Are the dark clouds that have been looming over Wall Street finally dissipating? The recent rally in stocks has generated hope among some investors that this is in fact the case. Driven by strong results from Gilead’s clinical trial evaluating remdesivir, its COVID-19 treatment, as well as President Trump’s plan to reopen the economy, all three of the major U.S. stock indexes wrapped up last week of trading in the green. This marked the first back-to-back weekly gains in over two months.
Having said that, one investing guru is wary amid the market’s modest recovery. In a recent note to his staff, billionaire stock picker Steve Cohen argues that an economic recovery won’t necessarily be linear. He believes that while there are compelling names out there, the team needs to remain “disciplined”.
Cohen’s investment firm, Point72 Asset Management, relies on a strategy that involves investments in the stock market as well as a more macro approach. This very strategy has cemented Cohen’s status as a highly respected investing powerhouse, with the guru earning $1.3 billion in 2019 thanks to a 14.9% gain in Point72′s main hedge fund.
Bearing this in mind, we decided to take a page from Cohen’s playbook and look at two stocks the billionaire went in on recently. According to TipRanks’ database, both Buy-rated tickers sport substantial upside potential. Here’s the lowdown.
Using cutting edge immunotherapeutics, Immunomedics is working to develop better treatments for cancer, autoimmune and other serious diseases. Even though it has already notched an 87% gain in the last month, some think that IMMU still has more fuel left in the tank.
Judging by the new position acquired recently, Cohen appears to be one of the healthcare name’s fans. Disclosing the purchase on April 16, Point72 snapped up just under 11 million shares. As a result, the firm now boasts a 5.1% stake in IMMU.
Several pieces of good news for the company inspired bullish sentiment from Guggenheim analyst Michael Schmidt. On April 6, IMMU revealed that it would be stopping its ASCENT Phase 3 study of sacituzumab in metastatic triple-negative breast cancer early on account of “compelling evidence of efficacy.” This is based on a unanimous recommendation made by the independent Data Safety Monitoring Committee (DSMC). According to management, “remarkable results” were witnessed across multiple endpoints. In addition, the data readout is still slated for mid-2020.
Expounding on the implications of this development, Schmidt commented, “We think today’s news significantly improves the outlook for IMMU, consistent with our bull-case scenario as investors had major concerns on the success probability of ASCENT and potential implications to sacituzumab’s approvability. The news also read-though positively to the ongoing TROPiCS-02 Phase 3 trial in the large HR+/HER2- metastatic breast cancer indication.”
On top of this, management announced that Harout Semerjian had been appointed President and CEO as well as a member of the Board. Semerjian brings plenty of experience to the table as he previously served as Ipsen’s Executive Vice President, Chief Commercial Officer, where he oversaw the global commercialization and portfolio strategy across oncology, neurosciences and rare diseases, and specialty operations in Europe and other international markets.
Based on all of the above, it’s no wonder Schmidt stayed with the bulls. Along with his Buy rating, the five-star analyst bumped up the price target from $25 to $35. Should this target be met, a 74% twelve-month rise could be in store. (To watch Schmidt’s track record, click here)
Looking at the consensus breakdown, 2 Buys, 1 Hold and 1 Sell add up to a Moderate Buy Street consensus. At $28, the average price target implies 39% upside potential. (See Immunomedics price targets and analyst ratings on TipRanks)
BGC Partners, Inc. (BGCP)
Inhabiting the financial sector, brokerage company BGC Partners takes pride in its world-class products delivered on a daily basis. While 2020 has seen the company shed a significant portion of its value, the weakness could present investors with an attractive entry point.
This is the stance taken by Cohen. According to an April 16 disclosure, Point72 added 7,505,667 shares of BGCP, increasing its position by a whopping 93.6%. With the total holding now landing at 15,528,960 shares, the firm has 5% ownership of the company.
Following an announcement made at the end of March, Piper Sandler analyst Richard Repetto also has high hopes for the brokerage name. BGCP stated that it expects to surpass its previous Q1 2020 guidance that was issued during the Q4 2019 earnings call. This guidance called for $540-$580 million in revenue and adjusted pre-tax income of $90-$106 million.
Commenting on the news, Repetto noted, “Our proxy volumes for BGCP have increased from 24% (Credit proxies) to 53% (Equity and Other proxies) quarter-over-quarter in Q1 2020. Although these proxies are not perfectly correlated to BGCP’s performance, we believe that the strong industry volumes likely provided a positive tailwind for the company’s brokerage revenues.”
That being said, the announcement wasn’t completely positive as BGCP will most likely reduce its quarterly dividend from $0.14 to $0.01. Elaborating on the decision, CEO Howard Lutnick said that the reduction wasn’t related to any liquidity issues, but was a “precautionary step to ensure the longevity and financial security of the company in unknown times.” Management also believes that its employees will understand the decision given the state of the market.
Repetto is on the same page in that he thinks the company is doing what it needs to do to stay afloat. “We’ve witnessed BGCP Chairman and CEO Lutnick lead & operate his firm through several past crisis. We believe he has made the strength and survival of the firm his highest priority,” the five-star analyst explained.
In line with his optimistic take, Repetto reiterated an Overweight call and $8 price target. This conveys his confidence in BGCP’s ability to soar 199% in the next year. (To watch Repetto’s track record, click here)
Turning now to the rest of the Street, other analysts have been relatively quiet. Only one other review was published recently, with that analyst giving the stock a Hold rating. As a result, the analyst consensus is a Moderate Buy. Additionally, the $8 average price target matches Repetto’s. (See BGC Partners stock analysis on TipRanks)