I want to spend today talking to you about two stocks that we’ve repeatedly recommended to Private Briefing readers. Both stocks made bullish headlines last week.
One of the stocks is a winner – a big winner, in fact. And the other has been a loser – so far.
But we’re predicting it will be a big winner, too – a huge winner.
And last week’s developments strengthened our case.
Protein Is Powering This Company[ad#Google Adsense 336×280-IA]After that preamble, let’s get started with the winner – Repligen Corp. (Nasdaq: RGEN).
We first told Private Briefing readers about the Waltham, Mass.-based biotech back in June 2013 when it was trading at $8.14 a share.
We pitched the stock as a way for them to invest in the high-growth potential of biotech – without the risks posed by clinical trials or U.S. Food and Drug Administration (FDA) drug approvals.
That’s because Repligen supplies the high-value ingredients – including an in-demand substance known as “Protein A” – that other firms need as they develop their own biological compounds. We’ve re-recommended the shares several times along the way – including in early January, when the stock was still trading at $24.24.
Shares of Repligen – which we’ve described as “Biotech Gold” – spiked more than 16% [recently]. So folks who acted on our original recommendation are sitting on a 358% profit. But even if you waited until January – our most recent recommendation – you’d have a profit of 55%.
Radical Technology Profits Editor Michael Robinson, who originally shared the stock pick with us, said [Monday’s] jump was due to stellar first-quarter earnings.
“Bill, the catalyst is clearly the small-cap biotech leader’s impressive sales performance in this year’s first quarter and its decision to raise guidance for this year,” Michael said. “During the first quarter, Repligen grew sales by 45% to a record $20.8 million. And for the full year, Repligen has raised sales guidance by $3 million to $78 million, even after accounting for an 8% negative impact posed by the strong dollar. Net income suffered a bit in the period as a result of a $1.1 million expense associated with an earlier product acquisition. That lowered earnings per share by about 30% from the year-ago period to $0.09. But profit margins are still ramping up, meaning Repligen’s overall financial health is dramatically improving. And that’s what really excited Wall Street.”
After a big move like this, we could see the stock give up some of its impressive gains on profit taking. That often happens in a case like this.
But here’s an interesting final note: In a recent special report, in which Michael gave his subscribers five stocks that he described as his “Million-Dollar Tech Starter Portfolio,” Repligen was included as the biotech representative.
And biotech firms will continue to need Protein A.
“Bill, Repligen is a leading provider of a substance known as Protein A – which is used to produce several leading drugs,” Michael told me. “For instance, it’s used to separate and purify disease-fighters known as ‘monoclonal antibodies.’ Protein A comes from bacteria that live in human respiratory tracts and on the skin. Repligen uses this protein because it has novel qualities that help it bind to antibodies. In turn, these are called ‘monoclonals,’ because they are replicated as exact clones of specific antibodies needed to help fight disease. By cloning different antibodies, scientists can create drugs that target a wide range of conditions.”
This strategy means Repligen gets to work on some of the biggest drug-development programs. And that means there’s plenty of growth potential.
“We’re talking about a segment of the drug industry known as ‘biologics,’ because they’re derived from the cells of mammals,” Michael said.
Forecasts call for the biologics market to almost double in sales to roughly $240 billion by the end of this decade.
The sector includes protein-based drugs like monoclonal antibodies and vaccines. Repligen is already a supplier for such leading drugs as:
Avastin, used to treat colon cancer.
Herceptin, a treatment for breast cancer.
And Humira, prescribed for rheumatoid arthritis and several other conditions.
We’ve had tremendous success with biotechs at Private Briefing. And with Repligen, we see additional success to come.
That ends our visit with the “winner” stock we promised to tell you about today.
Now let’s talk about the loser – Alibaba Group Holding Ltd. (NYSE: BABA).
A Bull on China
We’ve been bullish on Alibaba since even before the Chinese Internet heavyweight went public in early September. And that bullishness didn’t ebb when Alibaba’s share price did.
Earlier this year, we told you the stock had fallen more than 30% from its post-IPO peak of $120 a share. It was still well above its IPO price of $68.
When a stock or market index falls 20% or more, that’s considered a “bear market.” That had many investors panicking. But we told Private Briefing readers we continued to see a big, big upside for Alibaba.
Indeed, we’ve continued to pitch the sell-off as a major wealth opportunity – for you. And we’ve done so by reiterating the strategy we’ve outlined for Alibaba since we first recommended the company’s shares after they hit the public market.
It’s the kind of wealth opportunity that will enable you to pass riches along to your heirs.
As we’ll show you in a moment, you’ll be able to achieve that wealth for just a few pennies at a time – spending a few dollars to accumulate Alibaba shares every time they decline.
But let’s first look at why we’re even more bullish than before.
All the Right Moves
Alibaba’s shares jumped nearly 7% after the company posted an unexpected 45% jump in quarterly revenue and reported that mobile e-commerce transactions outnumbered those via personal computers for the first time.
And Alibaba made some key personnel moves.
The company said Chief Operating Officer Daniel Zhang would become CEO, replacing Jonathan Lu. Lu has been CEO for two years, during which his low-key demeanor was frequently dwarfed by the supernova-like persona of founder and Executive Chairman Jack Ma.
Lu will remain on board as vice chairman.
“It was a very good quarter which is especially important considering there were a lot of expectations that the results would not come in strong,” Gil Luria of Wedbush Securities told clients. “Sentiment is going to swing back to the favorable side.”
Alibaba did not detail the reason for the executive shakeup, but Ma wrote a letter to staffers in which he said he was glad to see the company’s reins going to a leader born in the 1970s. Zhang was born in 1972, while his predecessor was born in 1969.
Despite the change, Ma is seen as the driving force and the public face of Alibaba. Analyst Tian Hou at Capital Research in Beijing told MarketWatch that Zhang would be a thorough executive who executes well, believes in consensus – and “quietly gets things done.”
To fully explain this pennies-to-millions strategy, I need to start at the very beginning – by relating a story that I told Private Briefing readers several months ago.
In a Private Briefing report I shared [earlier this year] – after Alibaba released an intriguing earnings report that somehow managed to “disappoint” Wall Street – I posed a financial trivia question to you: Go back 17 years, to the day, and tell me where the shares of Amazon.com Inc. (Nasdaq: AMZN) were trading.
Here’s the answer, and why that trivia question is important:
Amazon went public on May 15, 1997, at $18 a share. But thanks to three stock splits that took place in the late 1990s, we have to “adjust” that IPO price to really understand where Amazon’s shares were trading on that same date 17 years before.
The adjusted Amazon IPO price works out to $1.50 a share. On Jan. 28, 1998, Amazon closed at $4.96.
Fast-forward 17 years to the day of the Alibaba earnings report. On that day, Amazon was trading at about $305. That’s a 6,049% increase in 17 years. Put another way, if you’d snapped up shares of Amazon at just under $5 a share back in early 1998 – and held them till the end of January 2015 – you’d now be looking at a return of better than 61 times your original outlay.
For purposes of comparison, Amazon is a terrific “peer” company for Alibaba.
And you can see the profit potential when a well-chosen and well-timed investment such as Amazon is held for the long run.
Amazon and Alibaba are examples of “transformational companies” – firms so revolutionary that they change the way business in their sector is conducted.
They even change consumer behavior.
True transformational companies are a rarity – which is why the payoff is so huge.
And they don’t have to be technology firms, as one other example – Wal-Mart Stores Inc. (NYSE: WMT) – demonstrates. Wal-Mart changed the way America shops. It shifted the power base in retailing, from product suppliers to the retailer itself, which is why marketing expert Eugene Fram refers to firms like it as “channel commanders.”
By emerging and reaching “critical mass” when it did, Wal-Mart displayed impeccable timing.
You see, Wal-Mart achieved its own “critical mass” just as the U.S. middle class emerged.
Alibaba has the same opportunity. It’s gaining traction in its home market in China just as that country’s middle class is emerging. And the development of easy-to-use mobile commerce is giving Alibaba a strong tailwind.
Because of the striking parallels between the U.S. and Chinese scenarios, I said in a Private Briefing report back in October that Alibaba could be the world’s “next Wal-Mart.”
And that positions Alibaba as perhaps the single-greatest wealth opportunity of our lifetime.
I can back my claim with solid numbers.
Wal-Mart was incorporated on Halloween back in 1969. And the company went public a year later – offering 300,000 shares at $16.50 each.
Wal-Mart has had 11 two-for-one stock splits since that time, meaning its “split-adjusted” IPO price is actually $0.008057 (about eight-tenths of $0.01) per share.
So, if you bought 100 shares at the IPO – an outlay of $1,650 – and held them until today, you’d now have 204,800 Wal-Mart shares.
At [Monday’s] price of about $80 a share, your original $1,650 outlay would now be worth just a bit more than $16.384 million.
Peter Lynch, the famed fund manager and best-selling author, used to say that a “10-bagger” (earning 10 times your money on an investment) was the “Holy Grail” of investing. In our Wal-Mart scenario, however, you’d be looking at a profit of $16.38 million – and a gain of more than 1,050,000%.
On its face, that seems like an outrageous call. But not long after I made this prediction, MarketWatch columnist Shawn Langlois honored my analysis by making it his “Call of the Day.”
And I stand by my assessment.
And that brings us to our “build a million-dollar fortune for only pennies a day” strategy that I referred to at the beginning of today’s report.
A “Spare Change” Stock
From the first time I told you about Alibaba, I’ve described the stock as one that you want to own for the long haul.
However, Alibaba is not a “back-up-the-truck-and-invest-all-you-have” stock.
It’s a stock you want to accumulate over time, using sell-offs as opportunities to add to your holdings.
And you can do this for pennies – even at close to $90 a share.
That’s thanks to the way discount and online brokerages have revolutionized trading for retail investors – slashing fees and taking away the onus of buying shares in “odd lots.”
So you can start picking up shares of Alibaba in ones, twos, or threes – or more. Start dumping your spare change in a cup on your dresser top or in a mug on your kitchen counter. It adds up quickly – you’ll be surprised.
And every time you get enough to pick up a share or two – do it. Every time Alibaba sells off, snap up more of the company’s stock.
Just keep accumulating the shares – and let your investment ride… without stop losses or trailing stops.
We typically don’t advocate this approach. But we believe that Alibaba has a very real chance of becoming the next Wal-Mart or Amazon.com.
And that would make it a “legacy stock” for you.
This is one chance to amass a true fortune.
And you can do it… pennies at a time.
The changes Alibaba is making show we’re on the right track.
— William Patalon III[ad#IPM-article]
Source: Money Morning