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Stock Pick: Novavax can be a Big Winner in 2017

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Novavax (NASDAQ:NVAX) develops vaccines based on protein nanoparticles which can help increase the immune response in patients. It is currently awaiting results of phase 3 trial. A successful result will provide significant bump to the stock and also make it an attractive acquisition target by bigger pharmaceutical companies.

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RSV F maternal vaccine candidate in phase 3

Data from RSV F vaccine in phase 3 will show its efficacy. We should see the results by the second half of this year. If the results are excellent it will allow Novavax to target 4 million people.

[ecko_annotated header=”Novavax’s RSV F vaccine is the only candidate in phase 3″ annotation=””]

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[/ecko_annotated]

The market opportunity of this vaccine is enormous. Close to 57,000 children younger than 5 years are hospitalized due to RSV infection. Being the only drug can provide significant advantage to Novavax. The RSV F vaccine for maternal immunization is estimated to have annual US cost burden of around $770 million. For older adults this burden is a staggering $28 billion. NVAX will be able to launch the RSV F vaccine for maternal immunization by early 2018 whereas vaccine for older adults can be launched in 2019.

[ecko_annotated header=”Big market opportunity for Novavax vaccines” annotation=””]

[/ecko_annotated]

Peak sales target

The past success rate of phase 3 drugs getting FDA approval is close to 50%. According to NVAX the market opportunity for maternal immunization vaccine is close to $770 million. This would result in a peak sales estimate of $380 million as there is no other competition for this drug. Valuation of a clinical stage biotech company is between 3-5 times its peak sales. Taking a conservative estimate, this $380 million in peak sales will translate to a $1.14 billion market capitalization for the company. Currently the stock has a market cap of $223 million.

[ecko_annotated header=”Probability of success for a drug at different stages” annotation=””]

[/ecko_annotated]

Currently the stock is trading at $0.82/share. If the above approval is provided we can see the stock skyrocket to $4-$4.5/share. Becoming an acquisition target soon after approval will also provide a good premium valuation to the stock in a short time.

Risk/Reward associated with the stock

Although the upside for the stock is quite strong at the present moment, it should be noted that everything hinges on RSV F vaccine getting FDA approval. In case this vaccine does not meet the requisite standards we should see a slump in the shares. A similar event happened in September 2016 when RSV F vaccine did not meet the standards for older patients. This led to over 80% fall in its stock price.

[ecko_annotated header=”Fall in NVAX prices after its last drug failure in meeting the standards on older patients in September 2016″ annotation=””]

[/ecko_annotated]

Investor Takeaway

Novavax is developing RSV F vaccine for Respiratory Syncytial Virus. This vaccine for infants through maternal immunization is in Phase 3 and the results should be declared in the latter half of 2017. If it gets the requisite approval from FDA, it will be the first drug in the market for RSV segment and will have a peak sales market opportunity of $380 million. This can boost the price of the stock to over $4/share from current price of $0.80/share.

If it goes through the acquisition route, the stock valuation can increase much sooner. However, traders much also be aware of the risk associated with this stock. The stock is heavily reliant on the positive outcome of its RSV F vaccine and if this does not happen, we can see a decline in the stock for quite some time.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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2 Comments

2 Comments

  1. Ershad

    April 22, 2017 at 10:27 pm

    Hi Rohit,

    Thanks for your article I wanted to ask a questions firstly how does one buy shares into this company? Secondly what are the probality that this new drug gets an approval from the FDA?

    Kind regards
    Ershad

    • Pabloasampras

      May 1, 2017 at 3:04 am

      Hi bud , you can open an independent investing account with Merryl Lynch

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Stock Picks

Stock Picks: Buy SJM and LB

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The S&P 500 (SPX) has recovered big last week after two consecutive large red candles on the weekly chart. Bulls managed to preserve support of 2,600 as the market bounced from a low of 2532.69 even in the midst of heavy selling pressure. In addition, RSI appears to have rallied from a low of 38.33. This is an encouraging sign as it indicates that momentum is creeping up. Nevertheless, the index must move above 2,872 to relieve selling pressure, and keep the uptrend alive.

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As the index still hesitates, let’s look at names that are near their firm support levels.

SJM – JM Smucker Company

J.M. Smucker Company is a 120-year-old company that manufactures and markets fruit spreads, peanut butter, shortening and oils, ice cream toppings, sweetened condensed milk, and health and natural foods and beverages. A household brand name in North American homes, its portfolio includes brands such as Smucker’s, Jiff, Crisco, Pillsbury, R.W.Knudsen Family, and Dunkin’ Donuts. The company is committed to strengthening families through moments shared around memorable, wholesome, and quality meals.

SJM lost its bullish momentum in February 2017 when it generated a lower high of 143.68. This signaled investors that the uptrend that began in August 2012 was over. Many cut their positions as seen on the eleven consecutive red weekly candles that spanned from February to May 2017. While SJM eventually bounced, it generated another lower high of 134.12 in June. From then on, the stock plunged until it bottomed out at 99.57 in November 2017.

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Technical analysis reveal that SJM has broken out of a bullish reversal pattern in December 2017. In addition, it created a bullish higher low set up at 114.33 two weeks ago. These factors suggest that the stock has regained its bullish momentum.

The strategy is to buy as close to 120 support as possible. With a higher low in place, the market will likely start its climb to our target of 155. The process may take six months.    

Weekly SJM Chart

Monthly SJM Chart

As of the time of writing, SJM is trading at 123.72.

Summary of Strategy

Buy: As close to 120 as possible.

Target: 155

Stop: A close below 115 negates this trade call.

 

LB – L Brands Incorporated

L Brands Incorporated is a Fortune 500 fashion retailer American company. One of the leading fashion retail brands worldwide, their flagship brands include Victoria’s Secret, Bath & Body Works, Pink, Henri Bendel, and La Senza. Established in 1963, the company continues its tradition of offering it’s clientele not only high-quality products, but captivating experiences as well.

LB topped out when it posted a lower high of 88.74 in April 2016. The downtrend was confirmed when it breached support of 80 in the same month. Since then, the stock created lower highs and lower lows until it found its bottom at 35 in August 2017. Having lost more than 60% of its value, the stock rallied after bottoming out.

Technical analysis show that LB has also broken out of a bullish reversal pattern when it went as high as 57.19 in November 2017. More importantly, it recently generated a bullish higher low set up at 45. This move may attract more bottom pickers which can inspire a big rally.

The strategy is to buy as close to 45 support as possible. As long as this level holds, the market has momentum to march to our target of 100. The entire process may take one year.

Weekly LB Chart

Monthly LB Chart

As of the time of writing, the L Brands Incorporated stock is trading at 47.97.

Summary of Strategy

Buy: As close to 45

Target: 100

Stop: A close below 42 negates this trade call

 

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 68 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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Stock Picks

Stock Picks: Invest in HCP and IRM

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The S&P 500 Index (SPX) has bounced from as low as 2,532.69 on February 9 to as high as 2,754.42 on February 16. However, it closed at 2,732.22 on the same day. The price action created a long wick above the daily candle’s body indicating the presence of sellers in the area. More importantly, the daily chart is showing signs of a lower high. Unless SPX can get above 2,872 soon, expect bears to take over, and drive the index down.

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As the SPX is not yet out of the woods, let’s look at issues that are near firm support levels

HCP – HCP Incorporated

HCP Incorporated is an S&P 500 Real Estate Investment Trust (REIT) that serves the healthcare industry in the United States. Since 1985, their services are characterized by high barriers to entry, favorable demographic trends, and solid real-estate fundamentals. Their portfolio includes senior housing, life science, medical offices, and hospitals – one of the largest portfolios in healthcare real estate to date.

HCP exhausted its uptrend in January 2015 when it generated a lower high of 45.16. The bearish move put investors on notice, and in May 2015, the stock broke below support of 36. From then on, it created a series of lower highs and lower lows until it eventually found its bottom at 22.86 in February 2016. The stock bounced after that, but it had trouble closing above 36 in the coming months. As bears defended the critical resistance level, HCP has dropped back down to 22.

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Technical analysis reveal that HCP’s plunge has opened an opportunity for bottom pickers. It appears that the stock is respecting support of 22. Volume surged from 19.72 million to 34.90 million when it touched this level. This shows that bulls are ready to defend the support level. On top of that, the stock is in oversold territory, suggesting a bounce is on the horizon.

The strategy is to buy as close to 22 as possible. Should bulls successfully defend this level, the stock will most likely resume its march towards the top end of our range, and our target of 36. The entire process may take six months

Weekly HCP Chart

Monthly HCP Chart

As of the time of writing, the HCP Incorporated stock is trading at 22.68.

Summary of Strategy

Buy: As close to 22 as possible.

Target: 36

Stop: A close below 21.50 negates this trade call.

 

IRM – Iron Mountain Incorporated

Iron Mountain Incorporated is an information management services company founded in 1959. With a portfolio that includes their trademarked Iron Cloud Storage, information management, digital transformation, secure data centers, and secure destruction. They promise to deliver data protection in various industries including federal government, banking, energy, entertainment, insurance, healthcare, law firms, life sciences, retail, and small businesses.

IRM relaunched its bull run in March 2016 when it breached resistance of 32. The move attracted breakout players, which pushed the stock to as high as 41.50 in August 2016. However, bears defended that major resistance level, which forced the stock to drop to as low as 30.75 in November 2016. With IRM down to a major support level, investors bought positions which enabled the stock to rally and go as high as 41.53 in November 2017. Like clockwork, bears claimed the resistance, and sent the stock back down to 32.  

Technical analysis show that IRM is respecting support of 32. The heavy volume over the last two weeks when the stock dipped to this level validates that assumption. Moreover, the stock is flashing near oversold readings which means a bounce might happen soon.

The strategy is to buy as close to 32 support as possible. Once selling is over, the stock will most likely move towards our target of 41.50. The process might take six months.  

Weekly IRM Chart

Monthly IRM Chart

As of the time of writing, the Iron Mountain Incorporated stock is trading at 33.17.

Summary of Strategy

Buy: 32

Target: 41.50

Stop: A close below 31.5 negates this trade call

 

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 68 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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Stock Picks

Stock Picks: Buy HST and HBI

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After hitting a low of 2,532.69 on February 9, the S&P 500 Index (SPX) appears to be in the middle of a bounce as it rebounded to 2,672.61 yesterday, February 12. While bulls are still in control, the index appears to show signs of hesitation. Volume is just slightly above the 20-day moving average at 2.687 billion. Moreover, yesterday’s price action created a spinning top candle indicating the presence of sellers above 2,656, and the presence of buyers below 2,636. Today’s candle should provide more clarity on the index’s direction.

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While the SPX hesitates, let’s look at stocks that are near key support levels.

HST – Host Hotels and Resorts Incorporated

Host Hotels & Resorts, Incorporated is a S&P 500 and Fortune 500 real estate investment trust (REIT). As of February 2017, the company owns approximately 53,500 rooms spread in 96 upscale and luxury hotels worldwide. Their committed maintenance of their superior diversified portfolio, disciplined capital allocation, and strong asset management capabilities landed them in RobecoSAM’s 2018 Sustainability Yearbook among the world’s most sustainable companies.

HST lost its bullish steam in March 2015 when it generated a lower high at 21.91. The bearish head and shoulders pattern on the weekly chart was triggered when the stock broke below support of 19 in August 2015. HST plunged as investors started to dump shares. It took the stock five months to find its bottom at 12.17 in January 2016. As the stock bottomed out, the stock quickly rallied.

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Technical analysis show that HST managed to reverse its trend and ignite a bull run when it breached resistance of 19 in October 2017. While the stock reached as high as 21.53 in January 2018, it flashed oversold readings which forced a dip. HST went as low as 18.74 this month before bulls rushed to defend support at 19. This slight correction is your chance to enter the market near a critical support level.

The strategy is to buy as close to 19 as possible. Should bulls successfully defend this level, the stock will most likely resume its march towards our target of 25. The entire process can take three months.

Weekly HST Chart

Monthly HST Chart

As of the time of writing, the Host Hotels and Resorts Incorporated stock is trading at 19.31.

Summary of Strategy

Buy: As close to 19 as possible.

Target: 25

Stop: A close below 18.75 negates this trade call

 

HBI – HanesBrand Incorporated

Hanesbrands Incorporated is an S&P 500 and Fortune 500 American clothing company. They are the world’s leading innovator, manufacturer, and marketer of basic apparel. Included in their portfolio are the brands Hanes, Champion, Playtex, Bali, L’eggs, Just My Size, Hanes Hoisery, Barely There, Wonderbra, Duofold, Aire, Beefy-T, C9 by Champion, Cacharel, Celebrity, Daisyfresh, J.E. Morgan, One Hanes Places, Maidenform, Rinbros, Ritmo, Sheer Energy, Silk Reflections, Sol, Sol y Oro, Tagless, and Zorba.

HBI exhausted its bullishness in November 2015 after posting a lower high at 33.24. It then went in a downtrend after breaking below support of 26 in February 2016. While the stock bounced, it created another lower high at 30.42 which validated the trend. From that point on, the HBI generated a series of lower highs and lower lows until it bottomed out at 18.91 in January 2017.

Technical analysis show that HBI has broken out of the downtrend channel that it respected for almost two years when it closed above 21 in June 2017, effectively reversing its trend. It went as high as 25.73 in September before succumbing to selling pressure. While it retreated, it seems to respect support of 19. More importantly, the stock appears to have capitulated on the week of February 5, 2018 as its weekly volume skyrocketed to 83.558 million when the average was just 33 million.

The strategy is buy as close to 19 support as possible. Once selling is over, the stock will most likely resume its march towards our target at 32.50. The process might take more than one year.

Weekly HBI Chart

Monthly HBI Chart

As of the time of writing, the Hanesbrands Incorporated stock is trading at 19.92.

Summary of Strategy

Buy: 19

Target: 32.5

Stop: A close below 18.50 negates this trade call

 

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 68 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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