Potential 10 baggers & how to spot them
Before we get into our stock suggestions below, I’d like to make the point that when it comes to spreadbetting or CFD trading in these type of stocks that due to the small market capitalisations of some of them it may not be possible to trade them via a spreadbet or CFD and if it is, the firms will almost certainly require that high initial margins be posted. This is actually in your interests, however, as it will avoid you being shaken out of the position in the event of more market volatility, and which tends to have a disproportionate impact upon the small cap sector - market makers go to ground and spreads get widened. I would even go so far as to say that you should, on the minnows, margin yourself at 70-80% to ensure you can carry a savage down-move and allow the trade to play out. Here are 5 stocks that IF certain catalysts occur at the current prices, each offer the potential to be a fabled 10 bagger:
1. Phytopharm. Current price 6p
The recent trial setback in early May for Myogane in an early stage animal testing model is, in our opinion, not a material issue as it seems that there were issues with regards to the data set and methodology. Still, an inconclusive result was unhelpful to investors. More promising results have been seen in the application of Cogane in the treatment of ALS in recent months. The catalyst that could propel Phytopharm up by a factor of 5-10 times from the current price of 6p is the results of Phase 2 trials of Cogane - due early next year. The chart below shows what happened on the last occasion the company delivered positive news in late 2009 — the shares were propelled from 5p to 35p in 2 days! If the trial is successful, the company would move quickly to final Phase 3 testing and would no doubt partner with a major pharmaceuticals player in exchange for a share of the royalties. Industry analysts estimate the size of the Parkinson’s disease treatment market to be over $4bn and Alzheimers, for which Cogane could similarly be used in its treatment, of over $7bn. As you can see, the numbers are not small for even a small market penetration...
Phytopharm fits the biotech profile. The company is currently in a key Phase 2 trial period for its primary drug, Cogane, which is hoped to be used in the treatment of the debilitating brain disorder Parkinson’s disease. Results are expected in early 2013. The company’s other major product - Myogane is also being tested for its efficacy in the treatment of both Glaucoma and ALS.
July 2012 | www.financial-spread-betting.com | 13