January 18th, 2012

AMGN: the ship for sailing the coming biotech tsunami

Since the beginning of the year, I’ve featured three different Industry Groups that look to have some potential including: Financials; Big Pharma; Cement, Concrete and Aggregate.  Another that has been in the top of the rankings for at least the 18 months is the Medical-Biotech Industry Group.  Two ways of measuring the group’s performance is through the its ranking according to IBD and the other is an ETF.

Medical-Biomed/Biotech has consistently been among the top 100 (out of 197).  Since last April, the group has ranked among the top 40 and last week, it ranked third.

Another picture of the stock performance of the group is available through the BBH (Holders Biotech) etf:The ETF is a composite of a large number of biotech stocks and, therefore, some individual stocks have performed better and some worse than that average.  Just recently, the group crossed above long-term resistance and moved into new all-time high territory.

According to PharmaPhorum, AMGN (Amgen) is:

“the biggest biotechnology company in the world, but its plush headquarters, global reach and tens of thousands of employees belie its humble origins. Founded in 1980 as Applied Molecular Genetics, it initially resembled the type of Californian start-up more common in the computer industry than the traditional big pharma behemoth. Much like the straightened origins of Apple or Microsoft, Amgen combined a relaxed attitude with determination and flexibility in dealing with limited resources…..Amgen’s innovative and flexible approach seems to be continuing into the new decade; it is widening its research to include small molecules as well as the more traditional biologicals, and it retains one of the highest ratios of R&D spend to income of the Fortune 500 companies. Biotechnology certainly promises many discoveries for the future, and Amgen will surely be as key a player in the next 30 years as it has been in the last 30.”

Stocks like AMGN are the sort that appeared to be at the end of one stage of their life cycles and there are questions as to whether they can be “reborn” and launch into a new life cycle of growth.  Apple went through just that until 2004 but then, through Steve Jobs leadership, it launched iTunes and iPods; the AAPL stock had been caught in a range but the introduction of those products launched it into a new life cycle.  The past twelve years has been anything but profitable for AMGN investors: But the stock is now again on the verge of breaking out of the channel in which it has been trapped since 2000.  A move above 70-75 would clearly signal the launch of a new life cycle move.  Smaller stocks in the industry are already moving higher and represent precursors of that tsunami; AMGN could be the steamship on which you may want to sail that wave.

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January 6th, 2012

Is the Secular Bear Market Close to Ending?

A recurring theme among some reporters and bloggers is the possible breakout of the mega-caps.  I believe one cause for this line of reasoning is the persistent dream of an end to what is now the 12th year of the secular bear market.  A name that continues to come up as emblematic of this breakout thesis is WMT (Walmart).  Any stock chart aficionado salivates over the potential of a stock like WMT.  When stuck in a horizontal trading range for over 10 years there’s the potential of a huge move should a breakout above that huge wall of resistance is ever successful:

But WMT isn’t the only large-cap stuck in the secular bear market trap.  As a matter of fact, half of the 30 Dow Industrial stocks are below where they were on December 30, 1999 (WMT is down 12.8%). There are a number of large-cap stocks not part of the DOW that also have charts that have attractive potential should they break above their own multi-year resistance levels:

  • MSFT (Microsoft)
  • AMGN (Amgen)
  • QCOM (Qualcomm)
  • DIS (Disney)

What we’re all waiting for are stocks to breakout like IBM because when more do, we’ll be certain that the 12-year secular bear market will have ended:

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