3 Undervalued Stocks With Strong Upcoming Catalysts

If all goes well for these three stocks, in the next six months they could be worth over double the prices they currently trade for. Each stock has important, business-defining events that, if positive (and it’s likely they will be), would make their businesses significantly more valuable.

I get dozens of questions every week on small biotech stocks. Searching out these small under-followed stocks is a core focus area both at Small Cap Gems and obviously Biotech Gems, not to mention my work on SeekingAlpha and Real Money Pro. One question that comes up often is what I think about a small developmental concern as an investment. Often the answer is that while the company seems like a reasonable play given its focus, funding, and pipeline, the stock is unlikely to do much in the market as its next important trial readout or PDUFA date is many quarters or years away.

Often this flummoxes the inquirer as they have already invested in the company and were unaware of this. In the old days, when data was tough to find a lot of research had to be done to know this kind of relevant material to make an investment decision; however, in the age of the internet this is borderline inexcusable. There are many solid and free FDA calendars that provide just about every important trial result date or upcoming FDA approval decision dates for scores of companies. Here is one I like and use. http://www.biopharmcatalyst.com/fda-calendar/

Knowing these upcoming catalysts are crucial to making an informed investment decision on a small developmental company in this sector. For example, when we included Exelixis (Nasdaq: EXEL), a small oncology concern into the Small Cap Gems portfolio in late April, the company had just secured its first approval from the FDA for its lead cancer drug cabozantinib, branded as CABOMETYX, for the treatment of patients with advanced renal cell carcinoma who have received prior anti-angiogenic therapy.

This information was already widely known in the market when we made our investment decision. What seems to be have been less-realized was that important Phase II and Phase III trial readouts for CABOMETYX in other indications were going to hit the wires over the next few months. Given the drugs recent approval and positive results in earlier trials, we reasoned that these trials would be successful and would be upcoming positive catalysts for the stock when they were released. That assumption turned out to be correct and the stock is up some 80% within the portfolio as a result.

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