Small-cap stocks are some of the most risky investments but they also come with bigger premiums. Obviously, one should not blindly put money into these stocks. The usual line on small-cap stocks is “higher risk, higher return” but investors need to do more research before putting them in portfolio. The question arises here, is to which companies to watch, so here are companies to put on your radars in 2015.
Enphase Energy (ENPH)
Enphase Energy, a small-cap stock engaged in the solar industry that is poised to reap benefit from the increase in demand in residential and small-commercial solar power systems. Currently, the direct-current electricity produced by solar cells cannot be used without converting it into alternating-current form. In the past, systems were dependent on large central inverters that helped convert the electricity from multiple solar panels (DC, or direct current) into power that make it directly usable in wired products. But Enphase was the first to successfully introduce microinverter technology, which is one of the biggest technology shifts in the PV industry to date as can be used to handle the output of a single panel. That helped generate more power as compared to central inverters, making solar power systems more attractive.
Enphase accounts for more than 90% of residential systems that use microinverters. Yet Enphase still has more room to grow, because only about the 40% of the residential market use microinverters. Moreover, Enphase still has not fully targeted the market for commercial systems to mark the success similar to that of the residential arena. Enphase needs to stay ahead of big players as rivalry is cutthroat, and the technology is changing rapidly. Considering a position of strength, Enphase has massive upside potential.
Geron is a key small-cap biotech that worth adding to traders’ watchlist in 2015. It initially was involved in development of stem-cell-based treatments, but it put to an end those operations in 2011 and handed over the long-stalled embryonic stem cell pipeline to BioTime (BTX) subsidiary Asterias Biotherapeutics in 2013. Geron then shifted its focus on developing two cancer drugs: GRN1005 and imetelstat. However, Geron finally discontinued GRN1005 and halted clinical trials testing imetelstat for breast and lung cancer.
But Geron was not ready to lose hope. It remained involved in testing its experimental drug imetelstat in blood disorders. Unfortunately, Imetelstat hit a road block in 2014 when the FDA put its only drug on a full clinical hold over concerns of liver toxicity, causing many investors to abandon the stock.
Yet Geron made a great comeback in November thanks to three huge catalysts: The hold was removed, Geron reported that seven patients (representing 21.2% of all patients in the trial) were identified who had a complete or partial response, and it entered into a licensing agreement with a unit of Johnson & Johnson. Pursuant to the Janssen Biotech Inc deal, Geron, which posted revenue (licenses and royalties) of just $1.3 million last year – was entitled to receive $935 million in potential milestone payments as well as “low double-digit” royalties for imetelstat if it is commercialized.
The stock is just a one-drug play that could get punished on any negative news, but still worth paying attention.
Ophthotech is developing a promising treatment for vision loss. Its lead compound, Fovista, is currently in the late stages of its testing phase to see if it can work as a treatment for age-related macular degeneration, or AMD. That provides a great sign. Lucentis which was developed by Roche’s Genentech unit and Novartis represents about $4 billion each year in total revenue treating AMD and other vision loss conditions such as diabetic macular edema. Regeneron’s Eylea eye drug, which also treats both AMD and DME, is on track to deliver sales of $2.8 billion in the coming year, too. What makes Ophthotech more appealing is that Fovista is being eveluated as a therapy to be used alongside those drugs, rather than instead of them. In midstage clinical trials, Fovista used in combination with Lucentis did a better job at improving vision as compared to Lucentis alone. If Ophthotech can duplicate that performance in phase 3, Fovista could have a big opportunity ahead of it. Novartis seems to agree: It recently entered into an agreement that could be worth as much as $1 billion to Ophthotech, plus royalties, just to secure ex-US Fovista ® sales. Novartis’ optimism is an additional reason to keep an eye on Ophthotech this year.