The "Dog-and-Pony Show" You Can't Ignore

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Inovio Pharmaceuticals Inc. (NYSE: INO) has been attracting a lot of attention from institutional investors.

And that's a trend you can expect to continue.

Inovio is the penny-stock vaccine maker that Radical Technology Profits Editor Michael A. Robinson, our resident tech guru, recommended on Friday.

Inovio, formerly Inovio Biomedical Corp., is researching DNA vaccines, with an eye toward preventing cancers and infectious diseases. In one of its initiatives, the Blue Bell, Pa.-based Inovio is trying to develop a synthetic flu vaccine.

And the company is starting to get noticed.

Stock researcher Maxim Group late last week instituted coverage with a "Buy" rating, and set a target price of $1 a share - 27% above where Michael recommended it.

In mid-January, investment bank Piper Jaffray Cos. (NYSE: PJC) placed an "Outperform" rating on Inovio shares and established the same $1-a-share price target.

Both those targets are well below the new latest consensus price of $1.67 a share - which is 135% above Friday's close.

And though we don't follow Wall Street's lead, we do continue to watch each new development.

That's because we understand very well the power of Wall Street's "PR" machine, and the liquidity the investment banks can funnel into the stocks that they've decided to push. So we're never unhappy to see these institutional players boost their ratings or "target prices" on shares that we've already uncovered as a result of our independent analysis - and recommended to you.

In short, as long as you're in the stock first, then we're happy.

As I know from my two decades as a business journalist, the smartest companies actually understand how to work that PR machine - and one of the best ways is via the "dog-and-pony show."

The bigger, Fortune 50-type companies will actually host "events" for analysts - typically in one of two ways.

The first, and most common, strategy is for the corporation to rent an auditorium in New York City and invite all the "sell-side" folks who follow it (and even some "buy-siders") in for a series of management reports and a detailed Q&A session.

(Indeed, the biggest firms usually hold an event for analysts in the morning, and then do an abbreviated encore for the business press in the afternoon. I can't begin to count how many of these I attended myself through the years.)

A less-common, but highly effective, strategy is for the company to bring the analysts back to the company's corporate headquarters, where the sell-siders are treated to a day's worth of tours of key facilities and a parade of interviews with the CEO, CFO and key business-unit managers. The company has the analysts on its "home turf," and - because these "analyst events" are highly choreographed - is usually able to put on quite a show.

The objective, of course (at least in most cases), is to get the analysts to upgrade the stock.

But don't think for a minute that Fortune 50-sized giants are the only companies to play the "dog-and-pony-show" game.

Little companies can play, too.

And Wall Street helps those smaller contestants all that it can.

If you watch the news wires carefully as I do, you'll spot dozens of "themed" institutional investor events that take place throughout the year. They focus on healthcare, biotechnology, technology, banking, and financial services, to name a few. Most are sponsored by the big and mid-tier investment banks, though some are choreographed by industry and trade groups.

And many of these investment symposiums have turned into annual events. One example that we mentioned in a recent Private Briefing column is the JPMorgan Chase & Co. (NYSE: JPM) Healthcare Conference in San Francisco. That early January affair was attended by 8,000 people and saw 600 companies represented.

These events are worth watching for several reasons. They often lead to upgrades (or downgrades) in the stocks of the companies that are presenters. News often emerges from the bigger ones (the JPMorgan Healthcare conference gave me a solid view of what the dealmaking market looks like in the Big Pharma/biotech sector). And sometimes some interesting insights will emerge about a company whose stock you hold - or that you'd like to invest in.

And some - like the American Society of Clinical Oncology (ASCO), which hosts its annual meeting each June - have actually turned into bull-run catalysts for specific types of stocks. The ASCO meeting, for instance, is attended by 30,000 people and is the scene of 4,000 research presentations - and each year seems to fuel a rise in cancer stocks that's become known as "The ASCO Effect."

I mention all this because Inovio is a scheduled presenter at the 15th Annual BIO CEO and Investor Conference, which is scheduled for next Monday and Tuesday in New York. Dr. J. Joseph Kim, the CEO and co-founder of Inovio, is on the agenda to speak from 9:30 a.m. to 10 a.m. (EST) on Tuesday.

This presentation isn't likely to have an ASCO Effect-like impact on Inovio's shares. But, remember, this is a penny stock - one that was trading at 71 cents a share when Michael recommended it. So this presentation could end up having a bigger-than-anticipated impact on Inovio's share price.

And even if the presentation doesn't affect the share price, it's worth keeping an eye on: We might learn some new and interesting facts about the company and its strategies.

We'll keep you posted.

[Editor's Note: This stock is a "Buy" up to a maximum of 75 cents a share. Given Inovio's highly speculative nature, make sure to observe all the usual precautions. Don't chase the stock (use "limit orders" to buy at the price you want and to avoid errant execution). Limit your purchase to no more than 1% of your portfolio. And use "trailing stops" (if you observe the other rules, a "trailing stop" of 40% to 50% is acceptable here). Finally, if you can't stomach volatility, or big losses, steer clear.]

About the Author

Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish… and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.

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