You may know me best for my recommendations and predictions for gold, energy and other natural resources.
You probably know that supply and demand drive commodity prices. But what’s driving this supply and demand?
In many cases, it’s innovative companies that are finding new ways to discover, develop and bring to market these valuable resources.
Energy technology, for example, is a fascinating business. It can help us to drill deep in dangerous areas … to refine low-grade shale into valuable energy sources … and it can help us to turn sunlight into a resource that powers our appliances and even our homes.
That’s just a small segment of how technology is changing the way we invest. It is also changing the way we work, interact and even live.
Each week in this space, we look at national and international events, and the direct impact they have on your commodity and related stock investments.
This week I’d like to take a slight departure from what’s happening in the world and share a potential profit opportunity I find very intriguing right now. That’s because it offers life-changing results for patients, and potentially life-changing gains as well.
A ‘Singular’ Investing Sensation
Longtime readers know about my enthusiasm for emerging medicine, technology and science. I am fascinated by the breakneck speed at which we could achieve what’s known as “The Singularity.”
That is, a point of time — likely within in the next 30 years — when the exponential growth of the power of computers and technology fundamentally changes how the world works.
This includes human biology and the very definition of what it means to be human.
We may think we live and invest in exciting times now. But I don’t think we’ve seen anything yet.
Lucky for us, as the speed of technology accelerates, this brand-new era will arrive that much sooner.
And the time to invest in this future is already here.
That’s why I launched my Superstock Trader service several years ago. I wanted a venue where I could provide investors an unfiltered look at the latest breakthroughs in science, medicine, engineering and computer technologies.
More importantly, it gives my team — including Geoff Garbacz and Dan Hassey — a place to share research and recommendations on these companies.
Right now, one area that’s advancing quickly is medical technology.
Fortunes have and will be made as a result of expanded understanding of the human body.
We’re going to see even more incredible breakthroughs, and just as incredible profits, from the rapidly growing biotech sector.
The biotech sector has been challenging for investors since the Great Recession. Many companies cut back on their research spending, and merger-and-acquisition activity has been quiet for many years.
However, we’re starting to hear a lot more about developments that have been quietly taking place behind the scenes. And bigger bucks are being directed not only into new treatments, but also into the companies that are creating them.
How to Invest in Breakthrough Biotech
Imagine a world that’s free of the illnesses that have plagued mankind since our first steps upright …
A world where we’re ready to defeat everything from acute illnesses to antibiotic-resistant superbugs.
I’m talking about treatments and cures that could eliminate health threats posed by cancer, diabetes, and blood and viral diseases.
When I want to invest in biotech, I look for companies with …
• Steady track records of growth,
• A solid management team, and
• A portfolio with both approved drugs and those in the late stages of clinical trials.
One name that’s caught my eye lately is Parsippany, N.J.-based Actavis (ACT).
Actavis is an integrated specialty pharmaceutical company that easily meets the above three criteria.
It develops, makes, markets and sells generic pharmaceutical products in the Americas, Europe, the Middle East, Africa, Australia and the Asia-Pacific region.
Actavis has a $76 billion market cap, and this “biopharmaceutical” name is growing thanks in part to buying other companies.
A Solid Growth-by-Acquisition Strategy
Continues to Boost its Global Footprint
Over the last few years, Actavis has used a common strategy to become a big player in the biopharma industry.
That is, it has avoided spending billions of dollars developing drugs from scratch.
Instead, it instead bought companies with already proven products like Warner Chilcott and Forest Labs.
Not only has Actavis been successful in bolstering its existing product pipeline. But it’s also been able to boost the confidence of its existing shareholders.
One of the most important things we need to consider is the fact that this particular strategy will fuel a majority of the company’s overall growth for the next 10-20 years.
Actavis, Allergan: A Promising Partnership
In addition to the acquisitions of both Warner Chilcott and Forest Labs, Actavis made a $66 million offer to acquire Allergan (AGN) back in November.
If both companies approve the deal, Actavis would then own the rights to such brands as Botox, Restasis and Namanda.
One of the biggest benefits of the deal doesn’t necessarily come in the abovementioned flagship brands but, rather, in the generic-driven strategy of which Actavis is now at the helm.
For example, the company plans to launch an array of generic drugs that will directly compete with Lucentis, Eylea, Concerta, Lovenox and Lidoderm.
These launches, combined with the cost savings from combining the Allergan and Actavis operations, are only part of this growth story.
Actavis also has a partnership with Amgen (AMGN) for biosimilars. Biosimilars require more clinical data for approval than standard generics, but far less than the original brand-name drugs required.
This partnership should help Actavis to boost its earnings in the near term and provide a foundation for even stronger growth in the future.
That’s because Actavis’ generic drug sales are buttressed by breakthrough drug development.
The combination of these two streams of income and growth through mergers and acquisitions gives Actavis a unique distinction.
That is, it is a company that is spearheading …
The ‘Growth Pharma’ Revolution
A “Growth Pharma’s” performance can be measured in terms of revenue growth, compared to the discovery-based biopharmaceutical sector as a whole.
Of the five characteristics mentioned above, three truly encompass the company’s ability to continue growing.
- It has numerous global brands that provide multi-faceted and diversified revenue streams.
- It creates, and can sustain, multi-national commercial franchises.
- It possesses a core competence when it comes to the expansion of its development-based portfolio.
Actavis is trading just below $300 a share. It has plenty of positive developments to help it maintain this level. But are they enough to propel shares higher?
Patent, and Therefore Profit, Protection
It’s crucial for a biopharma company to be able to preserve and maintain the marketplace for many of its flagship products.
So, to minimize competition, many of the bigger companies patent the products they use in clinical testing.
This minimizes both the size of the market and the competition that could potentially enter such a market.
Actavis has key franchises in Botox/Neuromodulators, Infectious Diseases, Central Nervous System, Gastrointestinal, Respiratory, Ophthalmology, Cardiovascular and Women’s Health/Urology.
In all eight of these categories, Actavis has patents that are protected until at least 2020.
In the chart above, five of the eight categories have patents that extend until 2025. One even extends past 2030.
That’s good for Actavis, but it’s not looking to rest on its laurels in the meantime.
As its own patents expire, Actavis will likely continue using its growth-by-acquisition strategy to take over smaller firms with attractive products and patents.
Not only does the company appear to be fundamentally sound, but the charts also seem to like Actavis. On the one above, I made this notation:
“The Erlanger Sentiment Triggers that signal whether a stock is a buy, sell or a hold are currently very bullish. Five of the six indicators were bullish on Wednesday. By the market close on Thursday, all six had turned bullish.”
My research says Actavis is a solid player within the biopharmaceutical marketplace. Its current price of $295.77 could offer investors a very valuable point-of-entry into one’s the world’s most compelling markets.
In fact I think ACT is a buy up to $298 a share.
If history is any indication of future performance, this stock should be on its way to $400 a share by the end of 2015. Assuming it splits 10-for-1, it could see $60 a share ($600) — perhaps even as soon as 2016.
I strongly believe that its management will continue to lead the company toward a very prosperous future. The company’s portfolio-driven advancements in terms of both its brand name and generic drug portfolio will continue to set its business apart and, ultimately, reward investors quite handsomely over the next several decades.
Always Watching Your Chickens,