Any value-conscious investor must now take the oil and biotech industry seriously. Despite significant improvements in oil prices over the past two years, many companies have reduced costs enough to obtain substantial profits at today’s prices, but Wall Street still positions prices at similar levels to the bottom of the market. In the past few years, biotech stock investors have been facing difficulties. Since 2015, the industry tracking Nasdaq Biotechnology Index has dropped by about 11%.
Although many large players in the industry have been a few years away, some of the smaller upstarts have recently gained staggering gains.
Obviously, investors should at least pay attention to the stocks of these two industries, so we asked all three of our investment contributors to emphasize the great companies in the industry to help you get started. This is why they chose Nektar Therapeutics Total (NYSE: TOT), (NASDAQ: NKTR), Walt Disney (NYSE: DIS).
The past few years have been tough on biotech stock investors across the board. The industry-tracking Nasdaq Biotechnology Index has fallen around 11% since this point in 2015.
Even though it’s been a rough few years for many of the industry’s bigger players, some smaller upstarts have brought stunning dramaticallys lately.
Best Biotech Stocks For 2019: Total (NYSE:TOT)
The results announced by the French oil giant in recent years are unbelievable. As oil prices began to fall, some new production projects that were happening by chance were in progress, and the company was able to respond quickly to the market by reducing capital expenditures and focusing on the various efficiencies that could arise in operations.
As a result, the company not only generates as much free cash flow as it did before the oil price plummeted, but also outperforms peers in return on equity – the year held by Exxon Mobil. If this is not enough to allow investors to be excited about the future, then management will also achieve double feats, while carrying out large-scale acquisitions and reducing net debt below our expected collapse.
Therefore, we have a company with a better balance sheet, higher returns, some timely acquisitions, and a management team that wants to start increasing dividends and buy back stocks. This should lead to valuation premiums, right? Do not. The stock trades at a very reasonable price to 1.6 times the tangible book value.
Best Biotech Stocks For 2019: Nektar Therapeutics (NASDAQ: NKTR)
Recent successes in multiple potential growth drivers have boosted the biotech shares by 818% over the past three years. Recently, Bristol-Myers Squibb (NYSE: BMY) submitted a pre-paid US$1.85 billion to Nektar’s chief cancer candidate NKTR-214.
It is not uncommon for large pharmaceutical companies to pay for the number of drugs in the 10 clinical stages, but they usually get all of them. Although Bristol’s development costs have been reduced by at least 67.5%, Bristol’s share of profits is 35%.
It seems that Bristol Myers seems to be too generous on the surface, but investors should understand that NKTR-214 can help Bristol’s main drugs generate more sales. In a small exploratory study of patients with multiple tumor types, NKTR-214 plus Opdivo shrinks the patient’s tumor at an impressive rate, which may be much better than Opdivo itself.
Around the middle of this year, partners will begin large-scale joint trials across nine tumor types, each of which is designed to support market applications if successful. Only lung cancer indications can lead to billions of dollars in annual revenue.
It will take some time before we know if Nektar and Bristol can send applications including NKTR-214 to the Food and Drug Administration (FDA), but the company has already submitted NKTR-181 for this quarter. This is an opioid that can significantly improve chronic low back pain during clinical trials but causes relatively little stimulant abuse. Doctors who are bored with long-term prescription of addictive opioids may cause NKTR-181’s annual sales to exceed the $1 billion mark.
Walt Disney (NYSE:DIS)
Walt Disney (NYSE:DIS) is still the same magic company as a kid, but it has evolved into a bigger giant than ever before. The company acquired Marvel Studios for $4 billion in 2009, which gave Disney access to the most popular super hero movie franchise. Then, in 2012, Disney acquired Lucasfilm for another $4 billion in another huge move that gave it ownership of all Star Wars movies, licenses, and merchandise.
In addition, Disney acquired the 21st Century Fox movie and TV studio, its cable entertainment network and TV business with $52 billion in stock at the end of last year. The deal still needs approval from regulators, but if it does, Disney will gain all of the above advantages, as well as the rights of X-Men, Avatar, FX Networks, and the Simpsons, and gain control over Hulu’s control of video streaming services. We must not forget that the company is dominant in its theme parks. These companies will benefit from all these purchases, and its revenue has jumped by 13% in the most recent quarter. No other company is quite similar to Disney, and recent acquisitions also ensure that it stays that way for a long time.