Stocks Off To Best Start In 28 Years; Gene Therapy – Pharma’s Great Hope; * “Best Stocks To Invest In If We Get A U.S./China Trade Deal”
Welcome to March. Winter is going out like a lion; and, the stock market is on a bull run, with the first two months of this year being the best start for stocks in the first two months of the year — in 28 years. As Randall W. Forsyth wrote in this weekend’s (March 4, 2019) Barron’s “early indications of [economic] activity as poor as the stock market’s performance has been good.” A classic case of investors looking ahead, and not back — and also factoring in part of the slowdown due to the prolonged government shutdown. Mr. Forsyth notes that “the S&P 500 was up 11.08 percent in the first two months of 2019, its best start to a year since 1991, when the large-cap benchmark rose 11.16 percent. That more than made up for the 9.18 percent drop last December.”
“The New York Federal Reserve Nowcast, meanwhile, puts first quarter growth in gross domestic product (GDP) at just 0.89 percent, while the Atlanta Fed’s GDPNow estimate is for just 0.3 percent, both adjusted for inflation,” Mr. Forsyth wrote. “That would follow the slower; but, still robust 2.6 percent real GDP gain reported last week for Q4 of 2018, after the previous three months (Q3/2018) of 3.4 percent.”
If we can get a U.S./China trade deal, that should help provide some additional tail-winds for stocks in the short-term. A lot of the pundits have said that a U.S./China trade agreement has already been priced into to stocks. I will take the contrarian position that they are wrong. Such an agreement will also be a lifeline for Europe, which is on the brink of recession. Germany, the economic bulwark of Europe barely has a pulse at +0.6 percent. My own personal view is that stocks in the short run, especially in the bio-pharma sector, still have room to run. But, if Europe does sink into recession, we may not be immune; and, a weaker summer/2nd half for stocks could be in the cards.
“Pharma’s Great Hope: Drug Companies Are Making Big Bets On Gene Therapy. Should Investors?”
The title above is from the feature article in this weekend’s Barron’s; and, I refer you to the publication for additional details and background. Gene therapy is one of the hottest sectors of the bio-pharma domain. As Barron’s notes, “gene therapy — treatments designed to replace faulty genes with healthy ones — offers potential cures for hundreds of genetic diseases like hemophilia and muscular dystrophy. That promise, and its rich potential, has led to a land grab among the drug giants. The latest is Roche Holdings (ticker: RHHBY), which agreed this past week to pay $4.8B for Spark Theraputics (ONCE), a maker of gene therapy for a rare eye condition and hemophilia. Roche is offering $114.50 a share for Spark, a premium of more than 100 percent of the pre-deal price.”
“If big pharma is piling into gene therapy, should investors follow?,” Barron’s asks. The answer, like most answers in life is — it depends. “here are plenty of risks; but, there is also the potential for an enormous payoff in share price.
Among the companies in this space highlighted by Barron’s include: uniQure (QURE), which has a treatment for hemophilia B, the less-common form of the inherited blood disease; Regenxhio (RGNX), a leading developer of viral vectors, the delivery mechanism for gene therapy. Other pure plays are: Audentes Theraputics (BOLD); MeriaGTx Holdings (MGTX); and Voyager Theraputics (VYGR).”
Gloria Amusa, an analyst with Chardan Capital Markets, “sees continued takeover activity in this sector; and, views uniQure as a leading candidate. His two other top choices are RGNX, and MGTX.
BioMarin Pharmaceuticals (BRMN), and Sarepta Theraputics (SRPT), (I own shares in SRPT), “are more diversified plays, with exposure to gene therapy.
“8 Best Stocks To Invest In Should The U.S./China Trade War Thaw”
With the potential for a U.S./China trade deal in the offing, what stocks could investors take a position in now — in order to take advantage of a run up in price once a deal is announced? In a January 18, 2019 article by Josh Enomoto which he posted on the InvestorPlace website. There are of course no guarantees; but, the old saying is, “you can’t make any real money, if you aren’t willing to risk it. If you believe that the U.S. and China will soon sign a new trade deal, then, you may want to consider taking a position in one or more of the companies Mr. Enomoto highlighted in his article. Those stocks/companies in order of preference are: 1) Alibaba (BABA); 2) Baidu (BIDU); 3) Tencent (TECHY); 4) China Green Agriculture (CGA); 5) Skyworks Solutions (SKWS); 6) Qualcomm (QCOM); 7) Micron Technology (MU); and, 8) United Continental (UAL).”
To the above, I would also add Caterpillar (CAT), who’s stock has gotten bulldozed in the past few weeks; and, who could benefit greatly from a new trade deal.
Remember, there are no guarantees, do your own homework and due diligence, and understand your risk tolerance. Otherwise, good luck. RCP, fortunascorner.com