— by Mitchell Clark, B. Comm.
I think that this stock market has a lot more resilience than some give it credit for. The market has proven this by its own performance, especially after earnings season was over.
Any consolidation over the near term would be a healthy development, but I don’t think it’s going to be very pronounced. I still sense a positive undertone to investor sentiment among institutional investors and second-quarter earnings season is just around the corner.
There are two groups of stocks that will outperform going forward, and they are U.S.-listed Chinese stocks, and domestic stories that offer recession-resistant business models.
One such company that really is defying what’s happening in the rest of the economy is Genoptix, Inc. (NASDAQ/GXDX). This burgeoning small-cap operates in the healthcare field, providing specialized laboratory service to cancer doctors. Based in Carlsbad, California, this company uses sophisticated diagnostic technologies to provide specialized patient assessments. The business is known for its diagnostic capabilities concerning the treatment of malignancies of the blood and bone marrow and other forms of cancer.
In its first quarter of 2009, the company’s revenues grew to 39.2 million dollars, representing a 76% increase over revenues of 22.3 million dollars generated in the first quarter of 2008. According to Genoptix, it managed nearly 13,000 patient cases in the first quarter for an increase of 65% over the first quarter of 2008. That’s solid growth for a mature industry.
Net income was $5.9 million, as compared to net income of $5.0 million generated in the first quarter of 2008. The company finished the quarter with cash equivalents of 111.5 million dollars and without debt.
Recently, Genoptix raised its 2009 full-year guidance for revenues and earnings. Total sales are now expected to be between 170 million dollar and 175 million dollars, with net income expected to be approximately 22.0 million dollars.
This small-cap is trading for a reasonable valuation. Standard& Poor’s just announced that it plans to add Genoptix to its SmallCap 600 Index sometime in the near future.
The health services industry is always one to keep an eye on, especially during a recession. You can see by this small company’s growth that its business model is defying the rest of the general economy, even in a state that’s being hit hard by the recession.
There are good investment opportunities in the domestic marketplace at this time, but there aren’t very many of them. This is one trend that’s going to continue for the rest of the year.