone," said Chief Executive Charles Baum, as quoted by Market Watch.

The news has been so encouraging, the stock found its way to $46.20 a share for a potential return of 1,300% since our June 2017 recommendation. As we’ve seen here, great news can send a stock skyrocketing, especially biotech stocks.

Better yet, fundamentals continue to improve for the company.

"We have made significant progress in all of our programs and continue to be encouraged by positive clinical results for sitravatinib and mocetinostat with planned data presentations at a fall oncology conference," said Charles M. Baum, M.D., Ph.D., President and Chief Executive Officer. "Additionally, we are on track to file our planned Investigational New Drug application (IND) for MRTX849, a potent and selective inhibitor for KRAS, in the fourth quarter of 2018."

Stay tuned for more.

The Cheap Investor just unveiled its next recommendations with similar potential last week.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You