Another Bet on Booming Biotech — If You Dare

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
Global stock markets continued their recent pullback last week. The Dow Jones was down 1.05% and the S&P 500 dropped 1.33%. The MCSI Emerging Markets Index (EEM) also fell back 1.08%
 
As a result, you were stopped out of both Standard Pacific Corp. (SPF) and ProShares Ultra NASDAQ Biotechnology (BIB), both at a gain. Your position in American Capital Agency Corp. (AGNC) dropped below its 50-day moving average and is now a HOLD.
 
This week’s Bull Market Alert recommendation, San Francisco-based Medivation Inc. (MDVN), is another bet on biotechnology — one of the hottest sectors in the S&P 500 this year.
 
Founded in San Francisco in 2003, Medivation, Inc. focuses on developing drugs for the treatment of serious diseases in the United States and Europe. Medivation’s current focus is on prostrate cancer, the second-leading cause of cancer deaths in men in the United States. 
 
And on that front, the company couldn’t be more active.
 
On Sept. 4, Medivation, and Astellas Pharma Inc. announced that the U.S. Food and Drug Administration (FDA) granted approval to XTANDI® (enzalutamide) capsules for the treatment of patients with prostate cancer. XTANDI was approved three months early as part of the FDA’s new fast track program and went on sale by Sept. 13. Investors took the swift approval and sale as a huge vote of confidence.
 
In more good news, just yesterday, Sept. 30, Medivation and Astellas revealed new data for XTANDI at the 2012 European Society of Medical Oncology (ESMO) Annual Meeting in Vienna, Austria, which further confirmed the survival benefit associated with enzalutamide. 
 
With all of this activity, it’s no wonder that Medivation’s stock has been of fire, more than doubling this year. The stock also split two-for-one last week, on Sept. 24, making the shares more attractive to investors.
 
The average analyst price target on Medivation is over $65.50, implying over 15% upside from Friday’s cost of $56.35. As the market enters its traditionally strong Q4, I think the stock could go a lot higher. 
 
So Buy Medivation Inc. (MDVN) at market today, and place your stop at $46.00. For potentially bigger gains, I recommend the December $62.50 call options (MDVN121222C00062500). 
 
A word of warning. MDVN is a pure momentum play. It’s also an even more volatile position than your previous leveraged bet on the entire biotechnology sector through the ProShares Ultra NASDAQ Biotechnology (BIB)
 
So, if you volatile stocks make it hard for you to sleep at night, you might want to keep your position size small. And if you want some advice on how much Medivation you should buy, I recommend you review my special free report “Hedge Fund Secrets Revealed,”  which you can download from NicholasVardy.com by clicking here.
 
Portfolio Update
 
Bank of Ireland (IRE) fell 6.44% last week. IRE halted its retreat last week directly on the 50-day moving average. Bank of Ireland’s “Quarterly Economic Outlook” report confirmed that the Irish economic recovery is stronger than initially reported. The bank now expects gross domestic product (GDP) to rise by 1.0% this year — an upward revision from last year’s 0.6% estimate. That’s all good news for IRE, which remains a BUY.
 
National Bank of Greece SA (NBG) slid 2.83% over the previous five trading days. The Greek Governing Coalition reached an agreement on the 2013-2014 austerity package last Thursday. NBG’s price level has been holding steady over recent weeks, maintaining its position above the 200-day moving average. NBG is a BUY.
 
Novo Nordisk A/S (NVO) bucked the market downtrend last week, dipping just 0.72%. The Japanese Ministry of Health, Labour, and Welfare approved Novo’s insulin degludec, named Tresiba, for diabetes treatment. This once-daily basal insulin pen injector will launch in Japan, as soon as pricing is negotiated. NVO is a BUY.
 
American Capital Agency Corp. (AGNC) gave back 1.62%. AGNC’s price-to-earnings (P/E) ratio is 9.6, only slightly higher than the real estate industry’s 8.7 average. This ratio is well below the S&P 500’s 17.7 P/E ratio, signaling AGNC may still have plenty of room to run. AGNC is scheduled to report earnings on Oct. 23. Now slightly below its 50-day moving average, AGNC is a HOLD.
 
Seadrill Limited (SDRL) lost 1.18% over the past five trading days. There are plenty of reasons to remain bullish on SDRL including a projected three- to five-year earnings-per-share (EPS) growth rate of 48%, a net income increase from $1.26 billion to $1.48 billion for 2009 to 2011, and an increase in sales from $3.2 billion to $4.19 billion over the same period. SDRL is a HOLD.
 
Michael Kors Holdings Ltd. (KORS) gave back 7.27% last week. For all of its apparent volatility, KORS has remained remarkably steady the past few weeks, holding the $52.50 price level as the broader markets continued their recent slide. Sideways trading or consolidation of this sort normally precedes a strong sustained move in the near future. KORS is a BUY.
 
CVR Partners LP (UAN) pulled back 3.95%. Natural gas consumption accounts for 50% of the input cost for production of nitrogen-based fertilizers. So, its continued low price spells good news for the continued profitability of UAN’s products. UAN is a BUY.
 

Exclusive  Investor Worries Slide from Greece to Oil

Like This Article?
Now Get Our FREE Special Report:
Alternative Investing: Investing in Timber

Stock Investor editor Paul Dykewicz reveals why investing in timber may be one of the best long-term portfolio strategies you'll find today.

Get Access to the Report, 100% FREE


img
previous article

Wall Street posts best third quarter since 2010 (Reuters) Wall Street closed its best third quarter since 2010, added by central banks sparking a rebound in equity markets. However, signs of weakness in the economy drove stocks lower on Friday. The S&P 500 climbed 5.9% in  the past three months, as central banks tried to boost liquidity to markets and aid weak economies. The move

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

LEARN MORE HERE

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

LEARN MORE HERE

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

LEARN MORE HERE

Mike Turner

Mike Turner’s financial, mathematical, computer science and engineering background serves as the foundation for his disciplined, rules-based approach to trading. Mike’s three services include:

Product Details

LEARN MORE HERE

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. Since 2010, Hilary's financial publications have provided stock analysis and investment advice to her subscribers:

Product Details

LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

LEARN MORE HERE