Martek: Formula for Success
12/12/2003 12:00 am EST
Growth stock guru, Gregory Spear notes that Martek Biosciences is the best performing biotech he knows, while momentum expert Jim Collins considers the stock-trading near its all-time high-an exceptional buy for aggressive traders. Here are their comments.
Gregory Spear, editor of The Spear Report, says, "Martek Bioscience (MATK NASDAQ) specializes in nutritional oils used in infant formula, nutritional supplements, and food fortification. Its formula contains a blend of docosahexaenoic acid (DHA) and arachidonic acid (ARA), two nutrients that are key building blocks of an infant's brain and visual system and are naturally present in breast milk. The company's products are protected by over 100 process patents. Among many other customers, they supply ingredients to Abbott Lab for Similac, Isomil and NeoSure brands of infant formula, and a private-label brand, Parent's Choice, for Wal-Mart. This past summer they announced a contract with Nestle.
"Data from two new studies presented at the American Heart Association conference this year demonstrate that supplementation with DHA omega-3 fatty acid results in a significant cardioprotective benefit for patients at risk for developing cardiovascular disease. It may also help post-partum depression, Alzheimer's, etc. You get the idea. That's why MATK is the best performing biotech we know. The fact that 20% of the float is short also helps. We grant you that a stock with a 145 PE is not exactly a value play. On the other hand, this company is growing revenues at 100% a year. MATK is a long-term buy-and-hold candidate."
Martek is also the latest featured stock from Jim Collins, editor of OTC Insight. He says, "DHA and ARA are found naturally in cold-water fish such as tuna, mackerel, and salmon, and a diet rich in fish can supplant DHA and AHA supplements. However, farm-raised fish often contain high levels of mercury and other unwanted impurities.To address this issue, Martek devised a cost-effective method to isolate DHA and ARA from microalgae in a purified form, free from contaminants. With its superior product, Martek has been able to sign all the major infant formula makers. In addition, DHA is sold in capsule form used as a nutritional supplement. For the quarter ended July 31, Martek reported earnings of $0.16 a share, $0.27 better than the $0.11 per shar eloss reported last year, and better than consensus estimates. Revenues increased 115% to $29 million. The stock is at an all-time high, trading at $59.70 at the end of November. There are risks, as competitors could develop similar technology and take market share. However, we consider the stock exceptionally attractive for aggressive traders."