Is It Time For Biotech?
Though not necessarily our usual ’small cap’ fare, we still think we have to point out something most of the market seems to be missing….a mini-bull market may be starting - or perhaps we should say restarting - in the biotech arena.
The AMEX Biotech Index (BTK) is up 9.5% from lows hit in early March, which easily tops the S&P 500’s 4.5% gain during the same period. On a six-month basis, biotech’s 9.5% rally tops the SPX’s 6.4% gain. Over the last two years, the biotech index is up by 52.9%, versus the S&P 500’s 22.6% run.
The point is, we see a distinct advantage in biotech stocks right now….an advantage we don’t think is likely to go away anytime soon.
So what’s the deal? Is it cyclical? Well, yes and no. It’s cyclical in the sense that biotech can come and go over time, but biotech rarely moves in tandem with the market’s overall bull/bear cycles. However, knowing biotech how we know biotech, it is indeed cyclical….just on a different schedule than almost all other stocks. From that perspective, it looks like a secular bull market for biotech.
In any case, the chart explains why now may be a great time to start looking at this hot spot.
You don’t have to look at this image too long to figure out the bigger trend is to the upside. If you want a piece of the action, we’d say all you really need to do is look for a dip to buy on. Though the index is up well off recent lows, on a macro level, we’re still on the low end of a bullish trading zone….one that’s guiding the index upward.
The reason we’re excited is, once these rallies get started, they’re capable of moving the index 20% to 30% higher, or more.
And for what it’s worth, we don’t think you have to look past our website for a couple of names we feel are worth considering. CEL-SCI (AMEX: CVM) is starting to show us more upside than downside, while BioCurex (OTCBB: BOCX) is looking attractively-priced as well.
And by the way, our track record with biotech picks is pretty darn solid. Aside from making some big gains a few different times with BOCX and CVM, Novelos Therapeutics (OTCBB: NVLT) - which we featured early last year - is up by 50% over the last six months, and seems poised to stay on that roll.
While NVLS may be history, we feel CEL-SCI and BioCurex have the exact same kind of potential, and you may not necessarily have to wait all that long to tap into it. Of course, as always, we think the best time to claim your stake is when nobody else is even thinking about a stock…..kind of like now. In both cases, the companies have demonstrated a legitimate and viable idea in the war on cancer.
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bocx is a penny away from your stop loss number. Other than being paid to say to, is there any reason to own this stock. I’ve called the company many times. Definitly not a brain trust working there.
IMRP seems to be going the wrong way. Any pearls of wisdom on this company? $85 price target seems unattainable while the .50 seems very attainable?
Editor’s response: Yes, I think BOCX is still worth owning - even if the stop is hit (I guess it would be worth re-entering, in that case). RECAF appears to be the real deal. Otherwise, I don’t think Abbott would be even thinking about being involved otherwise, and even without Abbott, RECAF’s story is incredible. It just might take a little longer for it to get traction. If we’re stopped, keep it on your radar for a better entry spot.
Immune Response, on the other hand, has just been painful to watch. The whole attraction to IMRP was their HIV work, and then they go and drop the program. In some regards their renewed focus on autoimmune disease was wise, as the early trials look good, and the market is there. But, they’re still years off from getting that to the market.
And now, the rumor (and nothing moe than a rumor) is that there’s some dissension about whether or not the HIV program should be dropped.
And, take a closer look at who owns shares. One individual owns 20% of the company, and has the right - via warrants - to maintain that proportion. He’s got a sweet deal too. The problem is, that may not be healthy for the company in the long run.
Point being, there’s a lot of things to overcome. It may be tough to do….and take a while. The shining star has lost a lot of luster. Your concern is not off base, though there may be some hope.
Comment by steve adams — 4/14/2007 @ 2:20 am
I still hold a bunch of Novelos. When you say NVLS ‘may be history’ what do you mean?
…history as far as your coverage of the company or history as a company worth being
involved in? Do you still have any interest and do you look at it at all antmore?
Editorial response: Whoops - sorry for any confusion. We meant ‘history’ only in the sense that it’s not on our coverage list, and that the best ‘getting in’ is in the past…about six months ago. Frankly, we like the stock quite a bit now - it’s performing much better than it ever did when we carried it. We wish we had a time machine.
Though we missed a big chunk of NVLS’s early gain, BOCX and CVM may be comparable biotech plays with more untapped potential.
We like them all though.
Comment by couser — 4/3/2007 @ 1:26 pm