On September 20, I gave an update to my Healthcare Innovators members about our Top Ten stocks to buy now, or on pullbacks into October.
While I didn't set out to focus on two of the most exciting industries in medicine right now -- Diagnostics and Genomics -- at least 6 of my picks were directly related to these two incredible areas of innovation and growth (we already owned precision oncology specialist Guardant Health GH and I wasn't recommending to buy more at the time).
I share that Top Ten buy list in the video that accompanies this article, including my suggested buy zones.
And what I didn't anticipate was that immediately after in the week of Sep 21, things started to really move in several industries and companies.
As Mr. and Mrs. Market would have it, we barely got a chance in the last two weeks to grab some terrific companies before they launched much higher.
Here's what I told my HCare Innovators members on Sep 30 as I made this video...
What a Q3 finale it's been for Biotech and MedTech investors!
Guardant Health, a billion specialist in cancer testing, rallied 38% in Q3 to make it out of mid-cap status under $10 billion -- and just made new all-time highs above $112 this week. It's part of the larger Diagnostics and Genomics trends I've been highlighting.
In fact, that theme handed focused investors several big gains in the past 8 trading sessions as we'll go over in this update.
Recall the "Top Buys" lists I gave you on Sunday Sep 20. It was all about Diagnostics and Genomics companies with EXAS, NTRA, ILMN, QDEL, BDX, and NVTA.
7 out of 10 buys were triggered in the suggested ranges I gave, and two that were within less than 1% have rocketed higher!
Here were the top rockets from that list...
Exact Sciences EXAS, the $15 billion maker of Cologuard also launching new liquid biopsy tests, went up over 40% from $71 on Sep 22 to $102 today.
Natera NTRA, a small specialist in non-invasive pre-natal screening (NIPS), went up over 20% from $59 on Sep 21 to nearly $74 this week.
Illumina ILMN, the $45 billion maker of million-dollar genomic sequencing machines, went up over 18% from $261 on Sep 21 to $309 this week after a rough start to the month on the $8 billion purchase of cancer-screening spinout Grail. Illumina's technology platform has played key roles in determining the genetic makeup of SARS-CoV-2.
Quidel QDEL, provider of COVID antigen tests, went up over 15% from $190 on Sep 21 to $220 today.
Becton Dickinson BDX, medical equipment and device supplier jumped over 3.5% today after dipping to $220 on Sep 25.
CRISPR Therapeutics also dipped just under $80 and sits above $85 this week.
For reference, here was my original list from Sep 20...
Top 10 Buys for October Surprises
As we look ahead to Q3 volatility and earnings season, we should begin assembling shopping lists. Here are some of my top ideas right now for October surprises, with 5 from the current HCare Innovators portfolio and 5 from outside...
Top 5 In HCare Innovators
ILMN: $270-290 for the long-term (though a ZR #5 currently)
Top 5 Outside Portfolio
Becton-Dickinson BDX is a blue-chip medical equipment and device supplier that is on sale right now near $225. The company provides exposure not only to a full range of supplies, devices, laboratory equipment, and diagnostic products worldwide, it also offers dental and COVID testing exposure.
With projected sales of nearly $19 billion next year, the stock trades at under 3.5X sales. We may buy BDX between $220 and $230, or lower depending on the next round of volatility.
(end of 20 HCare Innovators Buy List from Sep 20)
Why EXAS, NTRA, QDEL, and NVTA Are Surging
I've received a few emails from those who grabbed one or two of these trades, and a few more from those who missed them. Unfortunately I couldn't add NTRA because it was still a Zacks #4 Rank. And EXAS just flew away so quick on the day of this news...
Cowen analyst Doug Schenkel said Exact Sciences presented preliminary data on its multi-cancer liquid biopsy screening test "for the first time in a public forum" at the firm's Liquid Biopsy Summit on Sep 24. Though he sees "a lot of work still needs to be done," the company "took a big step today to declare its intent to be a major liquid biopsy company," according to Schenkel, who added that he is "very enthused by the early data."
Exact Sciences has conviction that stool-based Cologuard will "remain the gold standard for colorectal cancer," but Schenkel said he is encouraged that the company is developing blood-based multi-cancer screening tests in addition to a blood-based CRC test. He maintained his Outperform rating and $135 price target on EXAS.
And here was the big news on NTRA last week...
Piper Sandler analyst Steven Mah raised his price target on Natera to $76 from $63 on Sep 24 after Palmetto, a Medicare administrative contractor, made a "shocking move" by issuing a draft local coverage determination for "Minimal Residual Disease Testing for Cancer," implying its MolDx program will cover minimal residual disease tests for any cancer if comparable or better to Signatera.
The news "substantially moves up the timing" of additional cancer indications and "greatly de-risks" reimbursement. Mah noted that Natera has Signatera data in 13 indications and planned to pursue Centers for Medicare and Medicaid Services approval for one indication per year. The analystviews Palmetto's move as a "massive win" for Natera's oncology business as they move into Exact's territory with colorectal testing.
Meanwhile, the steady good news for Quidel just keeps rolling in as more institutions -- like the Pac-12 Conference -- recognize the need for more rapid COVID testing. Here was another key alliance that made news last week because it validates Quidel's ability to ramp production of COVID testing kits and get a big chunk of the estimated 190 million test kits that will be needed every month...
Neenah, Wisconsin-based electronics manufacturer Plexus announced its partnership with Quidel in support of the Sofia 2 Fluorescent Immunoassay Analyzer. Plexus will provide Supply Chain and Manufacturing Solutions to Quidel, an industry leader in diagnostic healthcare. The two companies will collaborate to scale the Sofia(R)2 product in order to support increased demand for point-of-care testing used in the fight against COVID-19.
Sofia(R)2 is Quidel's best-selling cartridge-based rapid diagnostic system for infectious disease testing. It is a small bench top analyzer that can be used near patients and in laboratory settings. Sofia 2 has the power to deliver fast, highly accurate, objective and automated results, in 15 minutes or less, that aid in the diagnosis of many critical diseases and conditions, including: COVID-19, Influenza A+B, Strep A, Lyme Disease and Respiratory Syncytial Virus.
Finally, a few words about one of my favorite young genomics companies, Invitae NVTA, the $5 billion provider of genetic diagnostics for hereditary disorders including breast, colon and pancreatic cancer. Invitae also has strong pre-natal screening services like Natera.
The strong investment case for NVTA was that they were providing medical-grade genetic info for individuals and families for only a couple hundred dollars more than less-robust consumer tests like 23andMe and Ancestry. And often the tests could be covered by insurance if prescribed by one's physician.
The long-term outlook was that Invitae was building a network of patients and data in an emerging era when people could opt for multiple, specialized diagnostic tests throughout their lifetimes.
Well, I foolishly took over 100% gains on this stock in June after Invitae announced it was to acquire ArcherDX in a deal valued at approximately $1.4B.
Here's what I wrote to my TAZR Trader members on 6/22...
Portfolio will take the big gain in NVTA on this merger deal.The stock opened at $22 and went above $27 -- up 45% on the day -- but with big pops on deals like this, it's usually a fair amount of short-covering as the bears get wrecked. And for investors, there's enough uncertainty about the deal to bring shares back down in the near term. We would look to be buyers again as that happens.
I was wrong about NVTA ever needing to fill that gap from the M&A announcement. The stock barely glanced below $27 again (where I sold). And I swore I would buy it back on dips under $30 in August and September, but missed my shots both times. Now shares are another 66% higher.
The lesson for me is this: when you put in the homework on these Diagnostic and Genomics companies, especially the mid-cap ones with potential to double and triple their revenues in expanding TAMs (total addressable markets), think it over long and hard first, before you sell.
That's the main thesis behind profiting from long-term winners in my Healthcare Innovators portfolio. I just needed a reminder I guess.
Disclosure: I own shares of GH, ILMN, and QDEL for the Zacks Healthcare Innovators portfolio.
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