Some smaller names from the medical sector have been showing a good combination of price strength and fundamental growth heading into year-end.
Over the longer term, most analysts have bright forecasts for health care and medical, as demand will likely rise as the U.S. population ages.
One of the lower-priced names that popped up on my scans this week was Cambrex (CBM), a New Jersey-based maker of ingredients that go into pharmaceuticals. Its products are used to treat pain, as well as cardiovascular, respiratory, gastrointestinal and other ailments.
After an earnings dip in 2010, income came roaring back this year. The company reports 2011's fourth quarter in February; it's expected to wrap up the fiscal year with EPS of $0.49, up 53% over 2010. In 2012, Wall Street sees profit of $0.56 a share.
Cambrex has been rallying to its best price levels since September 2008, before the bottom fell out from the entire market. It's extended from its most recent price consolidation, but its next pullback could offer a new buy point. Shares were trading at around $7.39 early in Friday's session.
Another lower-priced health care sector name that's been showing recent strength is Anika Therapeutics (ANIK), a Bedford, Mass., company that makes treatments for bone, cartilage and soft tissue conditions.
This week, the company announced a deal with DePuy Mitek, which will license Anika's Monovisc treatment for osteoarthritis of the knee. Anika will receive an initial payment of $2.5 million and additional payments if future milestones are reached.
The stock has been rallying out of a steep consolidation that began in March. It's working on its third month in a row of upside trade, including a heavy-volume leap of 33% in November.
Anika's stock was trading at around $9.08 as Friday's trade got under way. As with many low-priced stocks, Anika is a very small company, with a market cap of just $123 million. It moves around 45,000 shares per day, a paltry number. That can make the stock extremely risky, as one big shareholder can exit the position, sending the price sharply lower.
After some rocky quarters, Anika's earnings growth turned around earlier this year. It's seen concluding 2011 with EPS of $0.58, up 81%. Next year, analysts see profit of $0.72 per share, a gain of 24%.
This stock is not buyable yet, as it has some work to do before regaining previous highs. The improved fundamentals and technicals are promising, however, and make this a name to watch.
Another small health care stock that's been consolidating in an encouraging fashion is RTI Biologics (RTIX). The Florida company makes orthopedic surgical implants. It was trading at around $4.72 Friday morning.
The stock has a market capitalization of $258 million, and it trades 487,000 shares a day, which is not bad liquidity for such a small company.
RTI found support above its 10-week moving average after retreating from a two-year high of $4.73 in November. It's been flirting with resistance just below $4.80 in the past couple weeks.
This is another small company with promising fundamentals. It's expected to report its fourth quarter in January, with 2011 winding up with earnings of $0.14 per share, up 40% over 2010. Next year, Wall Street expects profit to continue rising, gaining 29%, to $0.18 per share.
As noted above, low-priced stocks can be much riskier buys than their higher-priced, more liquid cousins. It's imperative to stick to sell rules with these names, cutting losses at a pre-determined point. Many of them can deliver hefty gains for traders, though, and are worth keeping an eye on.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider CBM, ANIK and RTIX to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.