Staying Bullish on Biotech

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
The main U.S stock indexes slumped Friday, after a weak jobs report gave up all or nearly all of the gains during the shortened week. For the week, the S&P 500 shed 0.5% and the NASDAQ eked out a meager gain of 0.1%. The MSCI Emerging Markets Index dropped 0.95%.
 
Your Bull Market Alert portfolio outperformed the broader markets by a country mile. Standouts included Pharmacyclics Inc. (PCYC) up 7.98%; 3D Systems Corp. (DDD), up 5.96%; Mellanox Technologies, Ltd. (MLNX), up 4.09%; Standard Pacific Corp. (SPF), up 3.23%; and Monster Beverage Corp. (MNST), which added 3.13%.
 
Pharmacyclics Inc.(PCYC) is up a whopping 45% since I first recommended it just three weeks ago, making it one of Bull Market Alert’s top recommendations ever. And don’t forget that you took your 13th triple-digit percentage profits for 2012 on 3D Systems options last Tuesday, as well. As a result of these big moves, I have tightened your stops on all of the positions listed above (see “Portfolio Update” below). All positions in your Bull Market Alert recommendations remain BUYs, except for National Bank of Greece (NBG), which is literally one cent away from its BUY point.
 
This week’s Bull Market Alert pick increases your bet on the biotech sector through Questcor Pharmaceutical (QCOR). You’ve already generated big double and triple-digit profits in in this sector in 2012 through investments in big Bull Market Alert winners like Alexion Pharmaceuticals (ALXN).
 
California-based biopharmaceutical company Questcor Pharmaceuticals Inc. provides prescription drugs for the treatment of multiple sclerosis, nephrotic syndrome, and infantile spasms indications. Its blockbuster product is H.P. Acthar Gel, an injectable drug for the treatment of acute exacerbations of multiple sclerosis in adults.
 
On April 24, Questcor announced adjusted earnings of 58 cents per share for the first quarter 2012. That beat the consensus estimates by 16% and year-ago earnings by 222.2%. Net sales jumped approximately 161% to $96.0 million, surpassing estimates of $90 million.
 
When the company announces earnings on July 23, analysts expect Q2 earnings to hit 57 cents per share. I’m betting that Questcor will beat this estimate yet again, as it has by an average of over 22.6% over the past four quarters. Looking ahead, Questcor’s earnings are expected to grow 50% in 2013 and by over 38% annually between now and 2018. That trounces Questcor’s peer group average growth rate of 22.3%.
 
I also like that Questcor’s management is focused on maximizing shareholder value. In the first quarter, the company returned approximately $29 million to shareholders through its share buyback program. And on May 15, 2012, the company expanded its repurchase program by five million shares. All of this translates into higher earnings per share for investors in the months and years ahead.
 
The stock hit its 52-week high of $54.31 on June 26 but it has pulled back since then. That makes its current level a terrific point of entry. So, buy Questcor Pharmaceutical (QCOR) at market today, and place your stop at $40.00. For potentially even bigger upside, I recommend the October $55 options (QCOR121020C0005500).

Portfolio Update

Bank of Ireland (IRE) fell 1.32% last week. Both of your positions in IRE and NBG should benefit from good news out of the latest European Union (EU) summit. Rather than lending bailout funds to governments, who in turn lend to struggling banks, the EU now is providing emergency funding directly to bank balance sheets. IRE is a BUY.
 
National Bank of Greece SA (NBG) lost 5.85%. National Bank of Greece spent the week both just-above and just-below the 50-day moving average (MA) by a margin of pennies. However, the 20-day MA has been rising up from below the 50-day MA and will likely meet and/or cross in the next day or two. This event will lend additional support to NBG’s price level and push NBG buying above the 50-day MA with more conviction. NBG is a HOLD for the moment.
 
Monster Beverage Corp. (MNST) added 3.13%. As per the latest Nielsen report, Monster’s sales figures jumped 29% in the high-margin “convenience store” category for the latest reporting period. That beat the industry mean of 24%. MNST’s core product sales also rose 13% across all categories for the same period. MNST is a BUY. Raise your stop to $66.00.
 
Novo Nordisk A/S (NVO) rose 1.01% last week. In a recent research note, analyst firm Jefferies expressed its preference for Novo Nordisk over rival AstraZeneca. NVO is a BUY.
 
3D Systems Corp. (DDD) gained another 5.16%. DDD continued its third major run off of the 50-day moving average, making strong gains each day last week until finally coming to rest at the $37 price level and reaching a new 52-week high. DDD is scheduled to report earnings on July 26. DDD is a BUY. Raise your stop to $29.50.
 
Pharmacyclics Inc. (PCYC) jumped another 7.98%. PCYC is up a whopping 45% since its recommendation just three weeks ago. PCYC’s 52-week price range currently sits at a staggering $8.65 – $58.61, an astronomical one-year swing of about $50, or 578%! PCYC is a BUY. Raise your stop to $49.50.
 
Mellanox Technologies, Ltd. (MLNX) popped 4.09% over the past five trading days. MLNX ranks seventh on the Investor’s Business Daily “IBD 50” list. MNLX also hit a new 52-week high last Thursday on rising Relative Strength. A near-term pullback to its 20-day moving average would be reasonable and yield a good buy point. MLNX is scheduled to report earnings on July 18 and is a BUY. Raise your stop to $64.00.
 
Standard Pacific Corp. (SPF) gained 3.23% during your first week in the portfolio, while continuing its three-week run straight upwards. Standard Pacific will participate, along with six other homebuilders, in the construction of 700 new homes in Mesa, Ariz. — a location central to the hard-hit greater Phoenix area. According to a recent Arizona State University Center for Real Estate Theory and Practice study, existing single-family residence inventory is down a whopping 54% from just one year ago, and is a primary driving force in an amazing 43% surge in new home sales over the same period. SPF is scheduled to report earnings on July 26. SPF is a BUY. Raise your stop to $5.00.
 

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