By Michael Cintolo, Editor of Cabot Market Letter and Cabot Top Ten Trader
From Cabot Wealth Advisory 6/9/11 Sign up for free Cabot Wealth Advisory e-newsletter
For my stock pick today, I’m turning toward the biotech sector, which has held up well during the market’s maelstrom. Granted, most of the time in the biotech world, all you can find is a lot of pipe dreams with stocks that are knee deep in clinical trials and only hope to launch a new drug candidate. I generally stay away from such firms, because they can fall apart in a hurry if the trials go awry or if a competitor jumps into the fray.
So my stock pick today is … a small company with no sales and one major drug in clinical trials. Not joking! I don’t advise buying it here, but I am writing about it because it is, by far, the strongest stock I know of in the entire market.
It’s Pharmasset (VRUS), and the big idea here is a drug candidate with the sexy name PSI-7977. It takes aim at Hepatitis C, a hot area in biotech these days, and the trial results thus far have been more than encouraging. I don’t pretend to know all the ins and outs of the disease, but when combined with other treatments, a huge 98% of patients saw improvement with Pharmasset’s drug. And when two of its own drugs were used together, 15 of 16 patients had undetectable levels of Hep C within two weeks!
Plenty of analysts are on board with huge price targets because they believe this could prove to be the drug in the industry … if and when it gets approved in a few years. Again, this is highly, highly speculative, but what caught my eye is that, first, it was strong enough to appear in Cabot Top Ten Trader a few weeks back (where I screen for the strongest stocks in the market using a combination of short- and long-term relative strength metrics).
Second, I was intrigued that, after breaking out of a base in early March, VRUS doubled in just seven weeks. And after that … it went straight sideways, even with the market weakness. Then, just yesterday, the stock soared on monster volume after it expanded its trial size … a clear sign that the trials are going very well with little in the way of side effects.
Should you buy some here? I wouldn’t, at least not in any meaningful amount. This is the type of stock that could fall 20% in a day or two if things turn sour. But I definitely think it’s worth adding to your watch list, and learning more about the story’s potential as the market works through its correction.
Editor’s Note: Mike Cintolo is VP of Investments for Cabot, as well as editor of Cabot Market Letter, a Model Portfolio-based newsletter of the best leading growth stocks in the market. It’s been over four years since Mike took over the Market Letter, and during that time he’s beaten the market by 13% annually (up a total of 65% since then, compared to a loss of 6% for the S&P 500) thanks to top-notch stock picking and market timing. If you want to own the top leaders in every market cycle, be sure to give Cabot Market Letter a try by clicking HERE.
Vice President of Investments and Editor of Cabot Market Letter and Cabot Top Ten Trader
A growth stock and market timing expert, Michael Cintolo is editor of Cabot Market Letter and Cabot Top Ten Trader. Since joining Cabot in 1999, Mike has uncovered exceptional growth stocks and helped to create new tools and rules for buying and selling stocks. Perhaps most notable was his development of the proprietary trend-following market timing system, Cabot Tides that has helped Cabot place among the top handful of market-timing newsletters numerous times.