This past week brought more new all-time highs in the broad market indices which was not at all unexpected given the way we recovered from the 5-week corrective pattern as described in last week's post Ripping Higher.
One theme which has been working this year is biotech, specifically Jim Cramers "4 Horseman of Biotech" which are Biogen Idec (BIIB), Celgene (CELG), Gilead (GILD) and Regeneron (REGN). Together and individually, these stocks have trounced the SP-500 on a year to date basis as shown in the comparison graph above.
I have traded in and out of these stocks this past year and made and lost some money on these. On Friday, I went out long CELG and GILD on continuation plays, since both stocks made new, all-time closing highs in the prior week. Since I now have a financial interest, let's take a brief look at each of these and see what we can find out about the company, about the stock and how they trade.
First up is Biogen Idec which was formed from the 2003 merger of Biogen (founded in 1978 in Switzerland) and Idec Pharmaceuticals which was founded in 1985 in California. BIIB develops drugs to treat multiple sclerosis AVONEX and TYSABRI. BIIB also developed RITUXAN which is the world's most prescribed treatment for non-Hodgkin's lymphoma and an effective treatment for rheumatoid arthritis. The stock gapped out to new all-time high territory back in 4/3/2013 when it announced it purchased the remaining rights to TYSABRI from Elan corporation.
As for fundamentals, BIIB has been profitable for many years and has nearly a 28% 5-year annual earnings growth rate and a PE of 35 and no dividend yield. The stock is up 50% for the year so far and earnings are due out before the open this Thursday. Be very careful going into earnings, but be ready to add longs or sell puts on any gap down in the stock price.
Next up is Celgene which is another global biotech powerhouse founded in the mid 1980's and went public back in 1987. Similar to BIIB, CELG develops drugs to treat a variety of cancers and other auto-immune diseases. Most recently the stock gapped out to a new all-time high on 7/11/2013 when the company announced a positive outcome from its Phase III trials of REVLIMID for new indications. It is already approved for a series of other treatments. Interestingly, REVLIMID is chemically related to Thalimid which was prescibed in the 1950's as a sleeping pill and lead to a series of limb-related birth defects. That legacy continues and even now pregnant women should not be exposed to REVLIMID and related compounds.
As for fundamentals, CELG has a 5-year growth rate in the mid 20's but the actual number is missing from TC2000 for some reason, PE is 40 and no dividend yield. The stock is up 73% year to date and earnings are due out before the open this Thursday 7/25. I'm almost certainly going to clear out of my long before the close on Wednesday.
Next up in Gilead which was founded back in 1987 and went public in 1982. GILD produces Flu medicine Tamflu and has been a key player in antiviral drugs to treat patients with HIV and Influenza. The stock hasn't had any meaningful gaps lately, but is incredibly volatile and traded down to mid 40's in the May/June pullback and is since up 50% to a new all time high breaking $60 for the first time.
As for fundamentals, GILD has 5-year earnings growth of 13%, a PE of 32.7 and no yield. Earnings are due out before the open on Thursday, so like, CELG, I will be out before the close on Wednesday and look to re-enter on a gap down after earnings on Thursday.
Last up in Regeneron symbol REGN and based in Tarrytown, NY not far from the home of your humble blog author. Regeneron was founded in New York City in 1988 and has only 3 products on the web site EYLEA which treats Macular Degeneration ARCALYST which treats a rare hereditary condition abbreviated CAPS and ZALTRAP which treats metastatic colon cancer.
REGN has the least stellar earnings history of the 4 horseman and actually lost money as recently as the 4th quarter of 2012. So that leaves REGN with a non-existent 5-year earnings growth rate and a PE of 37 and no dividend yield. Even so that stock is up 60% year to date taking 3rd place behind CELG and BIIB.
Investing in biotech can be more of a minefield than stock investing in general since any bit of news can soar or crater the shares. Trading the above names, whenever I took full-sized positions with a tight stop, I nearly always go stopped out and lost money. When I look small say quarter of half-size positions (25 or 50 shares) and took reversals off the daily charts, I did okay.
As for this week, I need to be out of GILD and CELG by the close of Wednesday, then look to reload on any earnings related downward gaps on Thursday.
Enjoy your Sunday and have a great week ahead.
PS - This past week GILD and CELG resolved to the upside, reporting good results which led to new all-time highs in the shares. I washed out of GILD, but I continue to stay long the shares of CELG ..
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