Enough of the bad news.
Let’s all turn our attention to sectors and companies that are actually performing well during these turbulent times. Front and center is the biotechnology sector.
The trend of good news in biotech continues with positive earnings news from industry leader, Amgen (AMGN).
In its 2nd quarter earnings report, the world’s largest biotechnology company handily beat Wall Street estimates by $.11 per share. That’s a big beat and the market responded accordingly by sending AMGN shares higher by 5%, on top of a 30% gain AMGN has been enjoying so far in 2008.
Not too shabby.
The main driver for AMGN earnings came from a recovery in sales of its anemia drug, Aranesp® and positive results for experimental osteoporosis drug, Denosumab®.
With the good news AMGN raised guidance for the remainder of the year to a range of $4.25 to $4.45 (compared to last quarter’s guidance of $4.00 to $4.30 per share).
No Pain… No Gain
Amgen provides a great stock market case study of what can happen when investors buy shares of downtrodden companies.
For much of 2007, AMGN shares fell hard after approaching a high of nearly $80 per share. Before the selling was over in May of this year, AMGN lost nearly half its value touching $40 per share.
That was clearly the time to buy, as shares have now rebounded to the mid-$60s. Even if you had purchased shares at the start of the year, as I did, by making AMGN one of my Top 10 picks for 2008, you would still be enjoying solid returns well ahead of the market.
It just goes to show you that you don’t have to time the exact bottom when buying falling knives (and frankly impossible to do). Instead, try to focus on the long-term.
With AMGN, we know that there were legitimate concerns about slowing sales for its anemia drug, but there was little consideration for the future. The market was essentially discounting the research and development pipeline, and definitively stating that the anemia drug was done.
As we now know, that was far from the truth. The blips in performance were temporary. Thankfully, we can always count on the nature of capitalism to propel companies forward. Those that are pessimistic fail to appreciate the power of growth.
Today, I would enjoy the run on AMGN as I believe there is more meat on the bone.
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