Can These Stocks Bounce Higher?

However hard the market slams a stock, there's always the chance it'll come bouncing right back. We'll consult our Motley Fool CAPS community to find shares on the rebound, examining one specific sector of the economy in search of companies with rising CAPS ratings.          

There are 294 stocks listed under "drugs" in the CAPS' screener, and more than a handful of them carry well-respected four- and five-star ratings. Those accolades mean our 170,000 CAPS members are confident that these stocks will beat the market in the months ahead, but let's see what members are saying about the ones below:

Company

CAPS Rating Today*

Recent Price

52-Week Price Change

Estimated 5-Year 
Growth Rate

Anika Therapeutics (Nasdaq: ANIK  )

****

$9.86

35%

30%

Bristol-Myers Squibb (NYSE: BMY  )

****

$27.82

12%

1%

Vical (Nasdaq: VICL  )

****

$3.24

(13%)

NA

Source: Motley Fool CAPS; Yahoo! Finance. NA = not available. *Out of 5.

The markets have been on a rollercoaster ride lately, but with the S&P 500 up about 10% over last year, it might be surprising to learn the CAPS drug stocks have done only slightly better, rising 12% in that same time span. So let's take a closer look at why investors think some of these other companies won't be jumping from the frying pan into the fire now that the markets are roiled again.

Some spring in its step
Shares of biotech Anika Therapeutics have been riding the roller coaster of emotion lately, though the general direction has been higher. Investors are counting on a new manufacturing facility being worth the cost it is imposing now, dealing with the loss of a customer, and ultimately hoping that partner Johnson & Johnson (NYSE: JNJ  ) makes an offer to buy them out.

J&J is indeed the subject of acquisition rumors, but they center around a possible $20 billion deal for Swiss medical technology company Synthes. That makes more sense for J&J right now than Anika, since Synthes could have a meaningful impact on its operations; Anika would barely move the needle.

Of course, small tuck-in acquisitions are always possible, and others out there might be interested in what Anika has to offer, which is why CAPS member jdw12 still calls it a "takeover candidate."

You can add Anika to your watchlist to see if an offer ever materializes, and add your opinion to the Anika Therapeutics CAPS page on what will be its catalyst for growth.

A pricey prescription
Bristol-Myers Squibb needs a catalyst too. Plavix, which it developed with sanofi-aventis (NYSE: SNY  ) , is losing its exclusivity, along with several other big revenue producers for the pharmaceutical giant. Fourth-quarter sales had risen 2% to $5.1 billion on the strength of the blood thinner, allowing the company to beat analyst expectations.

It could be that cancer treatment ipilimumab, also known as Yervoy, will give Bristol-Myers the momentum it needs. Analysts suggest it could produce as much as $820 million to $1.7 billion by 2015, but there could also be a backlash after Bristol-Myers put a $120,000 price tag on the full four-dose treatment. Dendreon (Nasdaq: DNDN  ) was excoriated for its $90,000 tab on Provenge, and KV Pharmaceuticals (NYSE: KV-A  ) was ostracized for its $1,500 fee for Makena. Yervoy will become one of the most expensive medicines on the market.

Earlier this month, highly rated CAPS All-Star member health carevalue finds Bristol's ability to generate returns for investors the thing that speaks most to its future viability.

Low debt/equity, at 0.35. Reasonable price/earnings, at 14.95, which is low for historic levels of BMY. Market cap of 45.56 billion leaves some room to grow, but also indicates stability. However, the most single impressive track record of BMY is its historic positive and impressive values for Return on Invested Capital.

A vital statistic
Similarly, Vical was crushed last September when its blood vessel regeneration therapy being developed with sanofi-aventis was found to be no more effective than a placebo. It's bounced well off its recent lows, but Bristol's win with Yervoy gives encouragement to Vical investors, who hope it spells a new window of opportunity at the FDA. Its own melanoma treatment Allovectin-7 is where the company's future lies for All-Star drivermike64: "biotech with promising cancer drug in stage III trials."

Add Vical to Fool's free portfolio tracker and see whether this therapy can allow it to succeed where its other drugs have thus far failed.

The ball's in your court
There are many factors that go into whether a stock is a buy or sell, so it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made all from a stock's CAPS page. Head over to CAPS today and share your thoughts with other investor analysts on whether you think these stocks are ready to bound higher.

Motley Fool Options has recommended a diagonal call position on Johnson & Johnson, which is a Motley Fool Inside Value pick and a Motley Fool Income Investor selection. The Fool and Alpha Newsletter Account, LLC own shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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