Yesterday I looked at the biotech sector's outperformance of the headline-grabbing tech and small-cap sectors. Even better, I gave you a way to play it plus a way to juice what should be tidy profits.
But nonetheless, biotech stocks just aren't getting the same love as the highly touted "FANG" stocks and the like.
But that's okay with me - more money for the rest of us.
In fact, my "Best in Breed" (BIB) model excels at uncovering underappreciated outperformers. First, it looks for the strongest sectors. Then, it uncovers the highest fliers in those sectors - the cream of the crop.
Today, as promised, I have two biotech names that have not only outperformed this year, but should continue to outpace the large-cap tech media darlings as well as the on-fire small-cap sector.
Though both have outperformed in 2018, each one is subject to analyst skepticism that is not consistent with their technical strength. That's why I look for their rallies to continue throughout at least the next few months.
Without further ado, let's take a look at these beasts...
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
These Have Given a Slew of Double-Digit Returns
First up is Immunomedics Inc. (Nasdaq: IMMU), a stock that just returned a tidy 86% profit for my Seismic Profits Alert subscribers. Immunomedics is a leader in the development of antibody drug conjugates (ADC) to treat aggressive cancers.
After releasing encouraging data for its metastatic breast cancer drug, the company has now submitted a license application to become the first ADC approved to treat an aggressive form of the disease.
The Night Trader's Secret: A former Wall Street insider just revealed a new strategy for executing night trades that could set you up for potential $850, $2,250, or $6,775 paydays - overnight. Click here.
It's clear from Immunomedics' chart that the Street loves the stock, as the shares have exploded more than 80% in just two months, to hit an 18-year high. IMMU shares are up 57% so far in 2018.
Still, it's clear not everyone is so keen on it - though I can't say why.
While positive test results have given the shares a major price boost, it's the high short interest in IMMU shares that should sustain the rally. With a high short-interest ratio of 16.8, the stock will undoubtedly benefit from a short-covering rally as the stock gains ground.
Another factor in Immunomedics' favor is the fact that just three analysts currently cover the stock. But with the recent test successes, more analysts will be opening coverage on the stock.
You Have to See It to Believe It: The Night Trader's most powerful tool tells him exactly which stocks are set to go up tomorrow, the next day, the day after that, and beyond. And it is rarely ever wrong. Click here to learn more...
That means rosy price projections that should spur more buying. In fact, one analyst opened coverage this week with a $53 price target, which is more than double Thursday's close.
The shares are a must-buy. And to get the absolute most leverage on Immunomedics' strength, I recommend buying the IMMU Aug. 17, 2018, $25 calls (IMMU180817C00025000), which sit just outside the money right now and can be had for less than three bucks a contract.
Our second stock is Insulet Corp. (Nasdaq: PODD), a developer of insulin delivery systems.
The stock hit an 18-year high on Thursday on the heels of receiving FDA clearance for a new insulin management system that incorporates Bluetooth technology.
But Insulet had been knocking the cover off the ball well before this week's news. In fact, the stock has been on a year-long rally that has more than doubled the share price.
This uptrend has been perfectly supported by the 50-day moving average, a trend line the shares have closed below only a handful of times going back to June 2017.
This chart looks a helluva lot like Mt. Everest - steep and high.
Short interest in PODD shares is high, with a short-interest ratio above 10. As with Immunomedics, this skepticism is misplaced, especially considering the extended rally.
It seems the shorts are betting on a reversal that so far hasn't come.
And the only way out of their positions is to cover by buying stock and keeping the rally intact.
Analysts have likewise not bought in to the company. Half of the covering analysts do not consider Insulet a "buy," which is hard to understand.
But that's starting to change.
In the past month, several analysts have upped their price targets, a sign that they may finally believe in the "power of the PODD." If this trend continues, and I'm convinced it will, the share price will get a boost.
Get on board the PODD train! Consider the in-the-money PODD Sept. 21, 2018, $95 calls (PODD180921C00095000) for $7.00 or less.
Stay tuned for more of my BIB analysis. Biotech isn't the only underappreciated sector out there, and we'll be ready to cash in.
Must-See Footage: This Man's Secret Could Make You $15,000 Richer
This man never graduated from college - in fact, he worked most of his career at Home Depot.
But he invented something that uncovers opportunities to collect thousands of dollars in extra cash in a matter of SECONDS.
Live on camera, watch him become $1,050 richer in 15 seconds... $940 richer in 11 seconds... $1,260 richer in eight seconds... and $988 richer in seven seconds.
And he's prepared to show you something that could set you up for an extra $2,918... instantly. Click here to learn how.
Follow Money Morning on Twitter, Facebook, and LinkedIn.
About the Author
Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.