Understanding the Market
By David Kliff
While investing is never easy, making informed choices about when to buy or sell becomes more difficult during times of turmoil. With gas prices rising, conflict in the Middle East, a slowing housing market and the reemergence of inflation this would not appear to be an ideal time to jump into the market. On the other hand, this just might be an opportunity. Investing in stocks is the only place where a “For Sale” sign doesn’t bring buyers. Typically if someone walked by a store and saw a 20% off sign on item they been looking to buy, they would jump at the chance.
The key when investing is to understand that no one, not even the so-called professionals, know when the sale will be over. While the old adage may be “buy low and sell high,” picking the absolute low point and then selling at the high in any stock is more luck than skill. Simply put, trying to time the market or any particular stock just doesn’t work.
A more proven and successful strategy is pick solid companies; buy on weakness and set target prices for exiting. Keeping in the mind people invest in stocks to make money, the ultimate goal is to sell your shares for a higher price than you paid for them. This may seem obvious but it’s amazing just how many investor fail to follow this simple rule. Too often investors become overly emotional about their holdings and lose sight of why they invested in the first place.
With this simple strategy in mind, there are several companies in the diabetes sector that bear watching and are solid candidates for buying on weakness.
1. Amylin Pharmaceuticals (NASDAQ:AMLN) – Amylin is the marker of Byetta® and Symlin®, two new drugs that hit the market late last year. Byetta is an extremely effective drug and sales are accelerating. While Symlin sales are a fraction of Byetta sales, the drug is finding its niche. More exciting is Amylin’s rich pipeline which includes the long-acting, once a week version of Byetta. While once rumored to be a takeover candidate, Amylin is building a solid diabetes franchise and is the most valuable property in the diabetes sector.
2. Novo Nordisk (NYSE:NVO) – Recognized as the world’s premier diabetes company, Novo Nordisk is set to extend their leadership position. Besides being the world’s leading insulin company, Novo also has solid pipeline of products for both type 1 and type 2 diabetes. With the growing population of type 2 patients and the increased usage of insulin, look the future looks bright for Novo.
3. PolyMedica (NASDAQ:PLMD) – Best known for their Liberty Medical Supply division and Wilfred Brimley commercials, PolyMedica is the largest player in the Medicare market. With almost 900,000 customers, Liberty provides glucose meters, test strips and other diabetes supplies to seniors. The company has shown impressive growth over the years and is expanding into Medicare Part D. As the Baby Boom generation hits their 60’s and becomes eligible for Medicare, look for Liberty to garner a large share of this expanding market.
4. Becton Dickinson (NYSE:BD) – Although the company is world leader in insulin delivery systems such as needles and syringes, it is often overlooked by investors. BD is a well-run company with a solid brand name and dominant market position. While the company’s efforts to expand further into the diabetes space have meet with limited success, their core diabetes franchise is solid.
5. Dexcom (NASDAQ:DXCM) – By far the riskiest company listed here, Dexcom makes the STS continuous glucose monitoring system. After going public in 2005, the stock hit an all time high of $25 back in May. Since then, the stock has lost nearly 40% of its value as analysts struggle with how to value the company. Continuous monitoring is a new category and while patients and physicians see value in the product, no one is quite sure how the product will be used. As the only independent company with a continuous monitoring system on the market, many have speculated that the company will be acquired. The most frequently mentioned suitor is Johnson and Johnson (NYSE:JNJ), who recently acquired insulin pump maker Animas. The general consensus is the STS monitor would be combined with an Animas insulin pump as a semi-closed loop insulin delivery system.
NOTE: The information is not intended to be a replacement or substitute for consultation with a qualified medical professional or for professional medical advice related to diabetes or another medical condition. Please contact your physician or medical professional with any questions and concerns about your medical condition.
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