By Michael Cintolo, Chief Analyst of Cabot Market Letter and Cabot Top Ten Trader
From Cabot Wealth Advisory 12/6/12
The current market environment looks pretty rough, though it’s not a complete disaster out there. The rally that got underway the week of Thanksgiving is, technically, still in effect, but I have a couple of apprehensions.
First, not many stocks have actually broken out to multi-month peaks and shown some power, and the few that have are generally not institutional quality.
And second, the overall trend hasn’t decisively turned up. In fact, our longer-term trend indicator (which is more of a background, red light/green light type of indicator) is still negative, while the market’s intermediate-term path is on the fence.
That said, if there’s one good thing I can say about the recent rally it’s that it has allowed us to separate the wheat from the chaff—the stocks that both held together during the market decline, and rallied smartly during the past three weeks, should be watched closely. Of course, until the market truly gets going, I wouldn’t be doing a ton of buying in these names, but as always, it’s vital to prepare now for sunny days ahead.
One stock that must be watched is Regeneron Pharmaceuticals (REGN), which, admittedly, has already had a huge run this year ... something that makes it a riskier play. Still, if the stock wanted to fall apart, it could have done so during the past couple of months—instead, shares dipped reasonably and then exploded to new highs on huge volume as soon as the pressure came off the market in mid-November.
The big story here involves EYLEA, the firm’s treatment for age-related macular degeneration, a market that totals $1.5 billion in the U.S. alone, and up to $3 billion when looking at the entire world. On that note, EYLEA was just recently approved for use in Europe, which should boost sales through the company’s 50-50 overseas sales partnership with Bayer.
The treatment just hit the market earlier this year but it’s been one of the biggest launches ever—revenues have ramped from $123 million to $232, $304 and $403 million during the past four quarters. Earnings have exploded as well, totaling an incredible $1.89 per share in the third quarter, and analysts see $4.90 per share for 2013 ... a figure we think could prove very conservative.
Now, as mentioned above, the stock has basically tripled this year, so it’s not in the first inning of its advance. But after dipping from 166 to 136 during the market downturn, it’s spiked to new highs above 180 before calming down in recent days. If you want to nibble, you can do so here or on a dip toward 175, but even if you don’t buy any, keep REGN near the top of your watch list.
|Regeneron Pharmaceuticals (REGN)
777 Old Saw Mill River Road
Tarrytown, New York 10591-6707
|Index Membership: N/A
Full Time Employees: 1,791
12/6/12 Treatment for Age-Related Macular Degeneration