Billionaire Ken Griffin pulls the trigger for these 2 penny stocks
Risk and return are the yin and yang of stock trading, the two opposing but essential components of any market success. And there are no stocks that better encapsulate both sides – the risk factors and the earnings potential – than penny stocks. These stocks, priced below $ 5 per share, typically offer significant upside potential. Even a small increase in the share price – just a few cents – quickly leads to a high return. Of course, the risk is real too; Not every penny stick will show these types of profits, some of them are cheap for a reason, and not every reason is good. So how are investors supposed to differentiate between the long-term winners and those who are about to do so? Tracking the activity of the investing titans is one strategy. Hedge fund manager Ken Griffin, head of investment firm Citadel, is one of those titans who turned his college trading – from a PC in his dormitory – into a billion-dollar market giant. One look at Griffin’s performance during the coronavirus crisis shows how successful he can be. Last March, when Corona pushed the bottom off the markets, Griffin’s Citadel was still posting a positive net return of 1.7%. And for the full year, Citadel’s sales were $ 6.7 billion, nearly double its previous high in 2018. When we took Griffin inspiration, we took a closer look at two penny stocks. Griffin’s Citadel has made progress recently. Using TipRanks’ database to find out what the analyst community had to say, we learned that every ticker has buy ratings and huge upside potential. Abeona Therapeutics (ABEO) We’re starting Abeona Therapeutics, a clinical-stage biopharmaceutical company focused on gene and cell therapy. This is a cutting-edge area that uses the latest genomic technology to treat genetic diseases by inserting corrected copies of DNA directly into affected cells. Abeona has seven drug candidates in the pipeline, with EB-101 and ABO-102 being the furthest away and most interesting for investors. EB-101 is scheduled to begin a Phase III study for the treatment of recessive dystrophic epidermolysis bullosa (RDEB). This is a connective tissue disorder that makes people vulnerable to severe skin lesions and wounds. The cause is a genetic defect in which patients are unable to produce the collagen necessary to secure the skin’s layers. If approved, EB-101 would be the first and only treatment available for RDEB. During treatment, the affected gene and drug are transplanted into the patient’s skin cells, which are then transplanted into the affected areas of the skin themselves. In early studies, the drug was well tolerated by patients who showed marked improvement up to 2 years after treatment. Patients are now being enrolled in the phase III study. The furthest drug candidate, ABO-102, is in a Phase I / II trial for the treatment of Sanfilippo syndrome, a deadly disease in early childhood. The syndrome is currently untreatable except through supportive measures, and affected children typically survive by the age of 15. ABO-102 is a gene therapy drug that is given through a single IV infusion. It delivers working copies of the affected gene to the child’s central nervous system so that the body can naturally correct the enzyme deficiency behind the disease. Both drug candidates have received orphan drug designation in the USA and Europe, which provides government support for their development. In addition, they have received FDA certification for rare teething problems. Abeona’s drug pipeline and $ 2.22 share price received rave reviews from the pros on Wall Street. This is Griffin’s demeanor. Citadel increased its stake in the company a whopping 181% and purchased 1.846 million shares in the fourth quarter, now valued at $ 4.06 million. 5-star analyst Ram Selvaraju from HC Wainwright also counts himself as a fan. Selvaraju recently published two comments on ABEO that focus on the potential of EB-101 and ABO-102. Regarding the first, the analyst notes that, after the successful completion of the FDA meeting, Abeona will continue all necessary steps to enroll the next patient in the VIITAL trial and expects the registration to be completed in 2021. The resulting Feedback was a good sign for Abeona as the agency appears to be in agreement with the company’s study design and statistical analysis plan for VIITAL [Phase III] Study… ”Selvaraju turned to ABO-102 and said,“ From our point of view these data are very fascinating and it is worth looking into whether they can be confirmed in a larger patient cohort. In our view, maintaining neurocognitive development in young children with MPS IIIA is probably the most important measure of effectiveness that will resonate with regulators. “In line with his optimistic assessment, Selvaraju values ABEO with a Buy and a price target of USD 8. Should his thesis prevail, a potential twelve-month jump of ~ 264% could be in sight. (To view Selvaraju’s track record, click here.) A total of 2 purchases and no holds or sells have been awarded in the past three months. Hence, the analyst consensus is a moderate buy. With an average target price of USD 6.50, the upside potential is ~ 188%. (See ABEO stock analysis on TipRanks) Mereo Biopharma (MREO) The second stock we’re looking at, Mereo, is another biopharma company focused on rare diseases. Mereo has a large and diverse pipeline with six drug candidates in various stages of development. The company’s research programs include the treatment of solid tumor diseases, ovarian cancer and chronic obstructive pulmonary diseases. Griffin is among those who have high hopes for this name in healthcare. Griffins Citadel purchased 4.097 million shares for $ 16.3 million in the fourth quarter. The biggest news for Mereo was the announcement of a collaboration and licensing agreement with the Californian company Ultragenyx to further develop setrusumab, a candidate that is currently being tested for the treatment of osteogenesis imperfecta or fragile bone disease. This incurable condition is usually treated with lifestyle changes and exercise. However, setrusumab has shown in phase 2b studies that it can lead to a dose-dependent increase in bone formation in affected adults. Joseph Schwartz, analyst at Leerink, writes about the partnership between Mereo and Ultragenyx: “Although the RARE / MREO deal was unexpected, we are not surprised to hear that MREO has been looking for a partner and RARE has extensive experience in development and the introduction of successful bone agents has a prospect [the] Announced as a win-win for RARE and MREO, as both could complement each other’s strengths to bring setrusumab to market. “Given these comments, Schwartz rates MREO stock as a buy and its target price of $ 8 suggests it is up 103% for a year. (To see Schwartz’s track record, click here.) Some stocks are flying under the radar, and MREO is one of them. MREO’s is the only current analyst rating of this company and extremely positive. (See MREO stock analysis on TipRanks.) To find great ideas for trading penny stocks at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that brings together all of the insights into TipRanks stocks. Disclaimer: The opinions expressed in this article are solely those of the analysts presented. The content is intended to be used for informational purposes only. It is very important that you do your own analysis before making any investment.