We recently made a list of Piper Sandler’s Top Technical Stock Picks: 20 Best Stocks. In this piece, we will look at where Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) ranks among the list of stocks with improving technical rating according to Piper Sandler.
The start of October has seen another wild swing for markets. September’s second half saw Wall Street rejoice as the Federal Reserve delivered its highly anticipated interest rate cut. After an initial muted response from markets predicated on worries that the jumbo 50 basis point rate cut might have been due to economic worries, markets soared. Between the day the rate cut was announced and at the September end, the flagship S&P index and the broader NASDAQ index gained 2.6% and 3.5%, respectively.
However, trading during the first four days of October paints a different picture. From October 1st to the 4th, the flagship S&P shed 0.20% and the broader NASDAQ ended up losing 0.28%. This bearishness was fueled by the Labor Department’s JOLTS data which showed that job openings in America grew in September. For markets, this meant that the Fed now had more room to keep rates higher for longer, and investors started to price out a 50 basis point cut in November. Additionally, job openings grew by 8.040 million and beat economist estimates by nearly half a million openings. Investors also dealt with a tough global geopolitical environment after tensions continued to escalate in the Middle East following Iran’s attacks on Israel.
After the JOLTS data, October 4th came with more good news for investors who were worried about the economy. JOLTS was followed by the highly anticipated nonfarm payrolls data, which further dented hopes for interest rate cuts. This data showed that unemployment in America had fallen to 4.1% and the nonfarm payrolls had jumped by 254,000 which was the highest figure for the preceding six months. Economists had predicted the payrolls to grow by 140,000, so safe to say, the latest data blew these out of the park.
On the surface, the immediate implications of this would seem to imply that as rates can now stay higher for longer than investors had expected, stocks should fall. However, on the day of the nonfarm payroll data release, the flagship S&P and the broader NASDAQ gained 0.90% and 1.22% higher, respectively. Sounds strange, right? Well, some fresh commentary from Baird Wealth Management’s investment strategy analyst Ross Mayfield can provide some insights. He believes that the latest data set was “not the perfect report, but that’s kind of what you need for a soft landing anyways. Some broad based jobs added, but nothing too concerning for the Fed, right, in the form of reaccelerating wage inflation. So kind of a perfect Goldilocks soft landing report.” However, Mayfield adds that the nonfarm jobs report gives the Fed “reason to only go 25 basis points in November, probably 25 in December as well.” Yet, the somewhat ‘still warm’ labor market doesn’t take rate cuts completely off the table. According to the Baird analyst, “the Fed is trying to get back to neutral policy” and subsequently 25 basis points should be the way to go for the rest of the year.
Brad Bernstein, managing director at UBS Private Wealth Management, believes that some stock categories are better suited for the rapidly evolving environment that we’re facing right now. In an interview a day before the nonfarm data release, the Bernstein executive shared that financials, technology, and utility stocks have seen strong performance this year. Starting from financials, the analyst outlined that due to the low interest rates, “the improving yield curve for their balance sheet and what that means for their ability to lend at higher rates and pay cheaper rates on cash savings.”
As for utility stocks, Bernstein outlined that these have benefited from the Fed’s rate cut cycle, adding that small cap stocks have started to shine in the third quarter. According to him, “small cap has worked well in the last few months as well. So one interesting take away from the third quarter is for the first time the equal weight S&P outperformed the S&P. And small cap outperformed the S&P. So we’re seeing a real broadening out of markets and diversified portfolios, balanced portfolios look fantastic for the next 12 to 24 months in our opinion.” For more details on what investment bank Goldman Sachs believes about this bifurcation in the stock market, be sure to check out Goldman Sachs’ Best Hedge Fund Stock Picks: Top 20 Stocks.
The Baird analyst shared his take on the stock market after the nonfarm payroll data release. As per Mayfield, the optimistic economic outlook stemming from the labor market means that cyclical stocks might be worth their while (we covered some cyclical stocks as part of our coverage of 10 Best Consumer Cyclical Stocks To Buy Now). When building a portfolio, the analyst believes that “on the equity side, I really want to do anything but get too defensive here, you know, we have soft landing as our base case we think economic growth is strong, earnings are on the rise.”
These shifts in the stock market, which appear to be in their early stages, have also impacted analyst earnings estimates. According to FactSet, between June 30th to September 30th, the bottom up EPS estimate for Q3 has been revised downwards by 3.9%. This is a striking figure since FactSet adds that average downward revisions for the previous 20, 40, 60, and 80 quarters were 3.3%, 3.3%, 3.2%, and 4.1%, respectively. Consequently, except for the 80 quarter revisions, the current revisions have surpassed all estimates. Sector wise, only information technology Q3 EPS estimates have been revised upwards (by 0.3%) while all others have seen downward revisions. Within these, energy, materials, and industrial lead the pack with their EPS revised downwards by 19.2%, 9.4%, and 8.5%, respectively.
Our Methodology
To make our list of Piper Sandler’s top technical stock picks, we relied on the firm’s list of stocks with improving technical grade ratings lower than or at 19 as of the third week of August. These stocks had ratings higher than or at 20 in the preceding five weeks. The stocks were ranked by the number of hedge fund investors that had bought the shares during Q2 2024.
For these stocks, we also mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
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Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY)
Number of Hedge Fund Holders In Q2 2024: 25
Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) is a biotechnology company focusing on developing drugs for neural disorders. It is a revenue generating and profitable biotechnology firm with trailing twelve month revenue and net income sitting at $656 million and $115 million, respectively. However, unlike diversified biotechnology companies, Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY)’s sole commercial drug is its narcolepsy medicine WAKIX. Consequently, Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY)’s hypothesis is substantially dependent on this treatment, and while it holds key patents that will expire in 2029 and 2030, any competitors that offer better outcomes could lead to headwinds for the shares. This fact also increases the role of Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY)’s drug pipeline, and as of H2 2024, the firm has four drugs that could enter phase three trials by 2024 end. These include treatments that target sleep disorders and a neurodevelopmental disorder.
Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY)’s management shared important details about its pipeline during the Q2 2024 earnings call:
“Moving on to Pitolisant [indiscernible] resistant on GR program. We are on track to initiate the dosing optimization study in the fourth quarter of this year and a pivotal bioequivalent study in the first quarter of 2025 with PADUFA 2026. For the Idiopathic Hypersomnia or IH program, we are on track to submit an sNDA in the fourth quarter of this year. The submission will be based on the totality of the data generated from the EPI [ph] study, including data from the ongoing long-term extension study, which strongly support pitolisant efficacy in patients with IH. We have [indiscernible] defined other supporting information that will be included in the sNDA, including real-world evidence from pitolisant use in Idiopathic Hypersomnia in Europe to further strengthen our submission.
We are optimistic and remain committed in bringing the new treatment option to patients living with IH In our neuro behavioral franchise, we remain on track to report top-line data from the Phase 3 reconnect registrational trial of ZYN002 in Fragile X syndrome in mid-2025. In the rare epilepsy franchise, patient enrollment continues in the EPX-100 Phase 3 ARGUS trial for Dravet Syndrome with the top end data expected in 2026. We are also preparing to initiate a Phase 3 study in LGS another rare and severe developmental epileptic encephalopathy with high unmet medical need later this year. In summary, we have made significant progress in advancing our late-stage pipeline across three distinct franchises. If successful, these programs could result in at least one new product or indication launch each year over the next five years, along with the potential to help hundreds of thousands of patients across all the raise neurological disorders we are investigating.”
Overall HRMY ranks 17th on our list of the stocks with improving technical ratings according to Piper Sandler. While we acknowledge the potential of HRMY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HRMY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey. All investment decisions should be made after consulting a qualified professional.