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Insiders are buying up a large amount of stock in
Forest Laboratories(FRX), which develops, manufactures and sells branded forms of ethical drug products, most of which require a physician's prescription. Insiders are loading up on this stock into some modest strength, since shares are up over 14% so far in 2012.
Forest Laboratories has a market cap of $9.22 billion and an enterprise value of $6.65 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 12.05 and a forward price-to-earnings of 22.54. Its estimated growth rate for this year is -81.7%, and for next year it's pegged at 126.5%. This is an extremely cash-rich company, since the total cash position on its balance sheet is $2.5 billion and its total debt is zero.
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Billionaire hedge fund manager and beneficial owner
Carl Icahn just
bought 1,962,011 shares, or about $67.05 million worth of stock, at $33.97 to $34.35 per share.
technical perspective, FRX is currently trading above both its 50-day and 200-day moving averages, which is bullish. Shares of FRX recently sold off from a high of $36.44 to a low of $31.28 with some above average selling volume. Following that low, shares of FRX have started to ramp higher and move back above both its 50-day and 200-day moving averages. That move has now pushed FRX back inside of its uptrend that had been intact before the recent selloff.
If you're bullish on FRX, then I would look for long-biased trades as long as this stock is trending above its
50-day moving average of $34.40 with strong upside volume flows. I would consider any upside volume day that registers near or above its three-month average volume of 1.9 million shares as bullish. If FRX can maintain that trend, then this stock has a great chance of re-testing and possibly taking out its recent high of $36.44 a share.
On the flipside, I would avoid FRX or look for short-biased trades if this stock fails to hold that trend, and then drops back below some near-term support at $33.50 a share with heavy volume. If we see that action soon, then look for FRX to re-test and possibly take out its 200-day moving average of $32.80 a share.