Diabetes-related stocks remain a strong theme, and Dexcom (DXCM) is our top pick in the group, explains Mike Cintolo, editor of Cabot Growth Investor.
The shares didn’t spike with the market during the middle part of January, but it also hasn’t taken much a hit during the recent pullback — all in all, shares are chopping around in the 225 to 240 range as investors await the upcoming earnings report (due February 13).
While a big part of this company’s story is obviously its own products and execution, perhaps an even larger part is the entire industry — thanks to a wave of innovation, diabetics are shifting away from multiple daily injections and toward continuous glucose monitors (or pumps that use them).
And that trend has a long way to go. Just 40% or so of Type 1 (and fewer Type 2) diabetics use a CGM (continuous glucose monitor), but that’s quickly changing due to the benefits of keeping glucose levels within the normal range.
Thus, we have high hopes that this stock’s best days are ahead of it, but as usual, we’ll just take it as it comes. With the stock acting well here, we’ll stay on a buy rating; the next big event is earnings, which are due out February 13th.
Meanwhile, one of the other names we keep a distant eye on is Tandem Diabetes (TNDM), which was nearly a penny stock a couple of years ago before going on a huge run as it released what many believe is the best insulin pump on the market.
Dubbed the t:slim x2, it not only has better features and metrics (far smaller and lighter than the competition; has a larger touchscreen than others; uses Dexcom’s CGM; can be updated remotely), but also comes with some predictive software.
The stock had a gigantic run through early 2019, but it deserved a rest and that’s what it did over a nine month stretch, with a very reasonable sideways consolidation. Even so, it seems like it wants to go higher if the market stabilizes. Earnings are due out February 24th.
