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Singles Only: 3 Winning Cheap Stocks No One Cares About

Antares Pharma (ATRS), Peregrine Pharmaceuticals (PPHM), and Synta Pharmaceuticals (SNTA) move higher while no one's watching

by 9/19/2012 1:32 PM
Stocks quoted in this article:

What if a stock turned in an impressive rally and no one on Wall Street talked about it? It might make for an intriguing trade setup. This week, we are looking at low-priced outperforming stocks that have largely been ignored by analysts. A screen turned up a number of interesting candidates, including Antares Pharma Inc (NASDAQ:ATRS - 4.28), Peregrine Pharmaceuticals (NASDAQ:PPHM - 4.73), and Synta Pharmaceuticals Corp. (NASDAQ:SNTA - 8.10).

The 27 stocks below are all priced below $10 and all are up at least 10% in 2012. Despite their technical strength, all are covered by fewer than four analysts in total.

Table

ATRS shares have almost doubled so far in 2012, building on a nice long-term uptrend that goes back more than three years. In late July, the stock pegged a new record high of $5.58.

And yet, just three analysts currently follow the stock, all awarding "strong buy" designations. The average 12-month price target of $5.00 is just about 17% above current levels, which isn't a dramatic move given the equity's current momentum.

Short interest could be a factor in the stock's next move; nearly 15% of the stock's available float is currently sold short. At the equity's current rate of trading, it would take short sellers almost three weeks to unload these bearish bets, which is more than enough fuel to spark a short-covering rally.

PPHM has been on a wild ride of late, up 365% in 2012 and 171% higher since August 27. The company enjoyed the one-two punch of positive news regarding a lung-cancer drug in development followed by well-received earnings. The stock is now staring north at the $5 level, which hasn't been conquered since June 2009.

Despite this positive news and monster uptrend, just two analysts follow the stock. While both name it a "strong buy," any further coverage could draw sidelined investors into the PPHM pool. In other news, the 50-day put/call volume ratio of buy-to-open activity on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 0.16. While this means just 16 puts have been bought to open for every 100 calls during the past few months, the ratio is elevated on a relative basis, in the 74th annual percentile. This indicates speculators are more bearishly positioned than usual.

Finally, SNTA has recently chugged to a new three-year high and is up more than 70% year-to-date. The stock has even outperformed the S&P 500 Index (SPX) by more than 18 percentage points during the last month. Covering analysts, however, are nowhere to be found; our database does not unearth one brokerage following the stock.

Short sellers have taken a shine to SNTA, however, lifting the stock's short-interest ratio to 21.70. In other words, it would take roughly a month's worth of trading (at the equity's average daily volume) to clear out of these positions, should short sellers make a move toward the exits. Such a broad capitulation could be a powerful contrarian tailwind for the shares.

Here are some additional articles of interest:


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