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Global markets bounced strongly last week, as stock markets has their best week of 2012. The Dow Jones rose 3.59%, whie the S&P 500 jumped 3.73%. The NASDAQ soared 4.04%, as the MSCI Emerging Markets Index also recovered, rising 3.38%. The market was boosted by China’s cut in its lending rate, even as Fed Chairman Ben Bernanke did little to boost hopes of quantitative-easing part III (QE3).
It was also a big week in your Bull Market Alert portfolio. Your bet on the Bank of Ireland (IRE) recovered 10.42%. 3D Systems (DDD) soared 7.92%, while Monster Beverage Inc (MNST) jumped 7.88%. Liquidity Services (LQDT) jumped 6.92%. Recall you booked 50% gains in your first set of LQDT options on Thursday, June 7.
This week’s Bull Market Alert pick, Silicon Valley-based Pharmacyclics Inc. (PCYC) is true momentum stock. Shares have been on fire recently as some analysts are already predicting that one of its experimental treatments could grow into a true “blockbuster “ ($1 billion+) drug.
So why are investors excited? Last week, Pharmacyclics reported positive data from early studies of its drug ibrutinib as a treatment for blood cancers like non-Hodgkin lymphoma and chronic lymphocytic leukemia. Brean Murray, Carret & Co. analyst Brian Skorney highlighted ibrutinib’s "consistently robust clinical activity demonstrated in several different hematologic malignancies." In the studies, ibrutinib was as effective as Celgene’s Revlimid, but with fewer side effects. And with Revlimid boasting roughly $3.2 billion in sales last year, Skorney estimates ibrutinib could eventually generate $2.7 billion in sales by 2024.
While that is great news, Pharmacyclics is no one-trick pony, as the company has several other potential blockbuster drugs in its pipeline. This included Bruton’s tyrosine Kinase (BTK) inhibitor PCI-32765. Studies in mice have shown that orally dosed PCI-32765 can reverse the course of arthritis, as well as inhibit the development of certain types of kidney disease.
Pharmacyclics’ strong pipeline makes it a terrific potential takeover candidate by large-pocketed pharmaceutical or biotech companies. For a company like Pharmacyclics, a takeover is less a matter of “if” than of “when.”
The current target price on Pharmacyclics Inc. (PCYC) is $80. Although the stock had been soaring all last week, that target price still implies a 102.6% upside from Friday’s close. PCYS could easily double just based on current expectations.
So buy Pharmacyclics Inc. (PCYC) at market today, and place your stop at a very wide $29.50. Here is a word of warning. This is a highly volatile stock that has had a very strong recent run, and may endure a sharp pullback. As a speculative biotech stock, PCYC is not for the faint of heart. So you may wish to take a smaller position than usual.
Given its huge potential upside, PCYC is a perfect candidate for options. But with the stock up 7.87% on Friday, the call options are currently overvalued. So I am going to hold off on recommending options on this one until the stock consolidates its recent huge gains.
Portfolio Update
Bank of Ireland (IRE) jumped 10.48% last week. After several indecisive weeks riding the $5 price level, IRE used last week’s recovery rally to rise just up under the 50-day moving average. If Mr. Market’s positive mood continues, your position in IRE will likely switch back to a BUY this week. IRE remains a HOLD for now.
National Bank of Greece SA (NBG) dipped 2.42% over the past five trading days. European Central Bank (ECB) President Mario Draghi announced Wednesday that the Long Term Re-financing Operation (LTRO) in Greece will be extended until the end of 2012. This effort allows the ECB to lend hundreds of billions of euros to banks at an extremely low 1% interest rate, giving banks a relatively cheap method of recapitalizing. NBG is a HOLD.
Monster Beverage Corp. (MNST) added 7.88%. MNST had a strong week. At its annual shareholder meeting, it also indicated it may increase its stock buy-back program. Goldman Sachs sees good days ahead, as well, and recently raised its price target for the stock to $82 — nearly 8% above Friday’s closing price. MNST is a BUY.
Novo Nordisk A/S (NVO) rose 1.73% last week. The Food and Drug Administration (FDA) announced a delay in the review of NVO’s insulin drug, sending shares lower after jumping earlier in the week. This was an overreaction, as the FDA noted the delay was due simply to the large amount of data submitted by NVO. NVO is a HOLD.
3D Systems Corp. (DDD) gained 7.92%. DDD made the most of last week’s rally, jumping to a new 52-week high on Thursday. As an industry grows, you’d expect new competitors to jump into the market. However, in the case of 3D printing, the number of competitors is actually shrinking because the major players are buying out all of the smaller fish. Such industry consolidation can really sustain price growth in your position with industry leader DDD. DDD is a BUY.
Liquidity Services, Inc. (LQDT) powered 6.56% higher last week. As of the end of Q2, LQDT is servicing 50 of the Fortune 500 companies, selling to over 4,500 government agencies, and has 1.7 million registered users. LQDT is a BUY.
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