The big caps like Apple and Google are terrific performers, don't get me wrong, but they just can't hold a candle to small-cap gains.
I love small caps because they offer the potential for runaway, triple-digit profits that you can bank as the companies you've picked grow... and grow some more.
These kinds of gains aren't random. They're triggered by "sparks," catalysts that I watch for that can propel stocks upward.
In the case of the biotech stock I'm about to show you, there were a whopping five sparks present.
And, even better, there's likely almost 440% more in gains left for the taking...
A Novel Way to Fight a Deadly Threat
Rockville, Md.-based Novavax Inc. (Nasdaq: NVAX) is a clinical-stage biopharmaceutical company. It can deliver a novel vaccine candidate in just a matter of weeks using its innovative Recombinant Nanoparticle Technology - synthetic genes to create nanoparticle vaccines to cure (or improve immunity to) a particular disease. And Novavax does it with a level of precision and efficiency that has never existed before.
Until Novavax, traditional vaccine manufacturing required researchers to grow an actual virus, obtain an embryonated chicken egg, and adapt the virus or optimize new strains to grow in eggs. This process takes a long time.
It also puts researchers at risk of infection and requires high-tech facilities to ensure the virus is contained at all times.
But Novavax vaccines are developed, from inception, using synthetic virus genes. That means researchers are safe from contamination as they work. Additionally, the Novavax method implements a disposable, single-use manufacturing system - eliminating the need to clean and sterilize equipment between batches. That means an antivirus production facility can be built at a fraction of the cost traditional methods require.
Because the company can produce affordable safe vaccines, it can build regional facilities in area hotspots. So-called "local" sourcing is a huge advantage. It means customers don't have to rely on foreign suppliers that are subject to import/export regulations and miles of bureaucratic red tape that slows down effective pandemic treatment.
Novavax's system is much cheaper, safer, and faster.
In an age where deadly pandemics can travel just as easily as people can, which is to say dang near anywhere on the planet in 24 hours, you can see how this disruptive technology gives Novavax a serious leg-up over competitors, which still have to work with dangerous live viruses in a process that can take months to play out.
But a disruptive technology wasn't the only spark that was lit underneath these shares...
More Sparks, Bigger Profits
My research into Novavax alerted me to the presence of an incredible five sparks, including disruptive technology, that were poised to send this stock on a real rocket ride.
- Spark No. 1: Disruptive Technology. I am always on the hunt for the latest viable technological, medical, or special niche product that has the ability to either change the world or support a macro trend that is changing the world. This more than qualifies. The fact that NVAX can deliver vaccines in a fraction of the time, at a fraction of the cost, and set up operations in any part of the world, could revolutionize the entire vaccine industry and change the way vaccines are produced forever. What's more, with its disruptive technology, NVAX is one of the best buyout targets in the biotech industry. Right now a lot of bigger players (flush with cash) are finding it cheaper to buy a new product than develop it organically. We could see them circling NVAX soon.
- Spark No. 2: Upward Earnings Revision. Novavax benefitted from a revision just before I recommended it, and more followed in turn. And in the last 90 days, current quarter, next quarter, and current EPS trends have all increased. Remember, the upward revenue and earnings sparks are about more than just beating analyst expectations. My analysis has determined that upwardly revised guidance has a much bigger impact on a stock's price movement.
- Spark No. 3: Clinical Results Catalysts. The company had a series of successful clinical trial milestones since I recommended it, each one pushing the stock higher.
- Spark No. 4: Institutional Interest. Once a company's market cap exceeds $1 billion, it becomes much more attractive to institutional investors with very deep pockets. I recommended this company while it sported a cap of $453 million; today, that figure stands at more than $2.4 billion. Do you see how these sparks "feed" off each other?
- Spark No. 5: The Intangible Effects of an Infection Scare. Infectious diseases are constantly evolving. And while we've gotten lucky so far, a new virus could erupt at any time, anywhere around the world, and spread to wide population within a matter of hours. Certainly we don't want that - ever. But we must prepare for it. Therefore, the company has a tailwind that could easily last decades.
With the Sparks in Play, Novavax Blasted Off
This convinced me to make the recommendation to buy Novavax stock on Nov. 13, 2013. In a little more than a month, NVAX shares had jumped more than 20% as Wall Street finally caught on.
By Jan. 15, 2014, a little over two months after that initial recommendation, Novavax had given us gains of more than 100%. It was time for a "free trade," where we take our original capital off the table and make a bid for even more gains with the "house money."
Even with the recent pullback in the overall biotech sector, NVAX stock is still up more than 200% since I originally recommended it to my Small-Cap Rocket Alert subscribers.
Speaking of pullbacks...
Everyone knows the age-old investment mantra "buy low and sell high" - but most individual investors would rather get a root canal than buy stocks when they're pulling back - and I completely understand.
Legendary investors like Warren Buffett, George Soros, and Jim Rogers didn't make their fortunes buying stocks when most other investors were too timid to buy shares. I think that's where we find ourselves with Novavax.
The stock is off 38% from its recent closing high on nothing more than weakness in the overall biotech sector. The company has seven candidates in various stages of clinical trials for common diseases such as respiratory syncytial virus, seasonal influenza, and pandemic influenza. Any one of those programs could provide the stock with a new spark to send it to new highs.
Sid's tracking another small-cap story you won't want to miss: The largest free product distribution in American history is underway. It's backed by 27 million businesses and several government agencies with $33 billion at stake. Now Sid's found one tiny company with a near-monopoly in this historic initiative...
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About the Author
Sid is the investment community's best-kept secret. Since 2009, he's served at Money Map Press as Director of Research, analyzing thousands of securities and profit opportunities for subscribers. He's an expert in identifying "alpha" potential in a wide variety of industries, but especially the small-cap sector, where he's discovered a pattern of profits that's almost foolproof.