With the S&P 500 SPDR (SPY) trading to the upside by more than 10% in the last five days on the prospects for a short-term $15B rescue package for U.S. auto makers to prevent rising unemployment rates from skyrocketing into double digits, Caraco Pharma (CPD) and Altria Group (MO) represent two laggards from defensive industry groups.
The accompanying one-month chart [click to enlarge] illustrates a highly correlated sell-off in Caraco and another small generic drug company, Hi-Tech Pharmacal (HITK), with HITK recently rallying to cut its one-month loss to 20% from a 45% decline at the low. However, the market value of Caraco has been cut in half over the past month and shares have failed to rally by any significant amount despite the overall market rally in the past five days.
Along with the deep value parameters for Caraco and potential to resolve a FDA warning letter, the bounce in HITK from its lows would translate into a share price in the mid-$5 range for Caraco in the near-term if they continue to follow each other's trading patterns.
Altria Group (MO) has lost one-sixth of its market value in the past month, resulting in a dividend yield of 8.5% as investors flock to more high-octane trades such as companies in the ETF Innovators [ETFI] Global Maritime Transport Index of 61 companies – with DryShips (DRYS) soaring by over 50% yesterday ,but still osing about 90% of its market value in the past year on the back of declining commodity prices and the global economic slowdown.
For other potential opportunities in the ETFI Emerging Biotech and Pharma Index , below is a list of companies currently trading with a negative enterprise value, less than $10M in debt, less than 50M shares outstanding, and enough cash to fund operations for at least one year – providing a starting point for more research to determine if there is a reason to buy or if the market has it right by assigning no value to the following four companies:
1.) Achillion Pharma (ACHN): Article on its HCV Pipeline
2.) Icagen (ICGN)
3.) Adolor (ADLR)
4.) Acadia Pharma (ACAD)
$6.77 (12/09/08)
