Examining a company's general health and earnings prospects is a great way of predicting whether it could be a future stock market winner. But we don't have to stop there. We also can look around to see how other smart investors view our stock of interest.
How to do that? By playing Motley Fool CAPS. It's a stock-picking game that uses the wisdom of crowds to find the best investments. Players predict how stocks will perform versus the S&P 500 Index over a particular time frame. CAPS then rates players based on their performance compared to others. It also rates stocks according to the number of players who are bullish on them. Importantly, the game weighs more heavily the opinions of highly rated players. Motley Fool CAPS is fun -- and it can help you take advantage of the wisdom of crowds as you build and expand your portfolio. Let's use this game to help us choose the next winning coronavirus stock.
CAPS rating: 1 out of 5 stars
What investors might be noticing: Vir Biotechnology (VIR 0.21%) and its big pharma partner, GlaxoSmithKline, recently requested an emergency use authorization (EUA) from the Food and Drug Administration for their investigational monoclonal antibody treatment for mild-to-moderate COVID-19. An independent committee monitoring the trial stopped enrollment in it early, citing the treatment's "profound efficacy."
What's holding Vir back from a better score? An FDA approval for its COVID-19 treatment could offer this clinical-stage biotech company a boost. But if it gets one, investors will still have to wait and see whether doctors will actually prescribe it to significant numbers of patients. The fact that antibodies must be infused in a healthcare setting represents a challenge.
CAPS rating: 2 out of 5 stars
What investors might be noticing: Sorrento Therapeutics (SRNE.Q 8.22%) has 11 coronavirus-related programs in the pipeline -- they include tests as well as treatment and prevention candidates. Most recently, the company said its investigational COVI-MSC stem cell candidate soon may enter phase 2 trials. In phase 1, nine patients with COVID-induced acute respiratory failure recovered a few days after receiving three COVI-MSC infusions.
What's holding Sorrento back from a better score? The number of coronavirus programs in its pipeline may worry investors. The concern is whether the company will be able to devote enough resources to them and actually bring a product to market. Those concerns may ease if Sorrento is able to advance a candidate to phase 3 trials.
Foolish bottom line
Of the 278 one-star stocks in CAPS, 86% of them posted a double-digit percentage gain or better over the past year. And of the 421 two-star stocks in CAPS, 92% delivered double-digit percentage or better returns during that time. What does that indicate for our Vir versus Sorrento question? If we trust the wisdom of crowds, the higher-rated Sorrento may have a slightly higher chance of posting better stock market gains over the coming 12 months.