What’s Moving These Biotech Stocks? – Novo Nordisk (NVO), Peregrine Pharmaceuticals (PPHM)

Buy on Fundamentals & Not Speculation

While Novo sunk lower, large cap stock Sanofi SA (ADR) (NYSE:SNY) rallied 3.5% on news that it was increasing its stake in Regeneron. For the last year many have speculated that it could try and acquire the biotechnology company, and I believe it’s highly likely. However, you should never buy a stock due to the anticipation of an acquisition; it has to be for fundamental reasons. Therefore, buy the stock for its 3.60% yield, its large cash position, and its strong pipeline. If the acquisition occurs then it’s an added bonus.

Conclusion

A stock’s performance during a typical day does not necessarily mean that a stock will break out or trade lower over a period of time. Too often we associate stock performance with fundamental performance, yet it’s the inconsistencies between these two factors that create value. The ability to identify these inconsistencies is a psychological behavior-changing skill that very few investors are able to perfect. In the past, I have talked about this subject in great detail, and have taught investors how to change these tendencies to return large gains. My advice is to become a smart investor, by learning how to logically assess what caused a stock to move compared to its valuation. Then, if there is a distinction in value you are able to capitalize on the value.

The article What’s Moving These Biotech Stocks? originally appeared on Fool.com and is written by Brian Nichols.

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