REGN has been a momentum stock, that exhibits regular periods busty appreciation followed by correction, consolidation, and the cycle repeats. The overall trend line is positive, additionally, I like the business model and competitive barriers. The technical’s are beginning to flash caution signals. The 12/26 has crossed below the 9 day MACD, the 5day EMA is trending toward crossing below the 13 day, and is very close to piercing the 20 day SMA. Since October first nearly every day the stock has registered lower low’s, lower high’s, and lower closes on moderately high confirming volume. The PEG or ratio of PE to Growth is 3.54, a level of 2.0 is a stock priced for perfection. Any news hinting less than accelerating growth in revenues, earnings, and beating clinical milestones, can cause the stock to correct from 15%-30% in a heartbeat. Tellingly, since Early September eight company officers including the CEO, have sold an unusually large 200+ million shares at prices ranging from $ 275- $ 313. Please also consider that five institutional investors, holding nearly 35% of the outstanding shares, may lock in some profits, to secure their funds performance, prior to October 17. This puts downward pressure on stock appreciation, and could telegraph their view that near term, the stock is fully valued.
The external environment over the next two weeks is perilous. The impasse over the Budget and Debt limit is a negative overhang to the broader market and creats a powerful headwind for REGN and all stocks.
Absent positive company catalysts, unlikely before the October 21 quarterly report, REGN could test the 50 day SMA of $ 270.80, or the $ 255.60 support, representing a 20% correction from October 1 high. Put in context, REGN corrected, high to low, 20% June 10-24, 18% August 2-19, and only 7% since the current pullback began on October 1.
I typically maintain 1/3 core position in REGN and have profitably bought the dips and sold the rips on the remaining 2/3, 6 times over the past 18 months. I look to re-enter, in stages, at a better risk adjusted price in $ 255-$ 270 range. My thesis changes if the stock decisively reverses it’s current 7% correction, on high volume.
Fact based commentary or alternative views encouraged.
REGN Update..... The good news.....we appear to have a 6 week respite to the debt/budget impasse. As suggested in my previous post high beta stocks like REGN will disproportionately rise and fall in relation to the market and comparable's, S&P up 2.07%, IBB 3.41%, REGN 4.39%. The bad news the delay is short and may result in a replay in mid November, absent concrete progress that has been elusive. Likely result, short lived market euphoria, followed by weeks of periodic turmoil and attendant stock corrections.
This on-going uncertainty is not good for our country, but does provide an opportunity to buy the rips and sell the dips on high beta biotech stocks like REGN, SRPT, ARRY, EXAS, SGEN , and to a lesser degree CELG, BIIB, GILD.
Agree with some of what you say.
I am not a trader & here are my thoughts/opinions. REGN is down & only down due to the shudown. Even after insiders sold shares, we hit new highs, got fantastic trial results & many analyst price target upgrades.
Sanofi saying they are willing to spend about 4 billion bux to increase their holdings to 30% to me inspires enormous confidence in the future of the company.
Yes if we miss eps or have bad news we will go down just like any/all stocks but thats the risk of investing.
Long term this is an elite stock with compelling fundamentals which has not changed but only got better.
I am looking also to reload on the cheap.
I concur the medium and long term prospects for REGN are very favorable. As indicated in my previous post " The overall trend line is positive, additionally, I like the business model and competitive barriers." Share holders with a longer term perspective have and likely will continue to enjoy good returns.
Many investors, including myself, seek to find high return sectors, and specific companies within those sectors with sustainable competitive advantage, and disruptive technology. Biotech, as a sector, and REGN fill both objectives. Additionally, we seek the tactical entry and exit price levels that maximize risk adjusted returns. I typically concurrently invest in 3-5 dozen companies. REGN until October 1 when I sold 2/3 of my position just over $ 318, missing the high by $ 1.5, was my second largest holding.
Fortunately, for investors seeking return's optimization, REGN stock goes through predictable cycles of appreciation, correction, and consolidation. Some of these are caused by REGN specific factors, others are driven my external market considerations. These cycles provide opportunities to boost returns by buying the dips and selling the rips. This strategy works best with stocks exhibiting an overall positive trajectory, but has pronounced up's and down's within that trend line. REGN is close to a text book example.
Over the past 18 months my returns on REGN have exceeded a buy/hold strategy by more than
35%. REGN is now in the 5th day of a correction phase, that peak to trough is now -9%. This is half way through the 18-20% baseline declines.