Happy 2013. By the looks of it, this year could be one of compromise and progress. For the first time in recent memory, representatives of the US government worked through the holidays, accomplished something major, and sorted out a deal to avert the fiscal cliff that would have been imposed in the absence of such an agreement. Both sides can claim victory as each was able to hang onto some key provisions and standing points, although some post-vote bickering will still point out that there are also some bitter divides remaining. It's also impressive that the deal was done with much of the government operating in a lame-duck status, but it's also that the consequences of not coming up with solution to the cliff crisis could have been devastating for a recovering economy and for the People's perception of Washington. Our elected leaders knew this all too well, so any true celebrations of bi-partisanship and compromise may be premature for the time being, but at least we know if the folks in DC have their backs up against the wall that something could actually get done.
The prospects of a cliff deal sent the markets north during the last trading day of 2012, although they had dropped during the week prior. With the deal complete, stocks could be set for an early-2013 rise. Asian markets traded up to five-month highs on Wednesday and the outlook was encouraging that US stocks would react the same, but some caution is still likely to persist as the new talk of the day will revolve around an increase in the debt ceiling. Politicians will be right back at it and the stability of the markets may again be threatened as Republicans and Democrats look to use this latest round of negotiations to make up for any ground they feel they may lost in the cliff negotiations.
As with the cliff negotiations, expect the ceiling drama to play out until the last minute and volatility may again be a part of this game because the results of not increasing the debt ceiling will likely lead to another round of spending cuts that the media will play up to have as devastating an effect on the economy as those included in the fiscal cliff.
The new year is now in full effect, but although one major catastrophe looks to have been averted, the new year is still bringing more of the same - unless this new found spirit of compromise and cooperation actually holds true.
As the markets and the drama continue to play out, here are a few stocks and stories to keep an eye on...
Apple's Volatility Likely To Continue
Apple (AAPL) shares closed 2012 with the same fluctuation and volatility that had become the norm over the past few months and it should be expected that this action will continue into the new trading year. Much of the speculation surrounding the recent downtrend in the stock revolved around the potential tax increases that would have taken effect in the event of the fiscal cliff implementation, but some of those concerns were averted with the deal. Taxes were set to increase in 2013, regardless, so any selling on that account should be finished. Profit-taking was also likely a large part of the late-2012 selling, as AAPL performed rather admirably over the course of the year and it's never a bad idea to bank profits when the opportunities arise, especially in an uncertain economic environment.
APPL was also hit with a downgrade from Citigroup (C) in December, another factor that may have led some investors to the exits. Citi lowered its rating from 'Buy' to 'Neutral' while also cutting the price target to $575 from $675. Apple also made news during the closing weeks of 2013 when a judge denied judge denied Apple's request to implement an all-out injunction on the Samsung smartphones that were found earlier in the year to have infringed on Apple's patented technology. In the ruling, the judge essentially noted that an injunction would be over and beyond the common sense realm of punishment, given that Samsung was already ordered to pay Apple over a billion dollars in retribution while also only infringing on limited aspects of its smartphones. The court ruling had little effect on shares, but Citi's downgrade may have had somewhat of an impact.
Apple's immediate dominance - especially in the smartphone market - is not yet threatened, but investors will be keeping a keen eye out for evidence that the company's astounding innovation of the past will continue to build momentum into the future. The iPhone 5 hit the market in China with a splash, but it's reception in the US was mixed and the competition is growing extremely fierce in the sector, with the likes of In Motion's (RIMM) again looking to make some noise with the BlackBerry 10. RIM just recently received FCC approval for some of its new devices and will be fighting for survival with the pending launch of its new platform.
The biggest news story for Apple so far this year has little to do with the company's innovation or financials. On New Year's Eve armed robbers stormed an Apple store in Paris and made off with a solid score worth of merchandise. Such an ordeal will do nothing to the AAPL share price, but at least we know the products are still in high demand.
Healthcare, Biotech, Pharmaceutical:
Amarin Closes The Year On A Solid High
It could widely be assumed that trading volume on New Year's Eve is going to roll in light, with many already out gearing up for the festivities as the markets trudge along. For Amarin Corporation (AMRN), however, the celebrations started early as heavy volume carried shares five percent higher before the close. The move provides little solace to those who have been hanging on and watching the stock drop as the company looks to launch Vascepa - a treatment for high triglycerides - on its own, but it could be a sign that the shorts are more enthusiastically covering more now than they had been previously. Even some of the financial news and opinion outlets have offered more upbeat coverage of the company lately than they had in the recent past, another sign of confidence for those that may believe the shorts are leaving the building.
As those who have followed this story (which seems like everyone) already know, shares have slipped since Vascepa received an FDA approval earlier this year when buyout talks never materialized. The key to any merger or acquisition deal materializing could still be whether or not Vascepa receives a New Chemical Entity (NCE) status for Vascepa. Investors have long-awaited an FDA decision on this matter and until one is issued it's not likely that any final deal can be consummated, given the additional protection granted by NCE valued in. Company officials have argued in recent conference calls, however, that Amarin's strong patent protection for Vascepa is enough to ward off any potential patent lawsuits.
As hot a story as this was to watch during the closing months of 2012, Amarin will be just as hot a story to watch during the opening trading sessions of 2013. Vascepa's commercial launch is imminent and the product is still expected to become a billion-dollar blockbuster before it's all said and done. Speculation still has it that a buyout deal will eventually get done, with Teva Pharmaceuticals (TEV) and AstraZeneca (AZN) and Pfizer (PFE) all having been linked to such rumors.
It certainly looks as if the shorts have run the stock down to levels where buyers are comfortable coming in again, as evidenced by Monday's move, and shares could be trading again at attractive levels to add, accumulate or buy with the future of Vascepa in mind. There's always the wild-card that a buyout could materialize, too, to keep things exciting - especially if this NCE story is ever finalized.
Organovo Pushes Towards Three
In early December we took note of the fact that Organovo Holdings (ONVO) had been trading with increased volume, even as the share price remained fairly steady. Such action is often a sign that a short term move could be materializing, as the old saying goes "volume before price," but in the case of Organovo, it could also be a sign of validation of the company's long term potential, too. Shortly after the volume boost and at a time when increased attention was being paid to the 3D printing sector thanks to the rise of 3D Systems Corp (DDD) and Stratasys (SSYS), ONVO shares pushed towards the three dollar mark and hit a high of $2.88 last Friday before profit taking set in on Monday and shares modestly retreated. The move provided investors with quick gains and followed ONVO's trend of often providing nice trading opportunities and accumulation points for investors to reap short term gains while also waiting for the long term story to unfold.
That potential could be significant, as previously discussed, with the development of the NovoGen MMX Bioprinter. The MMX uses live human cell samples to generate 3D "bioprints" of human tissue that can then be used as disease models and enhance therapeutic drug discovery and development. The potential of this technology over the short to mid term is significant, as mentioned above, in the realm of therapeutic research and development, but looking further on down the road Organovo could potentially put this technology to use in "printing" organs for patients awaiting transplants. That specific potential was highlighted by The Economist magazine a couple of years ago and other high-profile coverage from CNBC also added validation to the discussion.
Organovo's contribution to the 3D printing technology in the field of medicine and biotechnology should not go unnoticed. The sector is flying of late and this company could likewise benefit as/if investors follow the maturation of the technology and become convinced that "printing organs" can be the real deal.
Bigger players are taking early stakes, too, as demonstrated by partnerships with Pfizer and United Therapeutics (UTHR). These relationships could turn into more robust collaborations in the future if positive progress continues and it's reasonable to believe that ONVO could looked at as an M&A target further on down the road. It could be a perfect fit for some of the larger companies in the sector looking to expand the bioprinting division. ONVO also signed on with AutoDesk last month in an effort to create the first 3D design software for bioprinting.
With the 3D sector flying through 2012, ONVO could be a hot one to watch this year.
Inovio Gearing Up For 2013
Inovio Pharmaceuticals (INO) could be another hot story to watch during 2013 and beyond. Like Organovo, shares of INO traded with heavy volume during the early portion of December with little price movement, often a sign that accumulation is taking place, and could be ready for a short term move higher, with due respect also paid to the long term potential of the company and its stock. Volume did taper off during the latter half of the month, but that should be generally expected as the trading force is paired down during the holiday season.
Inovio has nine programs in development, some of which could produce actual or interim trial results through the course of 2013. Investors will be keeping an eye on these developments and the acceptance of the technology by medical professionals and investors. Potentially the most-watched story will be the progress of the company's universal flu vaccines, which are founded on Inovio's proprietary SynCon platform. Through SynCon, the company had produced numerous synthetic vaccines that treat various infectious diseases and cancer types and gained fanfare for developing the above-mentioned universal flu vaccine. Just recently the company announced interim results from an ongoing Phase I trial demonstrating that Inovio's universal H1N1 vaccine proved to be twice as effective as the current standard of care and additional updates next year could prove as a catalyst for the INO share price as trials mature and/or finalize.
In 2013 Inovio may benefit from its evolution from a 'Phase II' play to a pure late-stage developmental play, as three of its chief pipeline programs have entered the latter stages of Phase II this year. Investors will take note that Phase II pipelines are still considered years away from market, but some of the most impressive investment gains in the biotech/small pharma sector are had when successful Phase II and/or Phase III trials are announced. INO is still trading at relatively speculative levels and could attract the interest of those looking to play future catalysts or simply hold for the future as this deep pipeline develops.
Yum! Brands Recent Volatility Could Lead To A YUMmy New Year
The trading action of Yum! Brands (YUM) shares during the closing weeks of 2012 was enough to make even the saltiest of sailors queazy. Initial reports of tainted meat in China dropped YUM shares to the low-sixties before a rebound materialized when it was announced that the said meat was actually within standards. The drop gave investors with a quick trigger finger the opportunity to pick up some cheaper shares as the rebound appeared just as quick as the drop did, although there will be some caution moving forward as the company warned of slowing growth in China during its last quarterly report. Such concerns are likely to be ignored at the outset of 2013, however, as the resolution of the fiscal cliff ordeal will probably send the markets higher, potentially sparking another run towards seventy for this stock. Concerns of slowing growth in China spooked some investors, but company officials eased those concerns with a follow-up report after the quarterly and the brands are still some of the most recognizable world-wide. For those looking at YUM as a long term or retirement hold, then any dips could be looked at as a potential accumulation point. Short term potential revolves around the general market action, barring any unforeseen developments.
Roundup: It's a brand new year and the markets around the world look to be starting off with a bang following the fiscal cliff deal in the United States. We still have the debt ceiling to worry about, but for now the certainty is to be enjoyed. For Europe, it's a solid sign that the new year begins with Greece still along for the euro ride - although barely - and the markets can now concentrate on recovery. The festive mood may not last too long before the headlines swirl about the debt ceiling again, which is a good reason to believe why now may not be the time to 'all-in' again with the cash on the sidelines. It's still a fickle market we're in and many are unconvinced that Washington's politicians can play nice for too long. Unfortunately, 2013 begins with an early end of the NFL season as the NY Giants thought they had the division wrapped up in November, when actually they didn't, and are now looking forward to Spring Training just like the rest of us.
Disclosure: ONVO, INO, AMRN, YUM.
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