Back in October, there was a sharp sell-off in a US Pharmaceutical company we had been watching named Celgene. The stock dropped from a high of $147.17 down to a low of $94.55 in a matter of weeks. On October 26th, Celgene released decent earnings but lowered guidance slightly and the stock sold off from about $120 to under $95 on that day. We felt that the selling was overdone and seeing it drop significantly on disappointing, but not disastrous earnings, we decided to snap it up and built an allocation at an average price of $96.021 USD.
The Celgene story is just one example of many time-sensitive opportunities most retail investors can’t act on. In traditional securities accounts, the logistics of locating hundreds of clients and processing hundreds of trades in a matter of minutes means that those investors pass on such opportunities on a regular basis. Without running a discretionary investment program of some sort, we would not be able to capture opportunities like we did with Celgene for our clients.
At the end of trading on November 2nd, the holding has gained just under 2.4% in just over a week. Here’s a chart of how it looked on the day from YCharts:
There could have been some ESP occurring last week, as we weren’t the only ones at our firm who picked up on the 18% intra-day plunge for a quality company. A couple of other partners at our firm saw the opportunity and called us. Celgene has great growth prospects and trades under 12 times 2018 earnings forecasts, while its competitors trade at over 14 times forward earnings. The company currently has more than $11 billion in cash and equivalents that may be used for acquisitions and/or licensing activities as well.
While all investments come with their share of risks, we think Celgene represents great value at this point. In addition to our thoughts, a company that covers equity research has a target of $130 on the stock, which would represent >30% return from these levels, and we believe this to be a great entry point for a long-term hold. Here’s a chart of the stock price going back 2 years:
Have a nice weekend,
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Daniel Popescu CFP, CIM, FMA, FCSI
President & CEO
MNP Tower, 3100-1021 West Hastings St.
Vancouver, BC V6E 0C3
T: 604-558-6830/1(877) 588-6822
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