By Timothy Lutts, Chief Investment Strategist and Editor of Cabot Stock of the Month Report
From Cabot Wealth Advisory, 6/12/09 Sign up for free Cabot Wealth Advisory e-newsletter
Technology stocks are looking good today. Commodity stocks are strong. And Chinese stocks are on fire. But medical stocks are languishing.
Does this poor performance in the midst of a broad bull market reflect fears investors have about the future profitability of the medical industry? I'd have to say it does. Investors fear uncertainty, and there are huge uncertainties today about the future of the medical industry, all revolving around money.
But there is one medical stock I want to mention.
It's BioDelivery Sciences (BDSI), based in Raleigh, North Carolina. This little company has been laboring for the past decade to develop innovative new drug delivery technologies. The company has no real revenues and no earnings. But the big idea is Onsolis, the company's treatment for pain in opioid-tolerant patients with cancer, and which is being evaluated by the FDA for approval.
The key to Onsolis is its BioErodible MucoAdhesive (BEMA) delivery technology, which consists of a small, bioerodible polymer film the patient can apply to the inside of his cheek. This delivery technology can quickly deliver precise amounts of pain-management medication into the bloodstream, bypassing the stomach and thus avoiding all the side effects that come from working in that hostile environment.
BioDelivery Sciences (BDSI) was initially recommend by Thomas Garrity, editor of Cabot Small-Cap Confidential, back in November, when it was trading around 2 1/2. It's had a good run since then, and in the past week, it's spent most of its time trading between 6 and 7, and Tom has been advising subscribers to take some profits.
In fact, his latest update read, "Any day now, BioDelivery Sciences should receive word from the FDA about Onsolis approval. We advise exercising caution ahead of the FDA's decision. If you haven't already taken some profits, we recommend selling into strength. We think you should always pay yourself for a job well done, but leave something on the table so you still have a stake if the stock powers higher on a favorable FDA ruling. Given the extreme volatility that can accompany any news, we think you should add shares only after assessing how BDSI acts once the news is out. Hold."
So I'm not recommending you buy it here. After a positive FDA approval, maybe. I'm intrigued by the thought that in the new cost-conscious healthcare industry that may be just around the corner, pain management might be more attractive financially than actually curing something.
What I am recommending is that you subscribe to Cabot Small-Cap Confidential so you can get Tom's current recommendations. The key to small-cap investing the way Tom practices it is to find companies with great mass-market potential, to buy them early and to hold them patiently, all while avoiding being carried away by the daily gyrations of the stocks or the latest news. Click here for more information: Cabot Small-Cap Confidential
Timothy Lutts President, Chief Investment Strategist, Editor of Cabot Stock of the Month
Timothy Lutts heads one of America’s most respected independent investment advisory services, publishing eight newsletters to more than 165,000 subscribers around the world. Tim leads a dedicated team of professionals who serve individual investors with high-quality investment advice based on time-tested Cabot systems. Under his leadership, Cabot has been honored numerous times by both Timer Digest and the Hulbert Financial Digest as among the top investment newsletters in the industry. Tim also edits Cabot Stock of the Month.