SUPN – New long position

Ticker – SUPN

Purchase date – 5/23

Price – $34.54

Company – Supernus is a specialty pharma company focused on developing and commercializing products for the treatment of central nervous system diseases.

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Below is an in-depth review of SUPN and why we recently took a long position in this stock.   One study we like to do is run specific watch lists by sector and note where companies rank and if any particular name stands out with an abnormally high overall score or if any name has drastically moved up in ranks from previous weeks.

Our current healthcare watch list is below

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For this run, the settings were set to classic and weights/targets were set to healthcare. Since each sector acts differently from each other, we needed to create different investor settings.  I wont go into much detail here but we spent a lot of time back testing each ratio performance per sector/industry to really improve this feature.

SUPN qualified as a top idea as it scored much higher than any other name in this run while also moving up the ranks in recent weeks.  When we see a name act like that, we start to get comfortable looking into taking a position.

Below you will see our summary page snapshot showing the averages of each category and some key ratios we like to see at a glance.  SUPN scored 13 bps higher than any other name which is rare when you understand what the other names went through to even make it to this point.  While it does everything from decent to great, I am going to highlight some of its strengths.

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First off the fundamentals (level 1) were very strong within a very strong group.   Some areas of strength were its growth rate, management and how it ran through the avg, basic and target areas.

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The technicals (level 2) were also aligned for an entry as all average indicators were on a buy signal.   RSI was slightly bearish but that just means it was close to 70 which by itself really doesn’t mean anything as a standalone.

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Level 5 is our rules section which has well over 30 rules.  Below is a small example of some of the grades we gave it.    Debt, PEG, Margins, Revenue and ROE all were very strong and only some weaknesses were insider ownership vs institutions along with forward growth which could become a concern but nothing short-term.  A score of 63% is very strong when you consider the average score of the 24 compared was only 55%

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The growth score (level 6) was also decent.  While it wasnt the best, it was still top 10 and the yearly and quarterly composite scores are very healthy for an investment and or trade

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Part of our valuation score (level 3) takes into consideration fair value and long term metrics.  SUPN stood out here, with a margin of safety just over 200% and a LTV at $106.   The lower and upper boundarys had targets of $46 and $50 respectively which means 32-44% upside.

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Now that we really understand this name is a clear leader in this sector run, we had to get down to its chart and just see where price has been and potentially could go. We thought this rising channel could really get going and so far we were right.

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On top of all the bullishness, the yearly return map was showing some really strong seasonality.  This combined with all the data above really got us excited about some of the short term potential.

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Actually, June is its strongest month to date and we are quickly starting to see why.

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I understand some of this might be confusing because all of the underneath calculations are priortiery and not shared with this or really any review, but understand we consider everything to really lower the risk when entering a trade.  We are currently +12% on this purchase since last week.

 

 

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