If you call your investment advisor to ask them why the stocks they picked for your portfolio are down right now they're likely to remind you that a receding tide lowers all boats. In other words, macroeconomic conditions are making it impossible to pick winners.
Rising interest rates and a looming recession that those higher rates could cause are weighing heavily on stock prices across the board. That said, there are some that bucked the trend and climbed to 52-week highs recently.
Image source: Getty Images.
Investors will be glad to know they haven't missed the boat on these stocks. In fact, there are reasons to suspect each one can continue soaring regardless of what happens to the global economy.
Biogen
Shares of Biogen (BIIB 1.01%) have been on a roller coaster over the past couple of years. The stock rocketed higher in 2021 after the FDA granted a highly controversial approval to the company's Alzheimer's disease drug, Aduhelm.
Unfortunately, Biogen stock fell hard this year because Medicare refuses to pay for Aduhelm citing a lack of clinical evidence that it slows patients' rate of cognitive decline. The stock rebounded this September because a late-stage clinical trial with a similar experimental therapy called lecanemab generated fairly convincing evidence that it actually works for patients with early Alzheimer's disease. During the 1,795-patient Clarity AD trial, patients given lecanemab showed 27% less decline on a dementia rating test compared to patients who were randomized to receive a placebo.
Shares of Biogen are up near a 52-week high and they could soon climb much higher. So far we've only seen a snapshot of data from the Clarity AD study. On Nov. 29, 2022, Biogen's development partner Eisai will present the full data at a scientific conference. Further confirmation of a strong benefit could push Biogen's stock price much higher. Of course, an unexpected disappointment could cause this stock's recent rally to completely unravel.
Vertex Pharmaceuticals
The stock market as a whole started trending sharply downwards at the beginning of 2022, but not Vertex Pharmaceuticals (VRTX 0.23%). This biotech stock has gained 42.5% this year.
Vertex Pharmaceuticals markets the world's only treatments for cystic fibrosis, a rare inherited disorder that affects a combined 83,000 people in the U.S., E.U., Australia, and Canada. With around half of patients on a Vertex treatment, the company expects at least $8.8 billion in product revenue this year and this figure has room to grow. The company thinks there are still more than 30,000 patients in developed markets who could benefit from its drugs.
In addition to soaring cystic fibrosis sales, shares of Vertex have been climbing in response to progress with its development pipeline. Earlier this month the FDA began a rolling review of exa-cel. This is a gene therapy for the treatment of transfusion-dependent beta-thalassemia and severe sickle cell disease that Vertex is developing in partnership with CRISPR Therapeutics.
Vertex is also enrolling patients burdened by a rare kidney disorder into a mid-stage clinical trial with VX-147. Investors will be glad to know that rare diseases aren't the company's only focus. Vertex is also running a pivotal trial with a first-in-class pain relief candidate called VX-548.
Good stocks to buy now?
With an established cystic fibrosis franchise delivering steadily growing cash flows and chances to launch several new drugs over the next few years you might expect Vertex shares to trade at an outrageous valuation. It doesn't. In fact, the stock appears reasonably priced at 21.3 times forward-looking earnings estimates. Adding some shares to a diversified portfolio right now looks like a good idea.
Biogen shares trade at just 17.8 times expected earnings but I'd argue that it is a much riskier stock than Vertex right now. Multiple sclerosis drugs that used to drive growth for Biogen have been losing ground to competition and we can't be sure lecanemab will succeed as a treatment for Alzheimer's disease. Both of these stocks have a chance to continue climbing but Vertex's path forward looks much smoother.
