Last Updated on June 8, 2019 by Sultan Beardsley
May 27th-31st we saw a continuation of brutal market volatility spurred by an escalating trade war with china, new tariffs, and rhetoric of war with Iran. Trade negotiations earlier this month ended in a stalemate, and no new talks are scheduled. Albeit, I imagine President Trump and Chinese president Xi Jinping will discuss the matter at the G20 summit in June. Until then, the U.S is imposing a 25% tariff on $200 Bn of Chinese imports (the first of which arrived by sea Saturday morning), and China is retaliating with 20-25% tariffs of their own on up to $60 Bn of U.S goods.
Other significant development was the blacklisting of Chinese tech giant Huawei and talks of slamming Mexico with tariffs. President Trump insists tariffs are a necessary repercussion for illegal immigration. The threat of a two-front trade war is disturbing. Depending on how long the disputes last and how extreme they get, the U.S economy could be seriously impacted. Given these recent developments, and considering that we are nearing a 10-year economic expansion, we should invest accordingly.
Warren Buffet said that what makes for a successful investor is a temperamental quality rather than intelligence. In the coming weeks and months we should continue to experience extreme market volatility. The important thing is to not be rattled and dump positions because of it.
A beautiful consequence of economic turbulence is “market inefficiencies” where fundamentally sound companies are mispriced. I propose using this as an opportunity to load up on discounted companies like ADMA Biologics (ADMA), Regenxbio (RGNX), and Seattle Genetics (SGEN). At the same time we can trade opportunistically with the remainder of our cash taking advantage of run-ups and trends. Warren Buffet also said that the stock market is a vehicle for transferring money from the impatient to the patient. On that note, I firmly believe if we execute this strategy our community will be rewarded handsomely.
Over the last 5 and 30 day increments, the healthcare sector as represented by the major biotech ETFs has performed relatively in-line with the Nasdaq, Dow, and S&P, if not a little worse. When we compare big pharma to the latter three indices we see they performed significantly better while most clinical stage bios performed worse.
This makes sense considering that in May we saw an escalation in trade woes. Stocks across the board, though, are up since January 1st, 2019 (YTD). The question is how much will that remain true if stocks continue to bleed week over week. The fact that Novartis (NVS) and Array (ARRY) ended the month up +4.53% and +17%, respectfully, while LABU (biotech bull leveraged ETF) lost nearly -20% tells me money is being invested more selectively within the healthcare sector, but is not flat out leaving it.
We know clinical stage bios still react positively under present market conditions when prompted to by hype from material events. For instance, Sesen Bio (SESN) gained +54% since May 17th as investors piled in for a pre-BLA (biologics license application) FDA meeting slated for next week. Aveo Oncology (AVEO) was resurrected on Friday running +30% stimulated by buy out rumors (click here to read about the merits of this rumor). On the other hand, small-cap medical device company Stereotaxis Inc (STXS) gained +25% in the past two weeks with no real new developments. By remaining vigilant for SESN, AVEO, and STXS like opportunities we can capitalize on short-term momentum. In tandem with accumulating fundamentally sound and growing companies, I believe we can continue to bank massive gains this year.
- Achieve Life Sciences (ACHV) $4.21
- Phase 2b data expected 2Q19 for the companies smoking cessation drug.
- AMAG Pharmaceuticals (AMAG) $9.53
- PDUFA June 23rd for AMAG treatment for female sexual dysfunction disorder (FSD).
- CymaBay Therapeutics (CBAY) $12.08
- Phase 2b NASH data expected 2Q19.
- Dova Pharmaceuticals (DOVA) $8.82
- PDUFA June 30th for sNDA for a drug to treat Immune Thrombocytopenic Purpura (ITP).
- Minerva Neurosciences (NERV) $5.21
- Phase 2b data due 2Q19 for primary insomnia drug.
- Sunesis Pharmaceuticals, Inc (SNSS) $.76
- Phase 1/2 data due at EHA June 13-16th for Advanced B-Cell Malignancies.
Cara Therapeutics (CARA) spiked 20% on Wednesday on news of positive phase 3 data. CARA held its gains closing on Friday at $20.56. Data from a second trial is expected in the 2nd half of 2019. CARA will be also be presenting at the Jefferies Health Conference on June 5th.
Amarin Corporation (AMRN) investors received great news on Wednesday as well. The FDA granted the company priority review for its sNDA for its lead drug product Vascepa. AMRN spiked 12% Wednesday and closed at $17.73 Friday. If approved, AMRN stands to rake in insane revenues from treating individuals with a high risk of developing heart disease. AMRN is presenting at the Jefferies Health Conference too.
My number 1 stock pick from April and May ADMA Biologics (ADMA) had a rough week closing down -12.2% at $4.15. In my portfolio update article from Friday, I discussed my sentiments, outlook, and investment plans for ADMA. I anticipate ADMA will announce commercial launch of ASCENIV soon. ADMA is presenting at 2 investor conferences in June; The Jefferies 2019 Healthcare Conference on June 6th and Raymond James Life Sciences and MedTech Conference on June 19th. Collectively these events should positively affect ADMA’s share price.
Top Swing Candidates
ACHV, AVEO, CBAY, NERV, AMRN, CARA, ADMA