As Market Awaits Fed, I'm Eyeing This Trusty Biotech
Several small-cap stocks that I'm trading reveal earnings this week, and this one reports its first quarter tonight.
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The upside spike in the indexes on news that Treasury Secretary Bessent will begin talks with China on trade this weekend did not last long. Investors understand that this is just the first step in what will likely be a very long and slow process. If there is a mutual agreement to de-escalate tariffs, that should help the market next week, but there will still be tremendous uncertainty with no end in sight.
There is flat action now as investors await the Fed interest rate decision this afternoon. It is extremely likely that there will be no change in interest rates and that Jerome Powell will indicate that there is a high level of economic uncertainty, which requires the Fed to wait for further data. There may be a reaction to some of the subtle implications of Powell’s comments, but the Fed is basically on hold until they have more information about the impact of tariffs on the economy.
There are quite a few small-cap earnings reports hitting this week that I’m actively trading. One of them is ADMA Biologics ADMA, which reports first-quarter earnings on Wednesday night.
The biotechnology sector has a very small bounce after the pounding it suffered on Tuesday. Breadth is good with a fair amount of green. There is some good movement in small caps that are reporting earnings, and I’m focused on trading some of them on news.
I first highlighted ADMA Biologics in this column about a year ago, when it was trading around $6.60. After some substantial volatility, it is now trading around $23.50. I’ve actively traded ADMA many times since my initial buy, and my plan is to continue to hold a core position and trade it aggressively
When you have a position with a gain of 250%, there is often an inclination to lean toward selling and locking in profits, but just because a stock has performed well, that doesn’t mean that it can’t continue to perform well. Rather than becoming more cautious with winners, the better strategy can be increased aggressiveness. That is my plan on ADMA.
I’m not going to place a big bet in front of the report tonight, but I do plan to aggressively trade the reaction to the news. In this market environment, there are very few stocks that gap up and run even on very strong earnings. There is almost always a chance of buying pullbacks and dips, and that is what I’ll do if the report is a good one.
ADMA has recently announced that the FDA has approved a "production yield enhancement process" that should increase production by 20%. This should lead to increased earnings estimates. Management also stated that it has a "strategic advantage" due to its U.S.-based manufacturing, which is not subject to tariffs.
The company is expected to produce earnings per share of $0.71 in 2025 and grow that 39% to $0.99 in 2026. It has a trailing price-to-earnings of 47, which is a little expensive, but with solid reports and increased guidance, it is well justified.
At the time of publication, DePorre was long ADMA.
