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dcsilver (< 20)

NVAX, AMRN, EXEL and what’s wrong with CAPS

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August 30, 2011 – Comments (1) | RELATED TICKERS: NVAX , EXEL , AMRN

 

I guess I'm becoming a biotech junkie. Kinda funny if you know me personally, because I know almost nothing about science or medicine. So take this post with a grain of salt.

 

First, some “analysis” from dailymarkets.com – If I make fun of the FOOL articles (http://www.fool.com/investing/general/2011/08/27/wall-streets-wrong-about-these-stocks.aspx?source=itxsitmot0000001&lidx=1) which make statements without giving actual analysis then I should do the same from other sources. I just happen to like what this guy is saying.

 

http://www.dailymarkets.com/stock/2011/08/29/stocks-to-watch-on-tuesday-august-30/

 

We finally got the breakout in Novavax, Inc. (NASDAQ:NVAX). Shares rallied past resistance of $1.47 and hit my trigger to open positions. Watch the $1.75 as potential resistance. Let’s keep an eye on NVAX as i think momentum will pick up.

 

The difference in the two is that the FOOL article is stupid. It’s an ATTENTION grabbing headline “Wall Street’s Wrong About These Stocks” but doesn’t have any depth to it. The FOOL’s premium services are well worth the money (I’ve been a member of MDP for years), but I chuckle at most of their free content. I’m sure Rich Duprey is a great guy, and he understands how to write an article to get clicks, but his stock analysis in this particular post isn’t worth the toilet paper I used this morning. What annoys me most is that his article doesn’t support his title.

 

As long as I’m ripping on Mr. Duprey, I’ll also rip on CAPS for a moment. CAPS is the opposite of Warren Buffett analysis. It doesn’t reveal quality companies at good prices, it reveals quality companies that have rewarded investors in the past. It doesn’t speak to the quality of the company at the moment.

 

I’ll give an example. Amarin (AMRN) is a stock I liked when it was 1 star. It’s now a 4 star CAPS rating. Does that mean that when I liked it, it wasn’t a quality company? Personally, I think the risk versus reward analysis of AMRN at $11.00 a share makes it a 2 star stock now. The stock might be worth $20 a share, but it could also drop to $5.00 in the blink of an eye. I feel the same way about NVAX at the moment. The chances of NVAX going from $1.50 to $7.50 is better than AMRN going from $11 to $55. So the risk versus reward analysis is favorable to NVAX in my opinion. There’s no recognition of that in CAPS until after NVAX is successful.

 

This is a long winded way of saying that when Mr. Duprey says that CAPS members don’t like NVAX and Wall Street does, he’s comparing apples and oranges. Wall Street is forward looking and CAPS is retroactive rewarding… So I’ll go with Wall Street on this one.

 

As far as 4 star biotech stocks that I think have a potential multiple bagger return, I still love Exelixis (EXEL). But that’s an MDP which the FOOL supports with actual analysis.

 

DCS

 

 

 

1 Comments – Post Your Own

#1) On August 30, 2011 at 10:32 AM, dcsilver (< 20) wrote:

Last line should say -

But that’s an MDP stock pick, which the FOOL supports with actual analysis.

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