The biotech business is shrouded with uncertainty -- from awaiting FDA decisions or the results of a clinical trial, or from determining whether the company can even capitalize on its latest scientific discovery -- and this uncertainty is reflected in how quickly investors change their minds about biotech firms.
Because of how easily day-to-day changes can affect stock prices, many investors consider this industry too difficult to track. We can therefore assume that qualified investors who brave the sector are keeping a very close watch on it.
Applying institutional buying trends
Interested to know what informed investors are thinking about a stock? One of the most telling indicators is net institutional purchases. Institutions, such as hedge funds and investment banks often invest hundreds of thousands of dollars or more at one time.
Regular investors pay attention to what institutional investors do because if they are willing to handle such large amounts of money it is easy enough to assume that they know what they are doing -- or at the very least know more than the average investor. This is why these investors are also sometimes referred to as the "smart money."
If institutional investors start investing in a company, regular investors can assume that some of the most talented analysts and money managers expect the company's share prices to increase over time.
The (bullish) list
We ran a screen on the biotech industry for stocks seeing the most significant net buying from institutional investors in the current quarter, indicating they believe there is more upside to these names.
"Smart money" investors are feeling bullish about these biotech companies -- do you agree with their optimism? (Click here to access free, interactive tools to analyze these ideas.)
1. Amyris: Amyris, an integrated renewable products company, offers renewable compounds for a variety of markets. Market cap of $525.65M. Net institutional shares purchased over the current quarter at 2.7M, which is 19.14% of the company's 14.11M share float.
2. VIVUS (Nasdaq: VVUS ) : Engages in the development and commercialization of therapeutic products for underserved markets in the United States. Market cap of $866.58M. Net institutional shares purchased over the current quarter at 9.8M, which is 17.10% of the company's 57.30M share float.
3. InterMune: Focuses on developing and commercializing therapies in pulmonology and hepatology. Market cap of $825.43M. Net institutional shares purchased over the current quarter at 7.9M, which is 14.97% of the company's 52.77M share float.
4. Savient Pharmaceuticals (Nasdaq: SVNT ) : Focuses on developing KRYSTEXXA, a biologic PEGylated uricase in the United States. Market cap of $159.38M. Net institutional shares purchased over the current quarter at 5.1M, which is 9.20% of the company's 55.46M share float.
5. Bacterin International Holdings (Nasdaq: BONE ) : Develops, manufactures, and markets biologics products in the United States and internationally. Market cap of $116.09M. Net institutional shares purchased over the current quarter at 2.3M, which is 9.13% of the company's 25.18M share float.
6. Seattle Genetics (Nasdaq: SGEN ) : Focuses on the development and commercialization of monoclonal antibody-based therapies for the treatment of cancer and autoimmune diseases in the United States. Market cap of $1.92B. Net institutional shares purchased over the current quarter at 7.1M, which is 6.26% of the company's 113.40M share float.
7. Oncothyreon (Nasdaq: ONTY ) : Focuses on the development of therapeutic products for the treatment of cancer. Market cap of $323.51M. Net institutional shares purchased over the current quarter at 2.1M, which is 5.67% of the company's 37.06M share float.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Data sourced from Finviz.