Billionaire Steve Cohen goes big with these 2 “Strong Buy” stocks

2022 has undoubtedly been a difficult year for investors. Even taking recent gains into account, all major indices are still low this year and a looming backdrop of economic uncertainty remains.

Such an environment makes it difficult to find the stocks ready to storm ahead, but one way to separate the wheat from the chaff is to follow in the footsteps of the legendary stock pickers.

And few are as adept at the investment game as billionaire Steve Cohen. Famed for its high-risk, high-reward trading style, the hedge fund manager firm Point72 has $25 billion in assets under management, with Cohen’s net worth estimated at about $16 billion.

So if Cohen makes some moves, it’s only natural for investors to pay attention. Recently, Cohen loaded two names and we dug into the TipRanks database to learn more about these tickers. Turns out it’s not just Cohen who thinks these stocks are worth a point. According to the analyst consensus, both are also rated Strong Buys. So let’s take a look at what makes these names attractive investment choices right now.

Exact Sciences (EXAS)

Cohen’s top pick that we’re looking at is Exact Sciences, a molecular diagnostics specialist focused on cancer prevention, with its tools to detect cancers while they’re still in their early stages.

The company’s first product was the colon cancer test, Cologuard, which launched in 2014 as the first stool DNA test for colorectal cancer. Initially focused on the early detection and prevention of colorectal cancer, Exact Sciences has since expanded its product line to include additional oncological screening and precision testing for many cancers.

The company’s latest quarterly report was a beat-and-raise affair. Exact achieved revenue of $523.07 million, representing a 15% year-over-year increase, while beating the consensus estimate by $19.95 million. Similarly, earnings per share reached -$0.84, improving Street’s forecast for -$1.07. And on the outlook side, due to the solid beat of the quarter, the company raised its full year 2022 revenue guidance from $1,980-2,022 billion to $2,025-2,042 billion.

It is therefore no surprise that an investor like Steve Cohen is showing an interest in a company like Exact Sciences. In Q3, Cohen’s Point72 made a significant purchase of EXAS stock, totaling 2.43 million shares, which is now worth more than $104 million at the current share price.

Canaccord analyst Kyle Mikson also sees sufficient reason for an optimistic outlook here. He writes, “Regardless of the path the colorectal cancer screening market may take in the coming years, we remain optimistic that Exact’s Cologuard business will be a consistently solid growth vehicle over time. We are also very excited about Exact’s long-term growth potential given its many pipeline assets, progress towards profitability (without pursuing dilutive options) and performance. We believe the company is on track to execute on its core long-term growth strategy.”

Accordingly, Mikson rates EXAS stock as a buy, supported by a $70 price target. There’s a lot of upside — 63% to be exact — if the target is met in the next 12 months. (To view Mikson’s track record, click here)

A total of 12 analysts have commented on Exact and they are broken down into 9 Buys and 3 Holds, giving the stock a Strong Buy consensus rating. At 57.67, the average target means equities will return ~35% in the coming months. (See EXAS Inventory Forecast on TipRanks)

Horizon therapy (HZNP)

The next name endorsed by Cohen is Horizon Therapeutics, a biopharmaceutical company focused on bringing to market drugs for rare, autoimmune and severe inflammatory diseases. Horizon has an extensive and varied drug portfolio, including Tepezza, the therapy for thyroid eye disease (TED), the gout medication Krystexxa, and Ravicti, the treatment for urea cycle disorders.

They all contribute to the turnover, with Tepezza leading the way. Although third-quarter sales of the drug fell 20% year-over-year to $491 million, the figure represented a 2% sequential increase and allayed fears of a bigger pullback. While total revenue was down 10% from the same period a year ago to $925.4 million, the figure beat Street’s forecast by $37.76 million. There was also a beat on the bottom line, with adj. Earnings per share of $1.25 are well ahead of the $1.01 expected on Wall Street.

In fact, the company also performed on its outlook; the full year sales guide was increased from $3.59 billion to $3.61 billion (consensus was $3.56 billion).

Aside from its product portfolio, the company has a bulging pipeline that got a real boost from last year’s acquisition of Viela Bio. The $3 billion deal not only helped the company get its hands on Viela’s lead candidate Uplizna, which is approved for the treatment of neuromyelitis optica spectrum disorder (“NMOSD”) in the US, but also bolstered its pipeline with three assets indicated for the treatment of autoimmune diseases. such as systemic lupus erythematosus (SLE), Sjogren’s syndrome and rheumatoid arthritis.

Cohen apparently thinks the company is taking the right steps. In Q3, he opened a new position and bought 2,094,400 shares. These are now worth more than $157 million.

Looking ahead, Wells Fargo analyst Derek Archila points out that there is plenty on tap next year: “We think 2023 will be an important year for HZNP’s pipeline, which we believe is undervalued and should generate upside potential for stocks. There are multiple clinical catalysts that we believe can help HZNP stock revalue and lead investors to assign more terminal value that is not in the stock at these levels.

Commenting on the above, Archila added: “Tepezza’s low CAS/chronic TED study will be readout in 2Q23, which is important to expand its use across a much larger set of TED points than high CAS/active. Aside from that, we are most interested in the SLE Ph2 trial of daxdilimab in 2H23, which is being deprecated by BIIB059, and the Ph2a trial in alopecia areata in 2023. We think this could be a pipeline-in-a-product be, given there are many autoimmune diseases involving Type I IFN. Also, data from dazodalibep in Sjögren from different populations will be reported in the 1H23.”

Given all of the above, Archila has high expectations. Along with an Overweight (ie Buy) rating, he set a $118 price target on the stock. This target sets the upside potential at 57%. (To view Archila’s track record, click here)

In general, most of Archila’s colleagues support his bullish stance. Based on 9 Buys vs. 2 Holds, analyst consensus rates the stock as a Strong Buy. The forecast calls for ~30% annual gains as the average target is $97.45. (See HZNP stock forecast on TipRanks)

To find great ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ stock insights.

Disclaimer: The opinions expressed in this article are solely those of the recommended analyst. The content is for informational purposes only. It is very important to do your own analysis before making an investment.

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