One of the great maxims of traders and Wall Street pros is to follow the "smart money."
I'm not much for the thesis that institutional shoppers tend to make smarter investing decisions, but many of you who've read my ruminations on insider buying say you'd also like to know how the Big Money is betting. Your wish is my command.
Next up: Savient Pharmaceuticals
Foolish facts
Metric |
Savient Pharmaceuticals |
---|---|
CAPS stars (5 max) | *** |
Total ratings | 451 |
Percent bulls | 91.6% |
Percent bears | 8.4% |
Bullish pitches | 58 out of 63 |
Highest rated peers | Trubion Pharmaceuticals, Codexis, Neostem |
Data current as of Nov. 8.
Savient's three-star rating is largely due to our top investors being slightly less bullish on the stock than the rest of their peers. But no two All-Star Fools are equal. One of our very best has high hopes for this budding biotech, which makes the gout treatment Krystexxa.
"The drug received 'orphan status' meaning that it has a 7 year exclusive before a generic can be released. Market value of Krystexxa appears to have a wide range, but $900 Million in five years might be possible," wrote Foolish investor TSIF last month.
Two things make this pitch interesting. First, TSIF ranks in the top 1% of all Fools rating stocks in CAPS. Second, Savient was worth $839 million in market cap and had $78 million in the bank as of this writing.
The trouble with using valuation to justify a bullish stance on Savient is no peers are willing to confirm its worth. Earlier conjecture that Amgen
Institutional ownership history
Top Owners |
2007* |
2008* |
2009* |
Latest* |
---|---|---|---|---|
BlackRock |
704,097 |
124,500 |
5,298,564 |
5,414,084 |
Palo Alto Investors |
7,142,719 |
3,658,682 |
3,463,179 |
4,345,303 |
Sectoral Asset Management |
742,207 |
5,530,449 |
3,743,048 |
3,665,348 |
The Vanguard Group |
1,620,858 |
2,117,299 |
2,940,502 |
3,234,790 |
Fred Alger Management |
1,841,109 |
279,752 |
2,822,241 |
2,936,089 |
TOP 25 TOTAL |
20,971,356 |
23,229,918 |
49,724,375 |
52,696,406 |
Source: Capital IQ, a division of Standard & Poor's.
*Indicates the number of shares owned.
Regardless, the institutions tend to agree with TSIF. The top 25 have been buying in aggregate since December, trimming their stakes only slightly this fall. (They've sold roughly 240,000 shares since June.) Most importantly, the five big buyers have held even as FDA uncertainty plagued Krystexxa and the overall business.
Competitor and peer checkup
Company |
Institutional Ownership |
Insider Ownership |
---|---|---|
Lannett Co. |
7.86% | 58.40% |
Novartis AG |
41.93% | 0.23% |
Par Pharmaceutical Companies |
89.51% | 2.06% |
Savient Pharmaceuticals | 65.06% | 0.88% |
Source: Capital IQ, a division of Standard & Poor's. Data current as of Nov. 8.
Savient looks good but not great in this table. Institutions still have room to buy, sure, but insiders own less than 1% of the shares outstanding. They're not risking capital in the same way their peers at Par Pharmaceuticals or common shareholders are.
Management has less to lose, and as a result may be less motivated to produce a winning outcome for Savient investors. So while I find TSIF's valuation argument reasonable, I can't justify betting on the stock at current prices.
Now it's your turn to weigh in. Do you think the institutions are wrong about Savient Pharmaceuticals? Let us know what you think using the comments box below. You can also recommend other stocks for Tim to evaluate by sending him an email, or replying to him on Twitter.
Interested in more info on Savient Pharmaceuticals? Add it to your watchlist here by clicking here.