Extreme Trades for the Week of January 21, 2019January 22, 2019
Like most investors, one of your top goals has been to enjoy financial freedom at whatever age you choose. So, it stands to reason that your money should ideally generate above-market returns with below market risk.
Truth is — if you really want to become a better investor then you need to be looking at where the smart money is heading. You need to understand what is truly driving the markets and how you can take advantage of these moves as – and before – they hit the mainstream.
That’s how the long-term wealth can be found.
For 2019, after one of the most bizarre, aggravating years on record for the markets, a great deal of top stocks fell too much too fast, including these three “must own” trades for the year.
Extreme Trade No. 1 — Bank of America (BAC)
After an incredible pullback with the broader markets, the stock became technically oversold at bottom of trend in December 2018. Not only did it drop to its lower Bollinger Band (2,20), it became over-extended on RSI, MACD and Williams’ %R, as well. That’s when we first recommended BAC, as it traded at $24.17. It’s now up to $28.45 and breaking higher. Its P/E of 10 for example is unreasonably low at this point. BAC also carries a low PEG ratio of 0.49, which we believe it unsustainable. In addition, the bank’s quarterly profit topped analyst estimates. BAC is still a strong buy in our opinion. We have a $35 price target.
There are two ways to trade BAC at this point. One is to buy the stock at market prices. The other is to buy to open the BAC May 17, 2019 30 calls at market prices. The calls last traded at $1.18.
Extreme Trade No. 2 — Axsome Therapeutics Inc. (AXSM)
Axsome Therapeutics Inc. is a clinical stage biopharmaceutical company that is developing novel therapies for central nervous system (CNS) disorders. Its product candidate portfolio includes AXS-05, AXS-09, AXS-02, AXS-07, and AXS-06. AXS-05 is in the Phase III clinical trial in treatment resistant depression and in agitation associated with Alzheimer’s disease, as well as in the Phase II clinical trial for smoking cessation. AXS-02 is also in the Phase III clinical trial in knee osteoarthritis associated with bone marrow lesions pursuant to a special protocol assessment and in chronic low back pain associated with Modic changes. AXS-07 is in Phase I clinical trial for the acute treatment of migraine. AXS-06 is also in Phase I clinical trial for the treatment of osteoarthritis and rheumatoid arthritis and for the reduction of the risk of nonsteroidal anti-inflammatory drug associated gastric ulcers. AXS-09 is a novel, oral medicine combination of esbupropion and dextromethorphan.
Even after exploding in recent weeks, there’s still plenty of opportunity in AXSM. The price is pushing higher in response to positive clinical data regarding one of its depression drugs, AXS-05, which significantly improved depression symptoms after six months, when compared with bupropion. The drug was also deemed to be safe and well-tolerated with no serious side effects.
“The clinically meaningful improvements in depressive symptoms seen with AXS-05 in this study were achieved versus an active comparator that is a well-established antidepressant, as early as only one week after initiation of treatment,” said Professor Maurizio Fava, MD, Executive Vice Chair, Department of Psychiatry, Massachusetts General Hospital (MGH) and Associate Dean for Clinical & Translational Research, Harvard Medical School. “Data show currently marketed antidepressants fail to provide adequate treatment response in about two thirds of treated patients. An estimated 16 million Americans suffer from major depressive disorder each year. As an oral NMDA receptor antagonist with multimodal activity, AXS-05 could provide a new approach to treating this potentially life-threatening condition.”
Buy shares of AXSM at market prices.
Analysts at BTIG Research increased their price target to $20 a share with a buy rating.
Extreme Trade No. 3 — Yelp Inc. (YELP)
Not only is the stock technically oversold, but one of its top investors believes it could be a $65 stock if it implements recommendations. SQN Investors LP says it can either improve its financial position or put itself up for sale. “We continue to believe Yelp has great potential to deliver significant value for its investors,” Amish Mehta, founder of SQN Investors, said in the statement. “After years of Yelp underperformance, we have lost patience and believe the board needs fresh perspectives and stockholder representation.”
Buy shares of YELP at market prices.