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No new BLOG postings since
last week's on KAL and TLPE. I believe both are still in
excellent ranges for accumulation. I'm working on more detailed information
on KAL's new cancer drug. I'm also working on some comments
on the massive one day swoon in UPSN last week. That stock is schizophrenic.
It dropped from $2.75 to about $2 in one day, and is now slowly climbing
back up. This is the second time it has happened. Apparently, the only
way to buy this one is when it gets clobbered. As it climbs back into the
$2.50 range you might want to sell and wait for another free fall opportunity.
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Check back frequently for updates particularly when stocks are moving to
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(NASDAQ: DXCM): Don't Buy This Stock; Yet
A bubble in the stock market happens
one one group becomes the market's obsession, and all stocks within that
group swell to absurd valuations. The internet bubble was the biggest of
all time. Two years ago it was defense/homeland security. Last year it
There's a stock market bubble coming
sometime in the future, and it will center around treating diabetes. There
will be huge and swelling demand for new diabetes technologies as the current
epidemic mushrooms. Thomas Gunderson of Piper Jaffrey states "We
believe the diabetes market is on the cusp of what may be sweeping changes
in alternatives for management and treatment of diabetes."
Gunderson also goes on to state "We
believe DexCom is positioned to provide the market with a long-awaited
technology- a more effective and more user-friendly tool to improve management
of the disease and decrease the longer-term risk of severe complications."
You are looking at the components
of a revolutionary new blood sugar monitoring device. This is a continuous
blood glucose sensor that can be implanted in the human body for up to
one year. The version you see here is very close to being approved by the
FDA for three day use.
The tube is used guide the insertion
of a tiny monitor under the skin. The patch fits over it, and the wireless
handheld LCD screen delivers second by second blood glucose levels. I have
seen a demonstration, and it is amazing. You can watch the levels change
in real time as the subject eats and takes medication.
In February of '05 DexCom
completed its clinical trials for the three day version of their product,
and submitted a request to the FDA for approval. Since then, the company
has launched clinical trials for a one year version.
Recent reports I have read by analysts
at Piper Jaffrey and Montgomery indicate FDA approval
is expected to come sometime in April. The stock has recently been surging
to new all time highs, and I believe it will continue on its current uptrend
right up to the FDA granting the approval.
I could write 20 pages on why this
product could prove so valuable to diabetics, but in the interest of brevity
let me sum it up this way: Type II Diabetes, which is currently reaching
epidemic proportions in the US, is a disease which gets progressively worse.
The more effective your blood glucose monitoring, the more effective and
less costly the treatment.
DexCom will not be first to
market with a product of this kind. Behemoth Medtronic (NYSE: MDT)
($10 billion in annual sales) got a device approved in 2005. It is similar
to the DexCom device, but not as accurate in certain ranges of blood
glucose monitoring. In addition, the device represents only a tiny percentage
of MDT's sales. For DXCM it is the holy grail and certain to have
a major effect on the stock price.
DXCM debuted for trading on
April 14th, 2005. Piper Jaffrey was the lead underwriter in the IPO, and
4.7 million shares were issued at a price of $12. DXCM received
$52.5 million in the IPO.
I have been patiently waiting for
a pullback in the stock to present it to OTC Journal subscribers,
but the stock has not cooperated. On Friday, shares of DXCM closed
at $16.24, just $.50 below the stock's all time high.
It is a San Diego based company,
and I have been following their progress since they began trading publicly.
Here's how I believe the script will play out: Assuming the market remains
in reasonable shape, I believe DXCM will continue working its way
higher right up until the FDA Approval is announced. The day it is announced,
the stock will spike up, and that will be your selling opportunity.
When the FDA announces its conclusion,
if they are not favorable to DXCM, shareholders will lose a lot
of money. Most who follow the situation believe the approval is a slam
dunk, but there are no guarantees.
By way of full disclosure, I started
accumulating this stock for my personal account last year. Currently, I
am holding 4,000 shares at an average cost of $13.18. I intend to make
a very substantial bet on this stock, and might accumulate up to 10,000
shares. I might buy it or sell it anytime without notification, but will
try to keep everyone up to date. One word of caution- just because I have
bought it for my own account doesn't mean it isn't risky. I make plenty
of mistakes with my own money.
This idea should be viewed as a special
situation for an event driven trade. You might want to review a previous
edition entitled Event
Driven Trading, published August 27th, 2005. Just click on the title.
As far as the upside goes- here are
my thoughts: Piper Jaffrey has a price target of $18- Montgomery pegs it
at $20. I believe the stock will surge higher than those levels when the
FDA Approval is granted- perhaps in the $22 to $25 range. I also believe
$20 plus pricing will be short lived, and the stock will come back rather
I have been trying to accumulate
this stock on pullbacks for some time, but the pullbacks are shallow and
short lived. A 38.2% retracement is about the best you can hope for, which
would be $14.20. If you want to own this stock, a good strategy
might be a partial position now, adding to it on the shallow pullbacks.
It is a tough stock to buy because there is so little supply. Nevertheless,
as implied by the title of today's edition, waiting for even a slight pullback
might prove prudent.
This one is out of the realm of our
normal microcap ideas, but it does fall into the theme of a company you
might not have found out about on your own. If you participate, I hope
we all ring the bell on this one. I will try to post a BLOG early
next week for questions and comments.
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