I Just Got a “Strong Buy” Signal …

29 | By Michael A. Robinson

If you’ve been joining our twice-a-week get-togethers for some time now, you’ve learned that I’m a focused and disciplined investor – and know that I ignore fads and refuse to chase “hot tips.”

I’m also very price sensitive: Although I’m hunting for stocks capable of delivering “moon-shot” price gains, I won’t pay a penny more than my charts or “black box” system tells me they’re worth.

To enforce that discipline – and to help pass along to you all that I’ve learned through the years – I developed the set of five rules that we talk about here each week.

But one of my best tools is also one of my simplest. It’s a roster of companies whose stocks I’d someday like to own, but that don’t currently meet my stringent criteria.

I call it my “Watch List.”

And through the years, this simple shopping list for stocks has ended up delivering some of my all-time-biggest winners.

And wait ’til you see my next winner – the “Watch List” stock with stratospheric profit potential that my system just upgraded to “Strong Buy.”

When Fear Breeds Profits

The sell-off that resulted from the credit crisis of 2008-2009 was the biggest bear market since the Great Depression.

Five years later, however, U.S. stocks are within 5% of the all-time high achieved in mid-September. There are a lot of great companies whose shares I would like to own, but my stringent guidelines signal that these stocks are still overvalued.

So if I can’t recommend the stocks, I do the next best thing: I put them on my Watch List.

And I wait – patiently, and for however long it takes.

I will wait months – even years, at times – to get the right stock at that perfect price.

This discipline can create some fascinating situations: Very often, in fact, I’ll see “the crowd” running for the exits, jostling and shoving one another in a panic-driven effort to get as far as possible from a stock that I can see is actually trading at a once-in-a-lifetime bargain price level.

So while those other investors are sobbing inconsolably about the loss they’ve taken on this stock, I’m inwardly thrilled (and sometimes outwardly grinning) at the “moonshot” magnitude profit potential that has literally fallen into my hands.

What this means is that I’m able to buy the stock at the optimum “entry point” – just ahead of the next big move higher.

And I believe that’s just what we have with the Watch List stock I want to tell you about today.

The company is Santarus Inc. (NasdaqGS: SNTS), a San Diego-based biopharmaceutical company whose shares could easily double in just two short years.

Santarus has a unique niche: It markets drugs that address the needs of patients being treated by physician “specialists.” In other words, these drugs aren’t run-of-the mill antibiotics – they are designed to treat such serious maladies as diabetes, high cholesterol, or autoimmune problems.

This is a stock that’s been on a roll, zooming all the way to a record high of $28.10 a share in early August.

That’s when the stock stumbled.

And it’s also when I added it to my Watch List.

Shares of Santarus have really hit the skids in recent weeks: On Monday, they closed at $21.88, down 22% from that record high.

When a market index suffers through a correction of that magnitude – 20% or more – it’s classified as an official “bear market.” Bear-market sell-offs are often overdone, setting up a nice rebound for investors who are able to identify the correct opportunity – and deploy the courage to act.

And my analysis of Santarus shows me that it’s time to move this stock off the Watch List – and onto the one for Strong Buy profit plays.

To see why that’s so, we need to take a closer look at the stock.

The “Super-Size Me” Economy

If you want one reason that Santarus has been able to generate such consistent profit growth, it’s this: The company has focused a lot of its energy on America’s No. 1 growth industry – obesity.

Some docs will tell you that U.S. obesity isn’t just a problem – it’s an outright epidemic.

And they may be right.

Nearly 26 million people in the United States have diabetes.

That’s more than 8% of the whole country.

The majority suffer from Type 2 diabetes, which is very often associated with being overweight later in life. Obese patients usually have high blood sugar, a condition with lots of complications.

Santarus has two drugs that help these patients improve their blood sugar levels, improving their health as a result.

GLUMETZA helps keep the levels under control and CYCLOSET can lower them without the patient needing to increase insulin levels.

Another drug – FENOGLIDE – targets high-cholesterol levels, another condition related to America’s growing waistlines. Then there’s ZEGERID, which reduces heartburn and other gastric problems.

Earlier this year, Santarus introduced a fifth drug with a big potential upside.

The drug – known as UCERIS is an extended release tablet for patients suffering from ulcerative colitis, an inflammatory bowel disease.

The drug had recent quarterly sales of just $16.2 million. But Santarus is projecting sales will increase some 18-fold to roughly $300 million in the next few years.

A drug with revenue of that magnitude approaches “blockbuster” status – the Holy Grail for any drugmaker.

Santarus’ current revenue needs are well covered – as are those in the intermediate term.

And the company isn’t standing pat – for it has three additional drugs in its pipeline, namely:

  • RUCONEST, designed to treat patients with a rare genetic disorder that causes swelling of the body. Santarus submitted the drug to the U.S. Food and Drug Administration (FDA) last April and expects to get approval in the next few months.
  • Rifamycin SV MMX, which treats travelers’ diarrhea, an embarrassing, inconvenient and sometimes dangerous problem affecting globetrotting business folks and tourists alike. The drug is in Phase III clinical testing.
  • SAN-300, a drug that targets multiple inflammatory and autoimmune diseases. With Phase I completed, the drug should enter Phase II trials by the end of this year

Five Reasons the Stock Will Double

With a market cap of $1.5 billion, Santarus trades at 15 times forward earnings, which is in line with the Standard & Poor’s 500 Index. That’s not pricey for a stock that my analysis says will double in value from the current level of roughly $22.

Let me show you why by running it through my “five filters” that comprise my tech-investing system.

  • Rule No.1 – Great Companies Have Great Operations: We look for well-run firms. CEO Gerald T. Proehl has nearly 30 years’ experience in the field. He joined Santarus in 1999 after spending 14 years in management roles for global drugmaker Hoechst Marion Roussel Inc. He took Santarus public in 2004. The firm has a 36% profit margin and an 84% return on equity (ROE).
  • Rule No. 2 – Separate the Signal from the Noise: If you really want to create wealth, you have to ignore the market’s many distractions and find companies with rock-solid fundamentals. The stock corrected in August on profit-taking because of an analyst downgrade that followed stellar earnings. But the company is making all the right moves for the stock to reenter its uptrend.
  • Rule No. 3 – Ride the Unstoppable Trends: We look for stocks in red-hot sectors because they offer the best chance for life-changing gains. That’s clearly true in biotech. Because of a steady stream of new drugs approved for sale, the industry has been on fire over the last two years. And the long term looks great as aging Baby Boomers seek to maintain a high quality of life – and benefit from drugs that combat diseases as diverse as cancer, diabetes and arthritis.
  • Rule No. 4 – Focus on Growth: As a rule, companies with the highest growth rates will give you the highest possible stock returns. In the most recent quarter, Santarus grew sales by nearly 90% and operating income by 392%.
  • Rule No. 5 – Target Companies That Can Double Your Money: I believe Santarus will grow earnings per share (EPS) by more than 60% next year from this year’s estimated $1.26. I’m projecting earnings of about $2.90 a share for 2015. If the stock just continues to trade at the current Price/Earnings (P/E) multiple of roughly 16, the share price could hit $46 – for a gain of as much as 104%.

This stock meets all five of our double-your-money criteria. And we believe that the shares have that kind of potential. Given the recent sell-off, expect the shares to trade sideways for a time – making this a stock that’s in search of a catalyst.

That catalyst could come as soon as Nov. 4, when the company is scheduled to report its third-quarter earnings.

But once the stock gets ignited anew, we expect it to head for new highs. The performance will really accelerate once the shares trade consistently above their recently closing high of $27.26.

We’ll keep you posted.

[Editor’s Note: This is the first of several new stock recommendations that I’ve promised to share. In the meantime, I want to continue to hear from you all. In the meantime, let me ask you a couple of questions. First, what are your biggest concerns right now? For the near term? For the long term? Second, what technology trends that we’ve talked about here in recent months continue to hold your interest? I’d really like to hear from you on either or both of these points. And feel free to continue to let me know what’s on your mind below. ]

29 Responses to I Just Got a “Strong Buy” Signal …

  1. mike smith says:

    Am concerned about market selloff with the mess the fed has created with all the money printing and the banks not putting this cash out to the public, tight credit.

  2. jim adler says:

    Seems like almost all the energy stocks are on a tear . Any reason to think this will be in line for a correction ?

  3. Donald W. Sperry says:

    Karl Marx famously taught his disciples, “Take over health care; everything else will follow.” It should be clear, by now at least, that Obama is a Marxist disciple. My biggest concern is that in the coming three years government may be in control of free markets….which means they will not be free markets. Underlying this concern is what this will mean for my (yours, too) individual liberty. That possibility, maybe probability, makes looking at time in a measured way, especially as it relates to investments. The knowledge that totalitarian governments almost always confiscate private money casts a pall over the future of everyone’s investments.

    How do you think it is best to manage these concerns of mine, and I suspect the concerns of others, as well?

  4. sandra Bodner says:

    Thanks Michael-As long as people do not take responsibility for their health through better eating habits there will be a continuing growing need for the “magic” pill to take away all their problems. However, these new developments sound intriguing for the long haul & I bet they are prime candidates for a buyout.

  5. Judy Madden says:

    I’m 75, widowed, athletic horsewoman in good health (will live to 95 or more). Financially uneducated, but have a nest egg with UBS 198 k , take 2000. a month, live on an old farm, no house payments..
    I want to live better on 3000.
    I subscribe to you, but don’t know how to implement .
    What is going to happen to my future in the present economic crisis? Should I take it out and stuff it?
    Judy Madden

    • Sue O'Reilly says:

      Hi Michael,

      Thank you for the great articles you put out. The companies you cover and bring our attention to have tons of value for the active, smart investor. I’m grateful for the guidance.

  6. Stephen Mandell says:

    Michael, I love your recommendations.

    The recommendations on ETFs a week or so ago blew my mind.
    Especially brilliant for a 69 yr olds, “never large enough” portfolio that still needs diversity.

    Question on santarus: You didn’t include how much “skin in the Game” the board of directors and management have. That and their compensation structure would add a lot of surety that they will manage with profits and stockholders in mind and not just sales, for instance.



    • Michael Robinson says:

      Hi Steve,

      Thanks so much for contacting me with your question. And it’s a good one. I don’t have the exact breakdown for each of the officers and directors of Santarus. However, “insiders,” including those with a 5% interest, hold a total of 13% of the outstanding shares. I hope that helps.

      Cheers and best wishes,


  7. Bernard Narcy says:

    I have been following snts for a long time and i keep it on my watch list but i am not so sure it will be a great stock, however, i am optomistic. I look forward to you next update. Thank you.

  8. Duke says:

    I understand the buy side of the equation for these tech stocks, but what about the sell side? There seems to be too much risk in buying at this market level.

    • Michael Robinson says:

      Hi Duke,

      Thanks for contacting me. I appreciate the support. Now then, despite the recent chaos caused by Washington’s budget battles, this doesn’t seem to me to be the time in the bull market to start shorting tech stocks. I’m still long on tech in particular and the market overall. I hope that helps, and good luck with your investing.



    • john j vanleenen says:


  9. fwkc18 says:

    SNTS just hit top of wave 3 in August, and now is inprocess of first leg of a ABC correction waves and most likely will hit the zone of 12.

  10. Jerry Anderson says:

    My #1 Concern is the probable passage of Obamacare which will destroy freedom and liberty in America.
    I’ve just started reading these emails from you. They’re really good! Biotech and technology are big (3D Additive), and I don’t know if you’ve talked about it, but Gold and mining stocks

    • Michael Robinson says:

      Hi Jerry,

      Thanks for the nice comments. Very much appreciated. As regards metals stocks, you make a good point. Many are used in high tech. However, at this moment I’m not tracking them as tech plays. However, if that changes in the near future I’ll be sure to let you know.



  11. l l beene says:

    I have bought several of your recommended stocks and I look forward to your newsletter. thank you very much.

  12. ELISSA JUNG says:



  13. Eileen Melllor says:

    I am 87 yrs. old and am trying to increase the money in my Retirement act.
    I took your advise and bought 100 shares of Santarum. Keep me posted.

  14. Geraldina Howell says:

    First of all Michael, I want to thank you from the bottom of my heart for your program. I am so glad to have signed up. I had doubts at first because I thought that it would be another of the high to pay programs and no results.
    But yours is different! You are sincere in helping us and offering your recommandations and advice to us.

    I have been retired for several years with a small, yes very small portfolio. Social Security fills just a small cavity. I had to educate myself about the stockmarket and about investing. My portfolio is self-directed because I want
    to have full control over it. It’s my responsibility.

    I have always been interested in technology, although I am not a wizard in it.
    It’s difficult to keep up with it but I try. My children get a kick out of me because I
    am a 75 year old grandma and as they say: “full of it”. I let them talk and tease me.

    Health is another area of my interests. Anything in biotech. I gravitate towards
    natural medicine. I want to know what is up in biotech and compare with what I
    know and learn about natural medicine. How is it coming together. I noticed that
    conventional doctors are more and more interested in other healing methods because they see that what they recommend their patients is not always working. I believe that doctors need to see and listen to their patients as individuals who have special needs. We are all different. It makes it so much more cheaper for healthcare.

    We in Indonesia never had an arsenal of medicines in our cabinet. All we had was 1 bottle of aspirine and some bandages. The kids were never sick, Our
    servants healed us with natural potions.
    Our first “physical” was when we immigrated to The Netherlands. All of us were healthy. There we were bombarded with sweets! We as kids could not believe our eyes! All we had in sweets in Indonesia was chomping on a piece of sugar palm.

    I took my first aspirine here in the U.S. at the ripe old age of 25. I got sick from it.
    Michael, I am planning to stay with your program for a long long time. Hope I’ll improve my portfolio. I need all the help I can get. I don’t understand anything about trading (fast) and options. I can only learn that if I had someone sitting next to me and could show me. Like show and tell. That’s my way of learning.
    Hands on and visual.

    You’re probably bored by now reading my comments. Sorry! You asked.



  15. gerald hirsch says:

    with millions of people coming into the “medical fold” your biopicks

    are sure winners…so long as their products are of value…and SNTS
    seems to fit the value model. Thanks

  16. Dennis says:

    Michael, my greatest concern is that there are self-perpetuating elements in place in our national sociopolitical and fiscal management systems that will keep us on our present path to our demise. Management by constituency is the inherent weakness in our democracy. Obama is the master of polarizing his dependent masses in opposition to those who have the financial capability to make constructive change. Buckle your seat belt for a future crash landing…..

  17. EDSR says:

    I brought SNTS back in March of 2012 at $6.7624 and I am a haapy invester with this stock. I agree with your recomendation but I do keep a close wateh on this stock in case I need to bail.

  18. Rick M says:

    SNTS was selling in the low single digits less than 2 years ago. It’s up 7 fold or more. Is it really likely to double?
    I confess I don’t know the company’s history, but just looking at the price history it looks like a huge bubble beginning to pop.

  19. roger says:

    karma swim swami says:
    October 8, 2013 at 5:02 pm

    As a gastroenterologist and an investor, I cannot imagine a more bogus investment than Santarus.
    Santarus’s budesonide for ulcerative colitis is hardly a new or novel drug, and it will NEVER make big inroads in UC treatment. It is a niche item, with realtively few indications.
    Zegerid is a monumental rip-off drug….omeprazole plus bicarbonate at 5 times the price. Its sales are an illusion….they are driven by ABSURDLY aggressive markeeting, when in fact this drug represents no therapeutic improvement over omeprazole alone. Competent MDs are refusing to prescirbe it, and I will not touch it for patients.
    Bromocriptine for DM-II. Give me a break! There is NO ROLE for this drug in treating DM-II, as its effects would represent only a trivial increment in therapeutic efficacy over metformin and sulfonylureas. Santarus’s other drug….extended release metformin??? Help us! This drug has been around for decades, and has such a long half-life that there in no need for an XR form.
    Santarus is a slimy, marketing-oriented pharma house selling drugs that the smart money and big pharma houses will not waste time on. And it is NOT a “biotech” company. Its representatives are abusive, in-your-face thugs that I have banned from my clinic. All of its meds are marketed with the attitude of “Let’s just try to get 5 per cent market share in a huge market.”

  20. Andras Schoffer says:

    What do you think happens to Bio-Tech if the dollar looses its status as a world reserve currency?Physical gold is great but, Bio-Tech should be a close second… Can you elaborate?Andy

  21. Myron Martin says:

    I personally have no interest in DRUGS and have never been to a medical doctor in my adult life (now 75) played hockey until I was 72, my simple premise being that drugs do not produce health, they simply alleviate symptoms of diseases that can only be eliminated by a positive lifestyle change. I don’t want to profit from their ignorance given these are all “lifestyle diseases” that can easily be prevented and cured by simple changes in lifestyle.
    The stocks I would be interested are those that address these problems from a natural dietary supplement and educational basis rather than a poisonous chemical approach that ultimately CAUSES more problems than it solves. If these people refuse to change their lifestyles then they will be SICK and drug dependent for the rest of their lives, so how is that any different from drug pushers on the street getting people hooked and dependent on drugs?

    I am far more interested in technology stocks that better our lives, a sector you might investigate is the fiber optic 4g build out sector for example.

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