William Patalon III
Investing in Biotech Stocks: Why the "ASCO Effect" Rally Could Start Tomorrow
Get ready to profit from the "ASCO Effect."
Each June, the American Society of Clinical Oncology (ASCO) hosts its annual meeting – an event that's attended by 30,000 people and the scene of 4,000 presentations.
And each May, just ahead of this crucial gathering, a select group of oncology stocks takes investors on a pretty wild ride – almost like clockwork.
That's the "ASCO Effect."
The catalyst for this big run-up – in which some stocks double, triple or quadruple in price (or more) – is well-known. A few weeks ahead of the meeting, ASCO posts drug-research abstracts of some of the presenting companies on its Website; investors look at the clinical-trial results contained in the abstracts, and key on the most-promising players – igniting share rallies so torrid that they're remembered for years.
This year's ASCO annual meeting is scheduled for June 1-5 in Chicago.
But, according to the latest reports we've seen, the abstracts are due out at 6 p.m. (EDT) today (Wednesday).
If that deadline is met, you can bet that investors will be scouring those abstracts all night.
If you want an example of the ASCO Effect in action, just look at what happened with OXiGENE Inc. (Nasdaq: OXGN) shares just 12 months ago. As May opened last year, OXiGENE was a relatively unremarkable biotech stock. Indeed, the company was juggling a lot of problems.
OXiGENE faced questions about its management turnover and its cash position. Shareholders were worried about its cancer-drug pipeline. And the stock was trading at less than $2 a share.
In fact, OXiGENE shares had been one of the biotech sector's worst performers in 2010, and the company had to endure the ignominy of a reverse stock split in February 2011.
Then came the ASCO Effect.
Stocks Have You Worried? Here's What You Do
Last Tuesday, USA Today ran a long Page 1 story under the headline "Invest in Stocks? Forget About It."
The story's message was loud and clear: U.S. stocks have risen more than 100% from their March 2009 bear-market bottom – including 25% since October and 9% so far this year – but most retail investors still wouldn't touch them with a 10-foot pole.
And with the Standard & Poor's 500 Index now on a losing streak – it's down about 5% from its April 2 high, according to Bespoke Investment Group LLC – you can bet that this "keep-stocks-away-from-me" sentiment has only intensified.
I mentioned this to Keith Fitz-Gerald, our chief investment strategist, during a private briefing last week.
True to form, Keith quickly said out loud what I had already been thinking.
"BP, those investors are making the mistake of their lives," he said. "In fact, I'll wager that they're actually compounding an already-huge mistake. They missed out on the most-powerful stock market rebound since the Great Depression – and they did that after having sold out at the very bottom of the bear market that preceded it, meaning they locked in some of the most-horrific market losses most investors have ever seen."
If you're in that group, don't fret: You can recover.
In fact, Keith helped me lay out a game plan just for you – one that will let you take charge, put the odds in your favor and even capitalize on approaching opportunities that Wall Street will be slower than you to see.
Let's take a look …
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Gold Prices: How to Climb the "Golden Staircase'
When U.K. subscriber John M. wrote in this week, he got right to the point.
Asked John: "What's happening to gold prices? Why are they dropping?"
For an answer, I speed-dialed Real Asset Returns Editor Peter Krauth - our resident expert on mining and precious metals.
Peter is based in Canada, which keeps him close to the natural-resource companies that proliferate north of the border. He gave me a detailed and insightful answer to John M.'s question.
And he recommended three ways to profit – including an ETF he says is perfect for first-time gold investors.
To explain what's happened with the "yellow metal" – and to project where gold prices will go next – Peter invented a pricing theory that he christened the "Golden Staircase."
"The bottom line, Bill, is that the price of gold has simply entered a consolidation phase – much like it has done numerous times since it entered this secular bull market back in 2001," he told me.
Gold futures were at $1,662.40 an ounce yesterday – well off the yellow metal's high. Here's why.
"If you think back, when gold hit its all-time high of $1,900 last August, we were in the midst of wild speculation that the U.S. government wouldn't resolve its debt-ceiling crisis," Peter explained. "A deal in Congress was reached in time, but Standard & Poor's went on to downgrade the nation's credit rating for the first time in history. Since then, there's been considerable apathy towards gold by the general investing public, pushing its price down about 13%. What's more, government-calculated inflation looks benign, taking away from gold's luster."
And here's where it gets interesting.
How to Avoid the Approaching Bond Market Debacle
If you're an income investor, you probably feel like you're in one of those nightmares where you're trying to run like hell – but aren't getting anywhere.
Martin Hutchinson and I were talking about this predicament last week.
As editor of the Permanent Wealth Investor, Martin is our income guru here at Money Map Press. His advice on how to thrive in this lousy-income environment was so good that I had to pass it along to you – along with one of his favorite income plays.
Traditionally, bonds – especially U.S. Treasury bonds – are the favored holding of income-seekers. But bonds face two big challenges right now – and we have the U.S. Federal Reserve to thank for both of them.
First, thanks to the ultra-low-interest-rate policies of the nation's central bank, Treasury bonds are yielding next to nothing. When I looked Friday afternoon, the 10-year was yielding 1.94% and the 30-year 3.12%.
Now, according to the latest federal figures, the U.S. consumer price index (CPI) fell to 2.7% in March from 2.9% in February. The CPI is the "official" gauge of U.S. inflation. But as we explained back on March 2, this is a bogus number.
The American Institute for Economic Research (AIER) says everyday prices – the ones that matter most to working Americans – are up a good 8% over the past year.
So income investors who stick to traditional tactics are actually losing ground to inflation. And you absolutely don't want to outlive your money.
If that were the only problem, it would be pretty bad. But there's a second challenge – and it's a doozy.
You see, the central bank's Federal Funds rate – the benchmark that helps determine most borrowing rates that American consumers and businesses pay – remains down near zero. And while no one can predict with certainty when rates will change, there is one thing you can bank on: When rates do change, they can only go up.
And since bond prices move opposite interest rates (bond prices fall when rates rise, and vice versa), those fixed-income securities will take a beating when rates increase.
And so will the investors who hold them.
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Biotech Stock Trading: The "ASCO Effect" Can Double Your Money in Days
At the beginning of May 2011, OXiGENE Inc. (Nasdaq: OXGN) was a relatively unremarkable biotech stock. It was trading at less than $2 a share.
You might even say that OXiGENE was deeply troubled.
The company faced questions about management turnover and its cash position. Its investors were worried about its cancer-drug pipeline.
In fact, the stock was one of the biotech sector's worst performers in 2010, and the company had to endure the ignominy of a reverse stock split in February 2011.
Then came the "ASCO Effect."
Over a nine-trading-day stretch that started the first day of May, OXiGENE shares soared 218% – on a massive spike in volume. If you include the intraday high, the stock gained as much as 245%.
This isn't an isolated case.
Each June, the American Society of Clinical Oncology (ASCO) hosts its annual meeting – an event that's attended by 30,000 people and the scene of 4,000 presentations.
Roughly two months beforehand, ASCO posts the titles of the research abstracts that will be the basis of those presentations.
Traders search those abstracts to identify the sponsoring companies – many of them development-stage oncology biotechs whose low share prices make them fodder for some fast action.
That's exactly what happened with OXiGENE at this time last year: Traders scoured ASCO's Website and found two abstracts dealing with the company's cancer drug Zybrestat.
Not long afterwards the stock zoomed.
Biotech Stocks and the ASCO Game Plan
This year's ASCO annual meeting is scheduled for June 1-5 in Chicago.
The ASCO Effect move often starts in April. But there's almost always an additional stretch in May during which oncology stocks experience near-vertical spikes in very short periods.
He Predicted the Apple (Nasdaq: AAPL) Sell-Off … Here’s What's Next
The recent sell-off we've seen in Apple Inc. (Nasdaq: AAPL) shares came as a real stunner to Wall Street.
But Strike Force Editor Keith Fitz-Gerald saw the sell-off coming.
In fact, he predicted it.
Back on March 27, Keith wrote a lead story for Money Morning in which he articulated seven very clear reasons that investors should consider shorting Apple's stock.
And that was a couple of weeks after he detailed a "put" option strategy – in essence, a "short" trade – that resulted in a 47% profit (in just two days, no less) for the subscribers of his Strike Force trading service who followed his recommendation (a short-term reversal delivered those gains).
I wanted to know what tipped him off that a reversal was coming – as well as what he was predicting for Apple's shares going forward.
"BP, it was clear to me that this kind of reversal was coming – and sooner rather than later," Keith said during a private briefing late last week. "The shares had soared 75% in just five months – one analyst actually described the performance as "euphoric.' Suddenly, we're seeing all these mainstream-news-media stories explaining why Apple shares are going straight to $1,000. But I know from my own experience as a professional trader that even the shares of the best companies on earth don't go straight up. I happened to time it perfectly and help Strike Force subscribers take advantage of the reversal I just knew was in the offing."
Key Questions for Apple Stock
The way we see it, the Apple stock sell-off raises these three key questions for investors:
- No. 1: What's going to happen to Apple shares in the near-term?
- No. 2: If the stock is headed for a volatile stretch, is there any way to profit until the smoke clears?
- No. 3: What's the long-term outlook for Apple – both the company and the stock?
Having worked with him for five years, I've seen Keith make gutsy calls like this – and have them pay off big – time and time again. Since I knew you'd be as interested in his answers as I was, we wanted to share them with you.
Here's what Keith had to say.
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Biotech Stocks: How to Invest in the Buyout Binge
Big drugmakers are scrambling.
Right now, some of their most-lucrative blockbuster drugs are coming "off patent" – meaning they face the loss of $170 billion in annual sales.
But I'm going to let you in on a secret that Wall Street investment pros hope the little guy never learns: The very same problem that has Big Pharma execs wringing their hands even as you read this is also creating one of the biggest profit opportunities we've seen in years.
To show you what I mean, allow me to tell you two quick stories.
The Secret Path to Biotech Profits
Late in my business journalism career, I spent three years covering the biotech sector.
Let me tell you: That reporting job brought me to a very quick understanding of just how challenging this business really is.
Wall Street and Big Pharma executives beat the drum about their successes – the new "miracle drugs" that treat or cure obesity, arthritis, depression and cancer. We hear about those achievements all the time.
What I found in my reporting, however, was that the failures dwarf the success stories.
The failure numbers are actually downright mind-numbing.
For every 1,000 "compounds" (drug candidates) that enter laboratory testing, only one will ever make it to human testing.
Indeed, once a company develops a drug, it's usually looking at about three-and-a-half years of testing in the lab before it can even apply to the U.S. Food and Drug Administration (FDA) for approval to begin testing in humans.
Of all the drug candidates that enter Phase I trials – the first of three phases that mark the path to FDA approval – only one in five ever makes it to market.
The bottom line, as I discovered, is this: It can take 10 to 12 years and $1 billion or more to develop a new drug.
For Big Pharma CEOs who are staring at eroding patent coverage and searching for replacement blockbusters, that's too much time and way too much risk.
They're not abandoning internal drug development. But they're also pursuing an alternative strategy: Sniff out the small players already developing the new potential blockbusters and either buy the drug, or buy the company outright.
That urgent multi-billion-dollar shopping spree is going on right now… boosted to the max by a need to keep boards and shareholders happy.
As Merck & Co. (NYSE: MRK) CEO Kenneth Frazier recently told an investor group: "My goal is to augment the pipeline. The way to augment is to find those assets that we can acquire."
That's easier said than done.
For one thing, Big Pharma/Big Biotech companies are fat with cash. That means there's a lot of competition in the search for new drugs or entire companies to buy. For another, there's a "scarcity of growth assets," as Goldman Sachs Group Inc. (NYSE: GS) said in a new report.
Although that supply/demand scenario is a tough one for Big Pharma, it's a terrific one for investors like us: It puts pressure on the suitors to buy whatever's available. And it means the prices will be high when they do.
And, as my second story demonstrates, those deals do happen.
In fact, our subscribers recently reaped a big payday from just that kind of deal.
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Investment Forecast: Why 2012 Will Be the Year of the "Micro Boom"
Forget about "buy-and-hold" investing.
Going the total blue-chip route won't help, either.
Even that grand old investment standby – indexing – figures to be a loser in the 12 months to come.
As an investor looking to maximize your profits in the New Year, you need only understand one thing – that 2012 will be the year of the "Micro Boom."
Never heard the term before?
That's okay … Micro-Boom investing is a different kind of investing strategy for what's shaping up to be a very different kind of market.
But make no mistake: These little-known profit machines will separate the winners from the losers in the New Year.
Let me explain …
Micro Booms are small pockets of intense growth … that can lead to stunning profits.
Don't confuse Micro-Boom investing with sector investing – they're not the same at all. Micro Booms are much more focused, much more intense – and far more profitable.
Take, for instance, the "Bakken Boom."
It's unfolding in North Dakota, and is being compared to a "modern-day gold rush." But it's not gold the profit-seekers are pursuing … it's oil from the Bakken Shale oil deposits located there.
Big Oil is investing $2 billion each month in pursuit of Bakken business. And the urgency is so intense that some towns in that region have seen their unemployment rate go all the way to zero.
And the Bakken Boom is just one of a half-dozen of these tectonic growth plays – some of which offer investors the chance to make five times their money … or even more.
But it's not enough just to identify these Micro Booms – to maximize profits an investor must be able to identify the biggest beneficiaries of all this growth, since those will also be the greatest profit opportunities.
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The Five Stocks You Have to Own in 2012
An energy play that's poised for a 50% gain – that will pay you more than 9% on your
money while you wait …
A global tech play that has a unique solution to the single-biggest danger that we face in this
new Information Age - and that will reward its shareholders with a gain of as much as 99% ….
And a low-priced stock in the industry we believe will be the focus of Wall Street's next
big takeover wave. (Hint: The company is one of the few gold-mining stocks most individual
investors have likely never heard of – but would be smart to own) ….
I've included all three of these recommendations – and several more, besides – in today's
report. It's free..
You see, in the four months that followed our Aug. 11 launch of Private Briefing, the feedback has been terrific.
To continue reading, please click here…
Free Briefing: Invest in the One Technology That Will Dominate the Planet
When you think of "mobile" or "connected" devices, you probably picture that new smartphone you just bought, and maybe your Apple Inc. (Nasdaq: AAPL) iPad2.
Well, I'm here to tell you that you're thinking too small.
Way too small.
By 2020, there will be 50 billion connected devices in use worldwide.
That's not a typo. And it's not a "hyped" estimate that we came up with internally. In fact, the estimate was made by Telefonaktiebolaget LM Ericsson (Nasdaq ADR: ERIC), one of the largest telecommunications companies on the planet, in the research report "More Than 50 Billion Connected Devices."
That creates a lot of significant risks.
But for savvy investors, it creates one hellacious profit opportunity. And – as you'll have the opportunity to see in a free investment briefing on Monday, there's one company in particular that's poised to profit.
Still need to know more?
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