PFE Stock: This Competitor Set to Soar?
Buying the right stock at the right time can be the difference maker in one’s investment account. If I had purchased Pfizer Inc. (NYSE:PFE) stock in 2009 at $9.00 when everybody was dumping equities from their accounts as panic ensued, I would be quite the happy camper now. That position is now sitting at $35.00, representing a 288% return.
Hindsight is 20/20 and if I knew what kind of opportunity was available in 2009, I wouldn’t be sitting here pondering what could have been. Pfizer stock now sits with a market cap of $212.0 billion, and I highly doubt that type of performance is expected if I were to purchase shares at today’s prevailing price.
I like the drug pharmaceutical sector, but if I want similar potential returns, I will have to look at other opportunities within the biotechnology sector in hopes of matching this type of performance. The company I seek must have a small market capitalization, which assumes a low valuation and the ability to grow. It also must have a constructive price chart in hopes that I can catch the position on an upswing.
More Upside Than PFE Stock?
Through painstaking research and endless hours of digging, I have come across just that name. Puma Biotechnology Inc (NYSE:PBYI) stock has a market cap of $1.84 billion and is in the process of developing treatments for various forms of cancer. The potential for upside in valuation is available if the company succeeds in its ventures.
With the utmost importance, my number one criterion in an investment is a bullish price chart. Being on the right side of a trend is the difference between a good and bad investment decision.
The stock chart below illustrates how PBYI stock has transitioned from a bearish trend to a bullish one.
Chart Courtesy of www.StockCharts.com
Trend lines are a chartist’s most valuable tool. By connecting the peaks on the price chart, I created a downtrend line. This trend can easily be identified as the price moves from the upper left to the lower right. This line represents a level of resistance. While shares are trading below a downtrend line, they are deemed to be in a bear market. In order for a trend reversal to take effect, the share price must break above this line.
On July 31, PBYI stock broke above the trend line and signalled the end of the downtrend. The breakout was done in an extraordinary fashion, as the price proceeded to gap higher. Gaps are significant depending on where they occur on a price chart. This gap is known as a breakaway gap, as it occurs at the same time the downtrend is broken. Breakaway gaps rarely get filled and almost always signal that a new trend has started.
The break of the trend line and the breakaway gap confirm that indeed the trend has reversed to the upside. The good news does not end there. The following chart shows another indicator that reaffirms the same premise.
Chart Courtesy of www.StockCharts.com
Puma Biotechnology stock has also managed to trade above its 200-day moving average. The 200-day moving average is the dividing line between stocks trading in a bull market and stocks trading in a bear market. When the share price is above the moving average, it is bullish; when the share price is below the moving average, it is bearish.
In April, PBYI stock fell below the 200-day moving average—a bearish signal. Shares proceeded to fall 90%, so it was wise to pay heed to this signal. As it wise to pay heed when the signal has reversed towards a bullish bias.
Bottom Line for Puma
PFE stock presented a good opportunity in 2009, in the midst of the financial crisis. The opportunity to acquire Pfizer stock on the cheap has long passed. If I were looking for a company in the same sector with the potential to produce outstanding returns, then PBYI stock would fit the bill. The market cap and bullish chart support my thesis that this investment has the potential to achieve my investment goals.
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