A Plan Coming Together
An A-Team Biotech Stock
Fans of the 80’s TV show “The A-Team” will remember George Peppard’s character, Hanibal, as the leader of the rebellious group of military misfits. At least once a show, he would stick a cigar in his mouth and say, “I love it when a plan comes together.” His face would light up because in many situations like military operations, auto racing, and political campaigns, too many things can go wrong. With so many political and economic factors involved, it’s a miracle when a plan does come together.
This scenario is even more applicable for penny stocks because there are so many unknowns to deal with.
For the biotech company Marinus (MRNS), so many things have happened to it recently, it’s hard to ignore – no matter what method or indications you use to make a stock pick. One of my favorite signals to buy is after disappointing Phase III results. In mid-June, MRNS announced Phase III results that were so bad they decided to discontinue further development of that drug. Another favorite signal is to buy after a super high volume day like the one that happened on July 18th when it traded over 8 million shares in one day (the average daily volume is under 300k). And yet another reliable signal came from their favorable Phase II results in late June.
The stock has only been publically traded for two years but it is more than 80% off its peak share price. Plus, it announced the start of a Phase I trial. Phase I and II trials usually produce favorable results so it is easy to get a lot of positive media coverage – which helps with raising money for Phase III and increasing the stock price. You have to love it when so many things come together that point to higher prices in the future.
MRNS produces therapies for epilepsy and neuropsychiatric disorders. This is not as big a market as diabetes or cancer but people of all ages suffer from these conditions. As the population grows, there will be more children and eventually more elderly people affected, so the demand for the drugs increases as well. With so many positive factors in place for this company, you can take a larger initial position of 25-33% of your trading capital instead of the usual 10-20%. Again, good Phase II results are relatively easy to obtain so be prepared to take some profits when there is a quick run-up in price because of the two active Phase II trials.
Note: Brad Hartung is the author of The Speculator’s Handbook and the blog, Small Cap Pirate. He specializes in making sound investment decisions in stocks that have the potential to significantly grow in value like biotech and junior resource mining.
Category: Biotech Stocks, Penny Stock Tips
