One of the best market conditions for active traders is one in which price momentum underperforms and then kicks back in with a vengeance, and given what we have experienced since July, that could be a scenario we are about to enter. The market has put in a grinding, sideways move and may be getting ready for a jump higher, especially if earnings start to pick up.
A new research report from Jefferies focuses on a bounce back for momentum stocks, and it notes that when price momentum has been as bad as it has been recently, it tends to rebound in a big way. The analysts screened the firm’s research universe, and found 25 stocks rated Buy that, as they put it:
Sit in the top quintile based on our one-month change in 200-day moving average of price momentum, and carry a market cap above $2 billion inside of the Russell 2500 Growth
We found four in the biotech and health care space that look very attractive for traders now.
The Jefferies team thinks this top company has virtually no competition in its space. Abiomed Inc. (NASDAQ: ABMD) engages in the research, development and sale of medical devices to assist or replace the pumping function of the failing heart. It also provides continuum of care to heart failure patients.
The company offers Impella 2.5 catheter, a percutaneous micro heart pump with integrated motor and sensors for use in interventional cardiology; Impella CP that provides partial circulatory support using an extracorporeal bypass control unit; Impella 5.0 catheter and Impella LD, which are percutaneous micro heart pumps with integrated motors and sensors for use primarily in the heart surgery suite; and Impella RP, a percutaneous catheter-based axial flow pump.
The company also manufactures and sells AB5000 circulatory support system for temporary support of acute heart failure patients in profound shock, including patients suffering from cardiogenic shock after a heart attack, postcardiotomy cardiogenic shock or myocarditis. In addition, the company engages in the research, development, prototyping and the pre-serial production of a percutaneous expandable catheter pump, which enhances blood circulation from the heart with an external drive shaft.
In a recent report the analysts noted this:
Competition in the space remains non-existent and having only penetrated 7% of the market for pumps thus far, we believe if the company can sustain a 40% revenue growth rate for the next 5 years, the higher $1.8B goal for calendar year 2021 could be achievable.
The Jefferies price target for the stock is $145, and the Wall Street consensus target price is $128.14. The stock closed Monday at $127.97 per share.
This is an integrated global oncology company focused on transforming the lives of cancer patients with breakthrough medicines. Ariad Pharmaceuticals Inc. (NASDAQ: ARIA) is working on new medicines to advance the treatment of various forms of chronic and acute leukemia, lung cancer and other difficult-to-treat cancers. The company utilizes computational and structural approaches to design small-molecule drugs that overcome resistance to existing cancer medicines.
Jefferies has liked the stock for some time, and many analysts feel that it remains a potential buyout candidate. The stock was hit recently as the pricing for one of its drugs has jumped four times in 2016. Iclusig, which is used to treat chronic myeloid leukemia and Philadelphia chromosome positive acute lymphoblastic leukemia, two rare blood and bone marrow diseases, now costs a stunning $199,000 per year.
Jefferies currently has a $15 price target for the stock. The consensus estimated is listed at $12.78. Shares closed most recently at $11.112.