Stem cell stocks: GERN, STEM, OSIR still riding high, but beware of politics
Today's Financial News - Posted March 11, 2009
Stem cell stocks like Stem Cells (STEM) and Geron (GERN) are capturing investor attention: But a look at the stock chart points at some Inconvenient Truths…
by J. Christoph Amberger
Baltimore—TFN: They made quite a production of it: There were journalists, camera teams, photographers. Beaming, clapping Congressmen and -women. Scientists looking pleased as punch. Heck they had even wheeled in a guy in a wheelchair who the President could shake hands with. All that was missing was the Vienna Boys’ Choir and a televangelist who could command foul demons OUT! of afflicted bodies.
Then again, they had the President for that.
The repeal of Federal funding restrictions on stem cell research involving new lines of embryonic stem cells was hailed as an advance of science and reason over restrictive, old-fashioned morals. From now on forward, government would never again impose its ideas of right and wrong on the scientific community.
(I couldn’t help but notice, however, that cloning—in and by itself a quite scientific and reasonable branch of genetic engineering—was exempt from governmental non-meddling. I suppose creating like-minded, like-behaving carbon copies of people will remain the domain of White House Fairy Godmother Oprah, who appeared to have had a hand in the production of the show.)
Investors liked what they saw. Stem cell-related stock soared.
But do they still make good investments?
Consider this: Ever since John Kerry announced his run for president in 2003, stem cell-related stocks had become a happy punting ground for punters playing the political ponies. (In fact, one very liberal analyst who used to work for me used to recommend stem cell stocks whenever a Democratic candidate showed an increase in the polls.)
The chart of StemCells, Inc. (NASDAQ:STEM) makes clear what I’m trying to say. Both the name of the company and its ticker symbol make it a no-brainer for tipsters and one-track minds. You notice the spike around November 4, 2008, and then again on Inauguration Day, and then again this past week. The reckoning is seductively simple: Democrats = good for stem cells = good for STEM.
But as you see, these are news-cycle driven price and volume spikes that are purely speculative. They have nothing to do with stem cells, stem cell research, or the viability of stem cell technologies. Only with publicity.
You notice similar spikes in the chart of Geron Corporation (NASDAQ:GERN). (See below!) Now, Geron is a different animal because it actually has decent products in development whose approval processes cause their on price and volume spikes.
TFN’s Laura Cadden can attest that Jan. 23, 2009 was a historic date in the history of U.S. medicine: The FDA, for the first time ever, gave a company approval to begin clinical trials of a therapy based on human embryonic stem cell technology. The lucky recipient was Geron Corporation. When the biotech company announced it had received clearance for testing of it’s GRNOPC1 for patients with acute spinal cord injuries, the stock jumped over 67% in just 1 day! So really, its January spike had little to do with Inauguration Day.
If you’d taken Laura’s advice, you could’ve seen the stock soar 75% in just 13 trading days! And prior to that particular recommendation of Geron, she had recommended the stock twice back in 2008. TFN readers who bought shares saw gains of over 20% each time!
It should be remembered that despite all the political preening, prodding, poking and positioning, private, for-profit companies are not really the prime beneficiaries of this new Federal funding. It’s like public schools: We’re told that researchers and teachers would create miracles if only more taxpayer money was spent.
Typically, Federal (and state!) grants are burned at universities… whose taxpayer-bought patents rarely ever give back to the investment community. Also, let’s keep in mind that genetic research—much like the manufacturing of sneakers—is a global market. Lack of U.S. public funding for some stem cell lines did not keep the Brits, Germans, Japanese, or Koreans from bankrolling their embryonic stem cell research. Unless you believe that only Americans could possibly produce scientific breakthroughs, the results fell just short off dazzling: Even their 7-year head start on the full spectrum of embryonic stem cell lines has thus far not produced the breakthroughs the politicians have promised.
Which is not to say that private stem cell technology companies won’t create such breakthroughs in the near future. Among the front runners is a local outfit called Osiris Therapeutics, Inc. (NASDAQ:OSIR). Again, Laura Cadden has been recommending this stock since early 2008… and took profits on this company twice in that year.
As you can see by the chart, this is not really a plaything of the punters: Which is reflected in its crash-free price curve, even in this terrible market. This company’s stock price is not driven by ephemeral speculation, but by solid business fundamentals and justified expectations for its products.
Osiris has been an open position in our Hot Stock Confidential portfolio… and we update our members weekly on its progress!
So where do we see the best opportunity to make money on stem cell and genetic technology-related stocks?
I though you’d never ask.
Right now, we have our eye on a small company that has unlocked the secrets of how to target specific genes… to change genetic predisposition for certain diseases… even to (possibly) determine the eye and hair color of your unborn offspring. Even better, we have taken a leveraged options position in this stock. Since last Wednesday, we’re up a whopping, spine-tingling, mind-at-ease-setting 325%... and our resident options guru Andrew Snyder has expanded his profit expectations on this play from 1,100% to 1,500%. Read up on it right here!
We welcome readers from condron.us
Next Article: Strategic Options Update: Up 325%… and counting!
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