3 ‘Monster’ Picks for Halloween

Written by GSCR Staff   
Thursday, 31 October 2013 07:04

Happy Halloween everyone! In the spirit of the day we thought we would take a look at some ultra high risk, high reward stocks, or in the festive verbiage, some tricks or treats.

 

Dracula

He drinks blood and can only come out at night. For those who have never read the Bram Stoker novel there is a huge underlying theme of promiscuity in Victorian England and is a great, quick read. To make a connection with stock picking we took a look at the small cap space for companies whose success is tied significantly to large or mega cap companies, in essence ‘feeding’ off of them.

We pulled Cypress Semiconductor Corporation (NASDAQ – CY $9.24) right off the Apple, Inc. (NASDAQ – AAPL) preferred supplier list. The Company is a unique Silicon Valley supplier of everything from computers, hardware, to games. Additionally, it’s Programmable Solutions division designs and develops programmable product offerings, including Programmable System-on-Chip (PSoC) devices, CapSense, and TrueTouch touch-sensing/touch screen products, technology definitely tied to Apple and others. The stock has taken a downturn recently mostly due to lowered expectations for Q3 financial results. Still, forward 12-month forecasts make it strong from a valuation perspective with a FY14 P/E under 18. We would not be surprised to see CY get back to the $11.50 level in just a month or two.

Frankenstein

Mary Shelley’s novel was probably never intended to be classified in the horror genre. Man creating a monster while trying to cheat death is more of a ‘lesson learned’ for science and technology. I think of the movie Jurassic Park and the line uttered by the Jeff Goldblum character, “…they were so occupied with if they could, they forgot to ask if they should”.

In making the connection here back to reality, we sought out a biotech play that may be on the cusp of a big breakout with some new drug or treatment which might be a longer term play.

Cyclacel Pharmaceuticals (NASDAQ – CYCC - $3.50) is a company that fits the mold with an innovative but risky approach to its oncology treatment platform based on technology that centers on altering the related DNA structure in cancer cells. The Company has progressed steadily in clinical trials and reached Phase III for ovarian cancer treatment for its leading candidate, Sapacitabine. As trials continue and Cyclacel is successful, the stock could take off, as some leading analysts to tout a one year target of $9.00. CYC should bounce back and get up to the $6.00 range sometime in 1Q14, in our view, based on development progress and seasonal valuation increases.

The Wolf Man

The wolf man is at full strength getting the most energy at the full moon, with no human elements remaining in the monster. The cyclical nature of this beast made us want to look for a cyclical and possibly downtrodden industry.

A natural pick is the energy industry and specifically, coal. Peabody Energy (NYSE – BTU - $19.90) is a mid-cap play, but close to our price range. From purely a momentum and technical analysis viewpoint, BTU looks great. The charts are very bullish in the short, intermediate and long term DMA, and the stock has climbed from the $16.50 level on over 6 million shares traded per day on average over the last three months. This dark stock could be a nice seasonal/cyclical play on a comeback to the $22 level over the next few months.

Have a great day and Happy Halloween!

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

Disclaimer:

This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports. 

Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.

It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations. 

The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.

This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.

ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS   INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.

For more information, visit our Disclaimer: www.goldmanresearch.com

Add comment
  • No comments found