This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Time Is Right for These Seven Biotechs

Now, here's my seven-stock, two-part biotech portfolio for the seasonal rallies.

Group 1: Three Profitable Big-Cap Biotech Leaders

Amgen (AMGN - Get Report) is down from its early February 2004 peak near $66, but the stock has been rebounding lately. On the basis of the strength of Amgen's product lineup, I predict compounded annual earnings growth of about 20% through 2005. Using that forecast as well as projected earnings per share of $2.85, Amgen is currently selling for a price-to-earnings/growth rate (PEG) ratio of roughly 1 -- historically cheap for Amgen or any stock with this kind of potential growth. The stock is as cheap as it is for a couple of reasons: Investors fear growth could be trimmed by reduced reimbursement benefits, and while Amgen's pipeline of new drugs looks strong in the short and long term, the middle term is worrisome.

Chiron (CHIR) is currently trading at just 21 times projected 2005 earnings, but valuation is not the likely catalyst for this stock. Instead, look to the upcoming fall and winter flu season to put a spotlight on this leader in the flu vaccine segment.

Genentech (DNA) wants to be the world leader in cancer drugs. The company's stock dropped from a peak above $60 in April to $45 at the end of July. In August the stock reversed course, and it appears to be building a base for the rest of the year. Tarceva, a promising lung-cancer drug from Genentech and its partner OSI Pharmaceuticals (OSIP), is likely to receive FDA approval in late 2004 or early 2005.

Group 2: Four Unprofitable Companies With Potentially Huge Pipelines

Cell Genesys (CEGE) has a pipeline full of gene-therapy drug candidates for Alzheimer's, Parkinson's and Lou Gehrig's diseases, but the nearer-term payoff comes from the company's GVAX line of cancer drug candidates. I look for the first drug, for prostate cancer, to hit the market in 2008, with drugs for lung and pancreatic cancer to follow by 2011.

3 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
ONXX $0.00 0.00%
NPSP $45.97 0.02%
AMGN $167.91 0.00%
INCY $107.34 0.00%
AAPL $130.28 0.00%

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs