March 4, 2015
Indicator Spots Stock That Soars 30%; Will This Blue Chip be Next?
By Tom Vician
For the past two years, biotech has been one of the best places to put your money in this bull market. During that time, while the S&P 500 rose roughly 40%, the iShares Nasdaq Biotechnology (NASDAQ: IBB) trounced that impressive gain with a return of more than 125%.
But given the boom-or-bust nature of companies in this industry, where so much is dependent on science, trial results, FDA approvals and acquisitions, pinpointing the next breakout star can be tricky.
A few weeks ago, I was alerted to a buy in biotechnology firm Pharmacyclics (NASDAQ: PCYC).
In addition to showing huge revenue and earnings growth, the stock scored an amazing 184 out of a possible 200 on one of the most reliable indicators I've ever encountered in my portfolio management career.
Pharmacyclics is dedicated to developing breakthrough treatments to cure serious life-threatening illnesses while improving quality and duration of life. Its primary product, Imbruvica, treats cancer by disrupting biochemical pathways in cancer cells, and is FDA approved to fight chronic lymphocytic leukemia and mantle cell lymphoma, a rare form of non-Hodgkin's lymphoma.
On Jan. 29, the FDA approved Imbruvica for treating a rare form of blood cancer with no known cure. This approval was a surprise, as it wasn't expected to be announced for another two months.
At the J.P. Morgan Healthcare Conference earlier in January, management said it expected sales of Imbruvica would more than double in 2015 to $1 billion. It also gave a robust outlook for its fourth-quarter sales that were about $17 million above the Street's estimates. Shares gapped higher on the news on huge volume.
When Pharmacyclics released its Q4 financials in mid-February, the company really delivered. It grew earnings 220% year over year to $0.96 per diluted share on a 135% surge in revenue to $290.2 million. This came on top of a Q3 earnings blowout with diluted EPS up 667% on a 162% sales increase.
Then, on Feb. 25, PCYC surged 16.9% on rumors that the company is considering a potential sale with possible suitors including Johnson & Johnson (NYSE: JNJ) and Novartis (NYSE: NVS).
All in all, the stock is up 30% in in 27 days since I recommended it based on its outstanding Alpha Score.
The Alpha Score is a proprietary indicator that combines a key fundamental factor and a key technical factor that have been proven to drive big trends and pinpoint market-leading stocks. I screen the entire universe of U.S. stocks for these two factors. Only the stocks that fall into the top 30% based on both factors make the cut. In other words, the Alpha Score finds the cream of the crop.
As I mentioned, PCYC's Alpha Score was 184 out of a possible 200. Only 50 stocks in the total database of 4,085 I screen currently have a score this high.
In the past 12 months, the Alpha Score has uncovered two other biotechs that delivered gigantic returns. Gentium S.p.A, which flashed an Alpha Score of 170 when we bought it, was acquired by Jazz Pharmaceuticals (NASDAQ: JAZZ) resulting in a 115% profit in seven months. And Hospira (NYSE: HSP), which had an Alpha Score of 160, was bought by Pfizer (NYSE: PFE), and we locked in 60% in eight months.
While the Alpha Score isn't screening for takeover candidates, it's not surprising that stocks with such high rankings were targets.
You may not have head of any of these biotech companies. One of the beauties of the Alpha Score is that it often spots little-known stocks that are ready to make big runs. Other times, it alerts us to the right time to buy big-name stocks that everyone knows.
In fact, it just signaled a "buy" for arguably one of the most popular stocks of all time
This blue-chip company shattered expectations with the release of its latest financials. Since then, investment managers have been going gangbusters to buy this stock. Share haves practically gone straight up since the blowout earnings release.
Looking at earnings growth and the acceleration in revenue, especially over the past two quarters, this blue chip sure is looking a lot like a growth stock.
This growth has translated into monster returns for shareholders over the years. A look at the historical chart pattern shows a real propensity for strong uptrends. Return on equity over the past 12 months is 35%, while the trailing price-to-earnings (P/E) ratio is less than 18 for this level of growth. Most importantly, this company sports an Alpha Score of 162, which puts it in the top eighth percentile of the thousands of stocks in my database.
Will this blue chip be the next one to make a double-digit run? It's certainly a possibility. In the past year, the Alpha Score pegged 29 stocks right before they jumped 10% or more in a month.
If you want to learn more about this powerful indicator, we've put together a presentation that shows exactly how the Alpha Score works and even reveals the name and ticker symbol of a top-rated Alpha Score stock flashing "buy" now. Click here to access it.
|
|
No comments:
Post a Comment
Keep a civil tongue.