Small cap expert Kevin Kennedy selects stocks based on time-test momentum factors such as high relative strength, new highs, strong industry groups, and big volume breakouts followed by pullbacks on lighter volume. Here, the editor of the Coolcat Report looks at a pair of biotech bets.
STAAR Surgical (STAA) makes implantable lenses and other vision products. The company has implanted more than 600,000 of its Visian Implantable Collamer Lens using refractive surgery.
The stock traded near $20 in April 2014, but fell to a four-year low of $4.98 in mid-May. It’s since jumped 80%, rising 24% in July.
The shares added another 28% gain last month after reporting second-quarter earnings while breaking out to new highs. The stock is 7% off its August high of $9.60.
The company is a bit pricey, with a market cap of $352 million more than four times annual sales of $80 million.
On the plus side, the company is expected to turn a loss of 32 cents per share in the past four quarters into a gain of 12 cents per share in the next four.
Cempra (CEMP) is a clinical-stage biotech company working to develop antibiotics to treat bacterial infectious diseases such as pneumonia.
Cempra came public in early 2012 at $6 and surged 94% in 2013 and 90% in 2014, then almost doubled to its peak of $46.99 last July.
It tumbled to a low of $14.03 in March, but gained 22% in August while trading as high as $25.09 Aug. 8, its best level since January. It has since consolidated those gains nicely on lighter volume.
Like most biotech stocks, it’s short on sales and long on promise. CEMP’s $1.16 billion market cap dwarfs annual revenues of $14 million, but it has $4.78 per share in cash and is expected to see losses rise slightly in the next four quarters to $2.45 per share.
The company hopes to receive FDA approval of Solithera (solithromycin) to treat community-acquired bacterial pneumonia later this year and begin marketing it in 2017.
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By Kevin Kennedy, Editor of Coolcat Report
