If you pick the right stocks, hold on to them, and wait long enough, you can double your initial investment. For some stocks, though, the wait isn't nearly as long as it is for others.
Three healthcare stocks -- Align Technology (NASDAQ:ALGN), bluebird bio (NASDAQ:BLUE), and Exact Sciences (NASDAQ:EXAS) -- have doubled in less than 12 months. And their gains really were much higher than only doubling. But are the dynamics that caused the stocks to skyrocket still enough to keep the momentum going?
Align Technology ranked as the top S&P 500 stock of 2017. Over the past 12 months, the stock has soared more than 190%. This once little-known medical-appliance stock is now getting a lot of attention from investors.
Chances are that you could have missed seeing this hot stock -- and its primary product. Align is best known for its Invisalign clear dental aligners. Like metal-and-wire braces, these aligners help correct malocclusions (misalignment of teeth). Unlike braces, though, Invisalign aligners are nearly invisible when they're being worn.
Demand has steadily grown for Invisalign as more patients and dental professionals have become familiar with the product. As a result, Align repeatedly set new record revenue levels throughout 2017. The company provides its fourth-quarter and full-year 2017 update on Jan. 30. It seems likely that Align will announce yet another all-time high revenue total.
But it's not just Invisalign that's making Align successful. The company partners with SmileDirectClub to provide non-Invisalign clear aligners that ship directly to patients at home. Align also markets a lineup of intra-oral scanners that dental professionals use to create 3D images of patients' teeth. Align then uses these images to create treatment plans for Invisalign. With all of these products continuing to pick up momentum, Align appears to be on track for sustained strong growth in 2018.
Bluebird stock has nearly tripled over the last 12 months. Most of this impressive gain came after June 5, 2017, when the small biotech reported encouraging early stage results for CAR-T therapy bb2121 in treating multiple myeloma. Those results were also good news for Bluebird's big partner, Celgene (NASDAQ:CELG). In 2013, the two companies teamed up to collaborate on use of gene therapy in treating cancer.
That relationship with Celgene appears to be paying off for Bluebird in several ways. Bluebird has received financial assistance in advancing its pipeline products. And, especially over the past week, Bluebird stock has enjoyed a nice boost thanks to reports then confirmation that Celgene was buying Juno Therapeutics. Like Bluebird, Juno also has a CAR-T program. The possibility that Celgene could acquire Bluebird as well has captured the imaginations of many investors.
While there's a high level of interest over bb2121, it's not even Bluebird's lead pipeline candidate. The biotech is evaluating LentiGlobin in a late-stage study for treating beta-thalassemia. Another gene therapy, Lenti-D, is in a phase 2/3 clinical study targeting treatment of adrenoleukodystrophy, a rare metabolic disorder.
You can bank on Bluebird continuing to attract a lot of attention from investors, even if Celgene doesn't make a bid for the company. Bluebird expects to file for regulatory approval of LentiGlobin this year. The biotech could also submit for approval of Lenti-D and bb2121 in 2019.
Exact Sciences is the laggard of these three stocks, with its share price "only" up close to 170% over the last 12 months. To be fair, though, were it not for a pullback over the last couple of months, Exact Sciences would have been an even bigger winner than Align Technology and Bluebird.
There's a one-word answer to why Exact Sciences has taken off over the past year: Cologuard. The DNA screening test for colorectal cancer received great news last February, when the Centers for Medicare and Medicaid Services announced that it was proposing that Cologuard be included in the Star Ratings program for Medicare Advantage plans. A couple of months later, that change became effective.
It certainly helped, though, that Exact Sciences simply executed well in 2017. The company persuaded more payers to cover Cologuard. It sold more physicians on ordering the DNA test. And Exact Sciences did a good job educating patients about the benefits of Cologuard, especially through its TV marketing campaign.
Why did the stock give up some of its gains? One reason could be that there was some insider selling. It's also entirely possible that investors decided to take profits before the year end. Still, Exact Sciences had a great run -- one that might only be paused temporarily.
Odds of a double-double?
Can Align Technology, Bluebird, and Exact Sciences double again over the next 12 months? My guess is they won't. All three stocks command premium valuations. That's especially true for Bluebird and Exact Sciences, which aren't profitable yet. However, the prospects for all three companies still appear to be very good.
Align claims only around 10% of the addressable orthodontics market right now. I think its piece of the pie will grow significantly. I also think the company's technological innovations will expand the addressable market considerably.
Bluebird could very well find itself an acquisition target for Celgene. And if not Celgene, another big biopharmaceutical company could come calling.
The future also seems bright for Exact Sciences. I'd say the biggest risk for the company is that another company develops a liquid biopsy that makes Cologuard obsolete. However, Exact Sciences is working on its own liquid biopsy program, in collaboration with the Mayo Clinic.
While I think the odds probably aren't in favor of seeing these stocks double again over the next 12 months, that doesn't mean that Align, Bluebird, and Exact Sciences aren't still good picks. I have no doubt that they will double again -- just give them a few years instead of only 12 months.
Keith Speights owns shares of Align Technology and Celgene. The Motley Fool owns shares of and recommends Align Technology, Bluebird Bio, and Celgene. The Motley Fool recommends Juno Therapeutics. The Motley Fool has a disclosure policy.