There are many ways to examine a stock's potential. For biotech companies, I usually look at their pipelines, revenue prospects, and various financial metrics. But today, I'm going to look at something different: what other investors say about two particular stocks. And the best way to do this is by playing a game called Motley Fool CAPS. This stock-picking game uses the wisdom of crowds to find great investments.
Here's how it works. Players predict which stocks will outperform or underperform the S&P 500 over a particular time frame. Then, CAPS rates these players on their accuracy compared to other players. It also rates each stock according to the number of players who say it will beat the S&P 500. A key point: The game gives greater weight to the opinions of the more highly rated players. So let's use Motley Fool CAPS to take a look at Vaxart (NASDAQ:VXRT) and Inovio Pharmaceuticals (NASDAQ:INO) -- two coronavirus vaccine stocks that soared by more than 1,000% and 168%, respectively, last year.
CAPS rating: 1 out of 5 stars
What investors might be noticing: Vaxart's investigational COVID-19 vaccine could be a game-changer. That's because the candidate is administered orally as a tablet. Plenty of people would be thrilled to have a way to get vaccinated against the coronavirus that did not require an injection or two. Perhaps more importantly, though, a room temperature stable tablet means easier and cheaper transport and storage. That's a win for healthcare systems, and a major benefit in terms of delivering a vaccine to areas of the world where the "cold chain" is less developed (or nonexistent).
What's holding the stock back from a better rating: Vaxart's phase 1 clinical trial data disappointed some investors. Still, the biotech is advancing its COVID-19 vaccine candidate into a phase 2 trial. So, Vaxart will have another opportunity to win over the investment community.
CAPS rating: 2 out of 5 stars
What investors might be noticing: Inovio recently completed enrollment in the phase 2 trial of its investigational COVID-19 vaccine. The biotech also is developing new vaccine candidates designed specifically to address variants of concern.
What's holding the stock back from a better rating: Back in September, the Food and Drug Administration placed a partial clinical hold on Inovio's phase 2/3 trial. The agency lifted the hold on phase 2 in November -- but it hasn't yet lifted the hold on phase 3. That decision remains pending while the company addresses questions about the special device that is required to deliver its investigational vaccine. If the regulator removes this roadblock, investors may breathe a sigh of relief.
Even stocks that haven't earned a big cheer from investors still can deliver great returns. About 30 one-star stocks in Motley Fool CAPS posted gains of 1,000% over the past year. Still, better rankings usually lead to better returns. About 15% of 466 one-star stocks dropped over the past year. And only 6% of 465 two-star stocks slipped during that time. So, if we use CAPS wisdom, the higher-rated Inovio may be more likely to double our money.