Cancer Stocks Weekly Review: Very Strong Week
by Alan J. Brochstein, CFA
AB Analytical Services
Reversing a portion of its summer slide, the universe of cancer stocks had a great week, with the median return of the group now -7% on the year thus far. The AMEX Biotech Index (BTK) moved back to the positive side of zero return for the year. The lists below, with data from StockVal, are comprised of domestic companies primarily with market caps in excess of $50mm, ranked by the return this past week. I did add several names this week, so the universe is now 103 stocks. If the reader believes that there are erroneous inclusions or exclusions, feel free to let me know.
Despite all of the volatility during the week, the market actually rose. Even better for those investing in cancer-related stocks, the median increase of 1.5% was actually about 0.1% stronger than the S&P 500. The average increase of 3.2% easily outpaced the average stock return by 1.8%. While it might seem immune from the developing problems that are related to housing woes and a rapidly spreading commercial credit crunch, the group, one must remember, is predominated by companies that frequently access public equity markets (debt sometimes too) for funding. In times like these, it is worthwhile remembering that capital isn’t always available. In other words, perhaps, for now, one should be focusing on companies that are profitable. For more on this subject, see the article published recently at BioHealth Investor.
STRONG
By the looks of things, one might expect that there was a lot of good news this week, with so many stocks up over 10%. In fact, though, the price action reflects
only extremely poor liquidity. Essentially, there are investors who are short a basket of biotech stocks and trying to reduce positions, forcing them to cover shorts (and sell longs). Allos (ALTH) soared back to unchanged year-to-date. While the company did report earnings, this appears to be clearly a case of short-covering. Genvec (GNVC) also soared back close to unchanged on the year after reporting poor numbers. Cell Genesys (CEGE) is now up 20% year-to-date. The only difference, since this company also reported earnings, is that the short-interest is extremely high. I wish I had more to say, and I am sure that some of you that hold these stocks must be real excited. I would, however, keep in mind that most of the stocks on this list are going up for non-fundamental reasons. In other words, one might be wise to provide liquidity (sell, in this case) at a time when the markets are extremely illiquid.
WEAK
The common theme was no good news on the quarterly report, so sell. Insmed (INSM) continued its march into oblivion, falling after reporting
earnings. This company lost a heated patent battle last year with Genentech and practically hasn’t gotten an uptick since then. As I mentioned last week when looking at some of the stocks showing strong price momentum, EOS (MELA) has had a great run but was ahead of itself. The point-of-care lesion detection company retreated sharply after reporting earnings. Synta (SNTA), the deep underwater IPO from February, also sold off post-EPS. Theragenics (TGX), which, oddly, remains up in 2007, continued its march back down to 3, falling on no news in particular, though it had gotten a post-EPS pop to the upside last week. Finally, Antigenics (AGEN) remains in an uptrend and is up 42% y-t-d, though it continues to consolidate the big gain since April, when they announced positive data regarding a cancer vaccine. These latter two, unlike a lot of the other stocks discussed thus far, were strong stocks getting weaker (while all of the winners were weak ones getting stronger).
The two screens below attempt to focus the investor on stocks that are working. The momentum list highlights stocks beating the market over the past month and quarter but eliminates those that have had extreme moves. The rebound list highlights stocks that are oversold but showing one-month relative strength without too much one-quarter relative weakness (if at all).
SHOWING MO
Parameters: 4-week outpeformance (S&P 500) of 3% or more, 13-week outperformance of 10% or more and Price Momentum Index of <2
Intuitive Surgical (ISRG) is probably the very best cancer stock, but one is likely to have an opportunity to purchase it at a better valuation in the future. Myriad Genetics (MYGN) is on my closely watched list and one that I think has a fantastic future in store. I had hoped to buy the stock earlier this summer at 35, but it didn’t quite get there (36 only – rats!). This one spiked up to 48 from 37 at month-end and then retraced to 41.56. What’s going on? Again, very large short-interest. Someone had to cover. They don’t report until next week.
POTENTIAL REBOUNDS
Parameters: 4-week outperformance of >5%, 13-week underperformance of <5% and Price Momentum Index of <0.
Celgene (CELG) bounced on the heels of a strong earnings report, but is retreating now. With that said, though, I would be very cautious on the name, as I expect that this 20-bagger over the past 5 years could get dragged down in the market sell-off.
Disclosure: None.
RELATED READING:
- Cancer Stock Weekly Review: Now Down 10% YTD
- Cancer Stocks Weekly Review: Falling with the Market
- Cancer Stocks Weekly Review: Now Down for 2007
AB Analytical Services is a regular contributor to BioHealth Investor
_____________________
AB Analytical Services
Reversing a portion of its summer slide, the universe of cancer stocks had a great week, with the median return of the group now -7% on the year thus far. The AMEX Biotech Index (BTK) moved back to the positive side of zero return for the year. The lists below, with data from StockVal, are comprised of domestic companies primarily with market caps in excess of $50mm, ranked by the return this past week. I did add several names this week, so the universe is now 103 stocks. If the reader believes that there are erroneous inclusions or exclusions, feel free to let me know.
Despite all of the volatility during the week, the market actually rose. Even better for those investing in cancer-related stocks, the median increase of 1.5% was actually about 0.1% stronger than the S&P 500. The average increase of 3.2% easily outpaced the average stock return by 1.8%. While it might seem immune from the developing problems that are related to housing woes and a rapidly spreading commercial credit crunch, the group, one must remember, is predominated by companies that frequently access public equity markets (debt sometimes too) for funding. In times like these, it is worthwhile remembering that capital isn’t always available. In other words, perhaps, for now, one should be focusing on companies that are profitable. For more on this subject, see the article published recently at BioHealth Investor.
STRONG
By the looks of things, one might expect that there was a lot of good news this week, with so many stocks up over 10%. In fact, though, the price action reflects
only extremely poor liquidity. Essentially, there are investors who are short a basket of biotech stocks and trying to reduce positions, forcing them to cover shorts (and sell longs). Allos (ALTH) soared back to unchanged year-to-date. While the company did report earnings, this appears to be clearly a case of short-covering. Genvec (GNVC) also soared back close to unchanged on the year after reporting poor numbers. Cell Genesys (CEGE) is now up 20% year-to-date. The only difference, since this company also reported earnings, is that the short-interest is extremely high. I wish I had more to say, and I am sure that some of you that hold these stocks must be real excited. I would, however, keep in mind that most of the stocks on this list are going up for non-fundamental reasons. In other words, one might be wise to provide liquidity (sell, in this case) at a time when the markets are extremely illiquid. WEAK
The common theme was no good news on the quarterly report, so sell. Insmed (INSM) continued its march into oblivion, falling after reporting
earnings. This company lost a heated patent battle last year with Genentech and practically hasn’t gotten an uptick since then. As I mentioned last week when looking at some of the stocks showing strong price momentum, EOS (MELA) has had a great run but was ahead of itself. The point-of-care lesion detection company retreated sharply after reporting earnings. Synta (SNTA), the deep underwater IPO from February, also sold off post-EPS. Theragenics (TGX), which, oddly, remains up in 2007, continued its march back down to 3, falling on no news in particular, though it had gotten a post-EPS pop to the upside last week. Finally, Antigenics (AGEN) remains in an uptrend and is up 42% y-t-d, though it continues to consolidate the big gain since April, when they announced positive data regarding a cancer vaccine. These latter two, unlike a lot of the other stocks discussed thus far, were strong stocks getting weaker (while all of the winners were weak ones getting stronger).The two screens below attempt to focus the investor on stocks that are working. The momentum list highlights stocks beating the market over the past month and quarter but eliminates those that have had extreme moves. The rebound list highlights stocks that are oversold but showing one-month relative strength without too much one-quarter relative weakness (if at all).
SHOWING MO
Parameters: 4-week outpeformance (S&P 500) of 3% or more, 13-week outperformance of 10% or more and Price Momentum Index of <2
Intuitive Surgical (ISRG) is probably the very best cancer stock, but one is likely to have an opportunity to purchase it at a better valuation in the future. Myriad Genetics (MYGN) is on my closely watched list and one that I think has a fantastic future in store. I had hoped to buy the stock earlier this summer at 35, but it didn’t quite get there (36 only – rats!). This one spiked up to 48 from 37 at month-end and then retraced to 41.56. What’s going on? Again, very large short-interest. Someone had to cover. They don’t report until next week.
POTENTIAL REBOUNDS
Parameters: 4-week outperformance of >5%, 13-week underperformance of <5% and Price Momentum Index of <0.
Celgene (CELG) bounced on the heels of a strong earnings report, but is retreating now. With that said, though, I would be very cautious on the name, as I expect that this 20-bagger over the past 5 years could get dragged down in the market sell-off.
Disclosure: None.
RELATED READING:
- Cancer Stock Weekly Review: Now Down 10% YTD
- Cancer Stocks Weekly Review: Falling with the Market
- Cancer Stocks Weekly Review: Now Down for 2007
AB Analytical Services is a regular contributor to BioHealth Investor
_____________________
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