Profit from a Pandemic: 30 Bullish Biotech & Drug Stocks to Watch

As stated on April 27 of this year in my blog post U.S. Futures Looking Dismal but Possible Swine Flu Profit Play, I gave you a look at how the media plays a role in helping stocks performance over a period of time. Since then the H1N1 Flu (Swine Flu) has been declared a pandemic. Although I don't expect the media to be reporting about the Swine Flu too much over the next week or two, unless something drastic happens (due to other stories that have crept up recently), this is still an issue we have to deal with, and don't think drug companies have stopped the R&D process on finding another pill.

I was doing my nightly research and I noticed an unbelievable amount of stocks from the healthcare sector (Biotech and Drugs) which have been strong the last 30 days (Swine Flu has been a popular topic in the media over the past 30 days, but note that all of the companies in this article are not trying to develop a vaccine for the Swine Flu, but are in the healthcare sector), and are still demonstrating strength on the technical level. The ratio used in evaluating these stocks is called the Bull:Bear ratio, which is defined on my blog post Bull Bear Ratio Defined. I don't like using just one piece of software so I go to another source which is Investor's Business Daily (IBD) as they give a very nice composite rating for these stocks. For details on how IBD ranks these stocks check out my blog post One of My Methods to Finding Bullish Stocks.

Company	Ticker	IBD Rating	Bull: Bear Ratio
Abaxis Inc	ABAX	83	11:1
Acorda Therapeutics Inc	ACOR	49	12:0
Alexion Pharmaceuticals Inc	ALXN	98	10:2
Alexza Pharmaceuticals Inc	ALXA	28	10:1
Alkermes Inc	ALKS	38	10:2
Auxilium Pharmaceuticals Inc	AUXL	31	11:1
Avanir Pharmaceuticals Inc	AVNR	92	13:0
Biovail Corp	BVF	87	13:0
Celgene Corp	CELG	91	11:1
Charles River Laboratories International Inc	CRL	53	8:4
Chattem Inc	CHTT	78	7:4
Dr Reddy Labs Depository Receipt	RDY	95	13:2
Endo Pharmaceuticals Holdings Inc	ENDP	78	10:1
Forest Laboratories Inc	FRX	51	11:2
Gilead Sciences Inc	GILD	98	9:2
Hospira Inc	HSP	95	11:0
InterMune Inc	ITMN	22	12:1
Ista Pharmaceuticals Inc	ISTA	95	13:0
Jazz Pharmaceuticals Inc	JAZZ	74	10:1
Meridian Bioscience Inc	VIVO	84	10:2
Metabolix Inc	MBLX	23	11:1
Momenta Pharmaceuticals Inc	MNTA	19	14:1
Myriad Genetics Inc	MYGN	93	10:3
Noven Pharmaceuticals Inc	NOVN	98	14:0
Orexigen Therapeutics Inc	OREX	58	12:1
Savient Pharmaceuticals Inc	SVNT	51	12:1
United Therapeutics Corp	UTHR	98	10:1
Valeant Pharmaceuticals International	VRX	99	13:1
Vertex Pharmaceuticals Inc	VRTX	55	13:0
Watson Pharmaceuticals Inc	WPI	91	12:1

From the list above the stocks I like the most and believe have a good chance of being winners in the near future are Valeant (VRX), Noven Pharamaceuticals (NOVN), and Ista Pharmaceuticals (ISTA).

Strategies I'll be using:

Strategy #1: Valeant showed up in this list and was a stock I've been bullish on since April 27 as you can see from my blog post linked to in the first paragraph. I think this stock has some upside left and I am going to be more aggressive and speculate by being the buyer of call options on this stock. I am currently looking at the September 25 Calls which can be purchased for less than 10% the cost of the stock price at close, therefore a 10% move up in the stock will give me my money back and a return. Not to mention this stock is trading above 26 which puts this call option already in the money by $1.18 a share. This stock has nearly doubled since I first blogged about it, and it could go down just as fast. This is the reason I may be purchasing calls in the money versus the common shares of this stock. To learn more about trading options check out my E-Books.

Strategy #2: I was thinking of using the buy/write option strategy for this stock, however If I purchased the stock I am afraid I would not be able to write out any options on it, as the options on this stock are almost illiquid. For this I would use the simplest strategy of all, and buy common shares. I would look to get in on weakness though, such as a 7%-10% pull back. Once I hold the stock I will monitor the options market to see if a decent premium can be made on heavier (more liquid) options volume.

Strategy #3: ISTA more than doubled since my blog post on April 27, but is still strong in both of my ratings obtained. The stock made a new 52 week high June 25, 2009 at 4.40 before closing at $4.19 a share. This stock looks like it wants to continue the breakout, and could very well do so. I am looking to accumulate common shares of this stock, as options are not issued on this stock. Again I will look to purchase shares on weakness, such as a 7%-10%.

For your convenience, I have put together a printable list of the 30 stocks in the table ranked by Bull: Bear Ratio as well as by IBD score.

(Click images to enlarge and print)





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