This Day On The Street
Continue to site
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

2 Drug Stocks Under $10 To Pick As Favorites

Chris Lau, Kapitall: If there was a recent mild sell-offs in the stock market, investors would not really notice it. Wide intra-day swings in the U.S. markets were not accompanied by an increase in the volatility index, as measured by the Volatility ETF (VXX). For market participants speculating on drug and biotech companies, the sell-off is a risk factor. Companies on the verge of launching a product could face a drop in share price, if investors reduce exposure to the high-risk sector.

In the biotechnology sector, stocks that happen to have a share price below $10 experienced a rise in short-selling in February 2013: [Related list:  7 Biotechnology Stocks With Insider Buying Activity]

Screen shot 2013-03-25 at 2.15.16 PM

Read  descriptions for all companies mentioned

Affymax (AFFY) shares experienced a 166% increase in open short-selling volume by February 28 2013. Short-sellers gained 64% on March 19 when the company said it will reduce its workforce by 75% and will consider bankruptcy protection.

Investors should avoid Affymax. The company issued a press releasing saying that Omontys, an anti-anemia drug, may never reach market.

Accuray (ARAY) issued $100 million in senior debt due in 2018 that pays 3.50% on February 8 2013. Bearish activity increased 23% to an short open interest of 9.9 million shares. The notes are convertible at $5.33 per share. Accuray closed recently at $4.54. In Q2, the company lost $0.30 per share, beating expectations. Revenue (non-GAAP) was $77.7 million, beating estimates by $3.47 million.

ZIOPHARM Oncology (ZIOP) traded as high as nearly $6, but closed recently at $4.85. The market is anticipating results from the palifosfamide sarcoma study. Poor results will, needless to say, hurt shares, and investors may be pocketing profits ahead of the news. Short-selling open interest rose 13.1% in February.

PDL BioPharma, (PDLI) reported quarterly (Q4) earnings of $0.34 per share, on revenue of $86 million. Short-selling open interest rose 13.5% ahead of the report. PDL pays a generous dividend of $0.60, yielding 8.23%.

Investors should strongly consider PDL in favorable terms despite the bearish bets against the company. Healthy royalty revenue (which rose 7% year-over-year) and earnings of $1.45 per share in 2012 suggest this company is not appreciated.

Arena Pharmaceuticals (ARNA) is another company to look at favorably. Weak sales from Vivus (VVUS) are creating so much fear that Arena traded at around $7.40 last week. Short-selling open interest rose 5.3% to 58.27 million shares on February 28 2013. With $216.23 million in share float, short float is 26.8%. It still makes sense to remain bullish on Arena.

- Chris Lau, Kapitall Contributor

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
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free


Chart of I:DJI
DOW 16,776.43 -13.76 -0.08%
S&P 500 1,983.04 +3.12 0.16%
NASDAQ 4,748.2780 -0.0830 -0.00%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs