Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Biotechnology Stocks

Biotechnology stocks are firms that are active in the sector and publicly traded. Biotechnology companies use applied biology for advancements in current methodologies in a variety of industries. The field uses living organisms and bio-processes in many sectors, such as medicine, engineering, agriculture and technology. Since there is a lot of research and development in this sector, small biotech stocks that can develop a new advancement in technology can become very wealthy firms and the stock price can move up sharply. Biotechnology stocks raise money in the public market to help fund this research.

A Hot Sector of the Market I Feel Will Soon Be a Buy Again

By for Profit Confidential

Why Action in 3D-Printing Stocks Is Healthy for This MarketEverything in the stock market experiences its own cycle of enthusiasm among investors. And this is especially well illustrated among speculative issues.

There was a time only a few years ago when some of the hottest speculative stocks were in solar energy. Now this small equity universe is still trying to rebuild itself.

And in more recent history, 3D-printing companies experienced incredible capital gains, only to experience incredible capital losses in what is a commonality among the market’s most speculative stocks.

At the end of the day, high-flying positions are still real businesses that have to deal with managing their own business conditions and hype among institutional investors.

As an investor, you have to consider both realities—the growth an underlying business is experiencing and the enthusiasm the marketplace has for such an enterprise or sector.

Twelve months ago, 3D Systems Corporation (DDD) was trading at $44.00 a share. Then it appreciated to a high of $97.28, before spending most of this year retreating to the $50.00-per-share level.

It’s only recently that the position broke the $55.00-per-share barrier, still sporting a forward price-to-earnings ratio of approximately 46.

Fervor for speculative stocks definitely diminished at the beginning of this year, and it’s part of the cycle that equities perpetually experience.

At the beginning of 2013, the breakout was in large-cap blue chips. Institutional investors had just started buying these stocks, and they led the broader market higher.

Then the NASDAQ Composite began to improve and actually took the lead for a while. But even with the Federal Reserve onside, it didn’t take too long for big investors to just book some profits. … Read More

Biotechs Still a Trader’s Paradise?

By for Profit Confidential

Key to Success in the Biotech SectorOne of the most speculative parts of the equity market is biotechnology. These stocks come to market generally overpriced, and they usually require a lot more capital to develop anything material.

But while investment risk is super high with these stocks, a drug that’s in demand and has high barriers to competitive entry can pay off tremendously.

One company that fits this scenario is Alexion Pharmaceuticals, Inc. (ALXN) out of Cheshire, Connecticut. The company’s main offering is “Soliris,” and it’s a huge moneymaker.

Soliris was approved for use in the U.S. and European Union markets in 2007, and then in Japan in 2010. It’s the only drug that helps in the treatment of patients with a rare blood disease called paroxysmal nocturnal hemoglobinuria (PNH), which is a genetic disorder.

It’s a growth story we’ve looked at before in these pages, and with consistency, share price retrenchments have been buying opportunities.

According to Alexion, net product sales of Soliris were $567 million in the first quarter of 2014, compared to $339 million for the same quarter in 2013.

The company generated GAAP net earnings of $159 million, or $0.79 per share, in the first quarter of 2014, compared to GAAP net earnings of $82.0 million, or $0.41 per share, the year earlier.

The company finished the first quarter with $1.55 billion in cash and full-year 2014 non-GAAP earnings-per-share guidance was raised to $4.75 to $4.85 per share from the previous $4.37 to $4.47.

Alexion’s share price definitely got caught up in the recent speculative fervor affecting the biotechnology sector and was a worthy sell for profit-taking and risk management purposes.

The … Read More

Biotechs, Small-Caps, and IPOs: Making Sense of This Peculiar Stock Market

By for Profit Confidential

This Year's Peculiar Market Short Exuberance RiskThe spot price of oil has been eerily steady for quite some time; this is quite unusual for the world’s most traded commodity.

It’s been a peculiar year in capital markets, and there’s definitely an uncertainty in sentiment, especially in the equity market with no real trend for investors to latch onto. It makes me think that equity investors should be proactive now and take a hard look at their portfolios for investment risk.

Speculative fervor has been reduced and while small-cap stocks, initial public offerings (IPOs), biotechnology stocks, and super-high-valued stocks have taken it on the chin, this is not unreasonable for the longer-run trend in equities.

The Dow Jones Transportation Average just hit another record-high and its long-term chart, while impressive, actually looks kind of scary. The capital gains are tremendous since the March 2009 low, which begs the question as to when it’s going to reverse.

Historically, most of the average’s declines have come in the form of short bursts of downside, peppered by several multiyear periods of non-performance.

The stock market is highly unlikely to break down without a commensurate move in transportation stocks. But there is clearly room for downside in these share prices. Delta Air Lines, Inc. (DAL) has doubled in value since just last September.

Caution. Caution. Caution. If you eliminate the bubble capital gains produced by stocks comprising the S&P 500 index during the late 1990s and their price recovery during the mid-2000s, the long-term chart still reveals an incredible performance. The crash of 1987 now looks like a blip. The 100-year chart of the S&P 500 is featured below:

S&P 500 Large Cap Index Chart

Chart Read More

This Stock Poised to Impress Long-Term Investors

By for Profit Confidential

Nike Company Poised for a Very Good QuarterIf there’s been a rotation into safer, more reasonably priced stocks, the trend can also reverse itself when the market is ready.

Biotechnology stocks, initial public offerings (IPOs), and hyper-priced technology issues were ripe for a sell-off after such tremendous capital gains. A rotation isn’t a breakdown in the longer-term stock market trend; it’s just a trade, and big investors wanted to book some profits.

Now some very good companies are more attractively priced, and there could very well be some decent buys if the broader stock market’s current fundamentals aren’t hit by some external shock.

The action in this market is choppy, and it’s the lull between earnings seasons. The lack of corporate reporting often makes for tough trading in stocks.

One company that I like for long-term investors, however, has come off its high by about 10%. The stock I’m talking about is NIKE, Inc. (NKE).

NIKE has a long track record of relatively consistent wealth creation for shareholders, and the company pays a dividend. Its current yield is approximately 1.3%.

According to history, this position has proven to be a good buy when it’s down. According to management, its business prospects for the rest of the year are solid. The company’s long-term stock chart is featured below:

Nike Stock Long Term Growth

Chart courtesy of www.StockCharts.com

Wall Street firms have been increasing their earnings estimates for NIKE going into 2015.

The company’s most recent quarter (ended February 28, 2014) was a good one. Total sales grew 13% to $6.97 billion, while diluted earnings per share from continuing operations grew four percent to $0.76.

Global footwear sales provided the biggest quarterly gain, jumping … Read More

Getting the Most for Your Risk-Adjusted Buck

By for Profit Confidential

Get the Most of Your Investment Capital in a Crumbling MarketTwo years ago, when the former Kraft Foods Inc. broke itself up, spinning off its global food and beverage business (now Kraft Foods Group, Inc. [KRFT]), the company renamed itself Mondelez International, Inc. (MDLZ). Now, the company is mostly a global snacks business. The new Kraft Foods Group has done pretty well on the stock market since listing in September 2012; the position currently has an attractive dividend yield of 3.7%.

Large-cap corporate spin-offs are typically highly profitable for shareholders. (See “Top Market Sectors for 2014.”) Despite a slow start, Mondelez has finally broken out of its recent consolidation trend on new operational momentum.

Mondelez sells cookies, snacks, confections, and cheese. Some of the company’s iconic brands include “Cadbury,” “Oreo,” “Nabisco,” “Christie,” and “Trident,” among others.

The Street’s been bidding “safer” stocks recently, and investors liked Mondelez’s news of a restructuring plan and the spin-off of its coffee business, which will net the company $5.0 billion in after-tax proceeds.

Like many large-cap public companies, Mondelez has been buying back its own shares. In the first quarter, it spent $500 million on its own stock at an average price of $34.20 per share. Its two-year stock chart is featured below:

Mondelez International Inc Chart

Chart courtesy of www.StockCharts.com

If you happened to be a shareholder of the former Kraft Foods Inc. then you’ve done well with both spin-off businesses and both stocks remain attractive holds.

Mondelez isn’t offering as much income as the new Kraft Foods Group; its dividend yield is currently around 1.6%. And while top-line growth is always an issue for established large-cap consumer brands, Mondelez is an improving earnings story—that’s … Read More

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The Great Crash of 2014

A stock market crash bigger than what happened in 2008 and early 2009 is headed our way.

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