One of the best sectors to watch when you are hunting down the fast money is biotech, suggests Mark Skousen and Jim Woods, editors of the premium trading service, Fast Money Alert.
The reason why is because biotech stocks tend to make huge moves to the upside if they are in the right place at the right time, or if the drug or medical treatment the company makes gets FDA approval and/or passes the next phase of a clinical trial.
Of course, the downside in this sector is that if a biotech company’s drug therapy or medical treatment fails to get FDA approval, or if its clinical trials are disappointing, the company’s share price can plunge. Indeed, the volatility and big swings keep a lot of traders out of the biotech waters.
But what if you can test the biotech waters without actually owning the shares of a drug company? What if you could test out the biotech segment by embracing a company that does the testing? Well, that’s precisely what we are going to do with our latest recommendation, Charles River Laboratories International, Inc. (CRL).
Charles River is no fly-by-night tech startup. Rather, this fast-money play was founded just after World War II, and in the decades since, it’s become a leading provider of drug discovery and development services.
The company’s research model & services segment is the leading provider of animal models for laboratory testing, which means that it breeds and delivers animal research models with specific genetic characteristics for preclinical studies around the world.
The company’s discovery & safety assessment segment includes the services that are required to take a drug through the early development process, including discovery services. The manufacturing support segment includes microbial solutions, which provides in vitro (non-animal) testing products, biologics testing services and avian vaccine services.
Basically, if you are a drug company or a medical therapy company and you need to make sure your new product is both safe and can pass clinical trials, then you need to hire CRL.
In its most recent quarterly earnings release, CRL reported stronger-than-expected revenues of nearly $915 million, representing an increase of 34% from the prior-year period. And in terms of earnings per share (EPS), the company saw a remarkable 65% year-over-year spike in Q2 EPS growth. The company also raised its full-year guidance citing robust industry demand.
As for the fast money, well, it has certainly been testing out the waters in CRL, as the stock has seen a concerted and relentless rise over the past year. Shares are up 119% over the past 12 months, and year to date, the stock has spiked over 78%.
That share price performance puts CRL in the top 5% of all stocks in terms of relative price strength. So, you know that’s where the fast money is. And while that move is robust, we suspect that CRL is setting itself up to make another big run higher leading up to its next quarterly report.
