What’s Moving These Biotech Stocks? – Novo Nordisk (NVO), Peregrine Pharmaceuticals (PPHM)

Typically, it doesn’t take a lot for a stock to trade with gains/losses of more than 5% in a session; it can be caused by an analyst’s remarks, sometimes it’s caused by earnings, or maybe it’s just a technical response. Sometimes the moves are warranted and other times they are not. Therefore, I am looking at several moves to determine if the stocks are presenting value or a value trap.

Novo Nordisk A/S (ADR) (NYSE:NVO)

Stock Rallies on Acquisition Rumors

Regeneron Pharmaceuticals Inc (NASDAQ:REGN) began the session with gains of 7% but then traded lower to maintain gains of 3% on Monday. The gains were caused by news that Sanofi SA (ADR) (NYSE:SNY) is aiming to buy another $500 million worth of shares in the open market. The two companies are already partners, and Sanofi is limited to the size of its investment. Sanofi has already said that it does not wish to purchase a controlling stake but judging the by the performance of the stock, investors seem to believe that Sanofi might be preparing for an acquisition offer. Regeneron does look expensive to the naked eye, but is consistent with that of other companies that have approved Orphan drugs and others in its pipeline. The company’s growing fast and is much more stable than others with the same valuation. Therefore, I think the stock might be worth buying on this news.

A Volatile Stock Rallies for No Reason

After a volatile year, shares of Peregrine Pharmaceuticals (NASDAQ:PPHM) traded higher by 5% on Monday. The stock rallied on no news but continues to trade in a steady range. At this point, I don’t trust the company. First, there were problems with the clinical study then the study was less affected than thought. There seems to be a lot of inconsistencies, therefore if data is positive for Bavituximab then I would rather pay a higher premium later then buy for a discount now.

Investors Take Profits & Stock Creates Value

European drug maker Novo Nordisk A/S (ADR) (NYSE:NVO) fell 14% on Monday after federal regulators asked for more testing for its diabetes drug. Now, I understand that a diabetes drug has sales potential in the billions, probably over $2 billion. However, this is a massive company that has several drugs that focus on the treatment of diabetes. The company has more than $13.5 billion in revenue and is growing by 15% year-over-year. Therefore, I think the pullback is a great opportunity. The stock had been trading at all-time highs, and it appears that the loss is more of a technical pullback from the stock having two decades of nothing but gains. I would buy on this news.

Buy on Fundamentals & Not Speculation

While Novo sunk lower, large cap stock Sanofi SA (ADR) (NYSE:SNY) rallied 3.5% on news that it was increasing its stake in Regeneron. For the last year many have speculated that it could try and acquire the biotechnology company, and I believe it’s highly likely. However, you should never buy a stock due to the anticipation of an acquisition; it has to be for fundamental reasons. Therefore, buy the stock for its 3.60% yield, its large cash position, and its strong pipeline. If the acquisition occurs then it’s an added bonus.

Conclusion

A stock’s performance during a typical day does not necessarily mean that a stock will break out or trade lower over a period of time. Too often we associate stock performance with fundamental performance, yet it’s the inconsistencies between these two factors that create value. The ability to identify these inconsistencies is a psychological behavior-changing skill that very few investors are able to perfect. In the past, I have talked about this subject in great detail, and have taught investors how to change these tendencies to return large gains. My advice is to become a smart investor, by learning how to logically assess what caused a stock to move compared to its valuation. Then, if there is a distinction in value you are able to capitalize on the value.

The article What’s Moving These Biotech Stocks? originally appeared on Fool.com and is written by Brian Nichols.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!