Author: Raj Gupta

Raj Gupta is Director, Research Analyst. After joining the firm in 2002 as a research analyst, Raj was appointed senior equity analyst in 2006, and lead senior equity analyst in 2014—largely because of his ability to select outperforming stocks. He acts as an expert in the O’Neil Methodology and contributes to the direction of product and service line development. He recommends securities for addition to or removal from the U.S. Focus List, or USFL, and the associated alerts to clients. During his tenure, he was part of the leadership that developed the Global Focus List, which marked the firm’s successful expansion into international equity recommendations. He is also a lead on the IPO Rewind report and contributes to weekly summaries on the performance of the U.S. market. Much of his expertise is delivered as highly customized service to clients. RAj earned his Bachelor’s degree in Economics from the University of California, Santa Barbara. He began working at the firm directly out of college, driven by his passion for investing and stocks. An avid soccer player, he built and managed an adult league in the Los Angeles area, in which he still plays. He also enjoys international travel; he and his wife commit to at least one major adventure a year.

Vertex Pharmaceuticals

Posted on by Raj Gupta

Key points from this report:

 

  • Buy VRTX: We recommend buying shares of Vertex as the stock forms the right side of its current base in heavy volume. VRTX has displayed outstanding relative strength, bucking general market weakness and recently even regaining its 50-DMA. Buy here and look to add more as the stock clears through $249.85 resistance.
  • Poised to double revenue/earnings by 2022, driven by triple combo: VRTX has four FDA-approved Cystic Fibrosis (CF) medicines, which together can treat 90% of the total CF population. There is no immediate competitive threat. Consensus calls for EPS of $12.06 by 2022, up from $5.33 in 2019, a 32% CAGR. Revenue is expected to reach $7.27B in 2022 from $4.1B in 2019, a 21% CAGR.
  • COVID-19 impact: On March 27, the company announced they are confident in the continu­ity of their supply chain despite the coronavirus pandemic. Vertex also highlighted that they have enough CF medicine to meet its commercial needs in the future, with all manufacturing facilities remaining operational.
  • Looking forward: The company will report Q1 results in late April. Consensus expects Q1 revenue of $1.26B (+47% y/y) and adjusted EPS of $1.78 (+56% y/y). For 2020, consensus expects revenue and EPS growth of 33% and 44%, y/y, respectively.

Market View

Posted on by Raj Gupta

U.S. Market

The U.S. market is in a Rally Attempt. The S&P 500 and Nasdaq rallied sharply higher off Monday’s intraday
lows before pulling back on Friday. Both have now held those lows for more than three days and are now in position to stage a follow-through day. We continue to recommend waiting for a follow-through day before any
meaningful increase in risk.
Seven of 11 O’Neil sectors rallied by 10% or more this week led by Utility, Consumer Cyclical, and Capital
Equipment. Lagging sectors and industry groups led the bounce before fading on Friday. Growth-oriented and
higher quality industry groups fared well, however; the majority remain well off highs with multiple layers of resistance to still regain. Growth-oriented industry groups showing good relative performance over the last several
sessions include Software, Internet, Semiconductors, Biotech, Medical Products/Equipment, and Managed Care.

Market View

Posted on by Raj Gupta

The U.S. market is now in a Rally Attempt. Indices declined for another week, however the Nasdaq (6,686) and S&P 500 (2,280) are slightly off lows for the third consecutive session, as the market status was moved to a Rally Attempt. If indices undercut recent lows, the status will be moved back to a Downtrend.

 

All 11 sectors declined for the week, led lower by Energy (-20%). The majority of sectors are bouncing around recent lows, led by poorly ranked industry groups (1=best, 197=worst). More than half of the 12 best performing groups for the week were ranked 103 or worse. Industry groups showing an improvement in rank or with RS lines at or near highs are primarily defensive in nature including Cleaning Products (CLX), Discount Retail (COST), Medical-Software (VEEV), Super Markets (KR), Water Utilities (AWR), Food (FDP), and Telecom (CCOI).

 

Despite the possibility of a follow-through day as early as next week, we maintain a very cautious and defensive approach. Indices remain near lows and low-quality stocks from poorly ranked industry groups are attempting to bounce higher. A lot of technical damage has occurred to stocks, and we believe it will take some time to repair. In the meantime, continue to monitor high relative strength quality stocks as they will be a valuable resource for fresh ideas when market conditions improve.

Large-Cap Secular Growth

Posted on by Raj Gupta

In light of the heightened economic uncertainty, our analyst team has compiled in the attached report a multi-sector list of companies that we believe can perform well through market cycles. These companies benefit from secular growth trends, are leaders in their respective industries, and have business models that we expect to be resilient through a challenging period for the econom

Small- and Mid-Cap Secular Growth

Posted on by Raj Gupta

In light of the heightened economic uncertainty, our analyst team has compiled in the attached report a multi-sector list of companies that we believe can perform well through market cycles. These companies benefit from secular growth trends, are leaders in their respective industries, and have business models that we expect to be resilient through a challenging period for the economy.

Market View

Posted on by Raj Gupta

U.S. Market

The U.S. market remains in a Rally Attempt. The S&P 500 and Nasdaq have now held above the February 28
intraday low (S&P 500: 2,855; Nasdaq: 8,264) for six sessions, despite heavy selling to close the week. Monday
will mark day seven of the attempted rally with a follow-through day still needed to move to Confirmed Uptrend.
If these lows are undercut, however, the market status shifts back to a Downtrend and we again look for indices
to establish and hold above another new low.
Lagging sectors and industry groups broke through last week’s lows, while defensive-oriented sectors including
Utility, Consumer Staple, and Health Care held up best. The best performing groups over the last week include
Building Products/Services, Utilities, Food, Mining, Managed Care, and Telecom. The worst performing groups
included Oil & Gas, Leisure, Gaming, Lodging, Banks, and Airlines.

U.S. Market Update + High Relative Strength Global Growth Ideas

Posted on by Raj Gupta

Attached is the accompanying report to tomorrow’s U.S. Market Update + High Relative Strength Global Growth Ideas webinar from Executive Director, Research Analyst Raj Gupta. He will review the current state of the U.S. market, using historical precedent to discuss potential scenarios that could occur in the coming days and weeks. He, along with other analysts, will also review high relative strength ideas on our Focus List across a number of sectors. You can listen to the webinar in the Research Library on PANARAY® or on our website any time after 11am ET, Thursday, March 5.

Market View

Posted on by Raj Gupta

U.S. Market

The U.S. market is in a Downtrend. The S&P 500 and Nasdaq have broken below all major moving average
support levels this week. The next level of price support is ~2,822 on the S&P 500 and 8,243 on the Nasdaq.
During a market correction, we do not try to catch the exact bottom simply by looking at where support could
be. We first allow the market to establish a new low, and hold above that low for three sessions – this is what we
refer to as a Rally Attempt. Day 1 of an attempted rally begins when a major index closes up from the previous
session or closes in the upper half of an intraday trading range. Neither volume nor the size of the gain matters.

The only thing that matters is that the attempted rally stays alive. For the attempted rally to remain intact, the intraday low on Day 1 cannot be undercut. On Day 4 or later of the attempted rally, at least one of the key market
indexes must deliver a strong gain in volume up from the previous day. We prefer to see at least 1.7%, but the
bigger the better. That big gain in rising volume is the follow-through day, which confirms that a new uptrend is
underway.

Market View

Posted on by Raj Gupta

U.S. Market

The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq pulled back to their respective 21-DMA
after making new all-time highs earlier in the week. Distribution did rise over the last several sessions, though
one day will expire on both indices next week. We will likely shift the market status back to an Uptrend Under
Pressure should indices close below the 21-DMA in the coming days. The next level of support below the 21-
DMA is the 50-DMA (S&P 500: 3,274, -1.9%; Nasdaq: 9,228, -3.8%).

Nine of 11 sectors, 110 of 197 industry groups, and 56% of S&P 500 stocks are trading above their respective
50-DMA.Technology and Consumer Cyclical pulled back sharply Friday, falling 2.3% and 1.6%, respectively.
Health Care, Consumer Staple, and Utility closed relatively flat on the session. The best performing industry
groups over the last several sessions include Mining ( PAAS ), Reits ( DLR ), Utilities ( PNW ), Building Products/Services ( DOOR ), Home Builders ( LGIH ), and Pharmaceuticals ( ABBV ). The worst performing groups include Semiconductors ( COHR ), Software (ZS ), Toys ( HAS ), Travel Booking ( BKNG ), and Oil & Gas ( DVN ).