A fortune in fat cells?

This company seeks cell-based medical therapies that use fat cells instead of embryonic stem cells. Its stock is on a roll.

By Jim Van Meerten Dec 2, 2009 11:01AM
On BarChart recently I screened for the stocks trading above 100,000 shares a day that were hitting the most new highs, eliminating stocks trading below $5 and those that scored below 80% buy on BarChart's technical indicators.
 
I came up with a stock I'd never heard of -- Cytori Therapeutics (CYTX). As I researched it, I found that it is involved with finding cell-based medical therapies. But instead of using embryonic stem cells, it uses fat cells.
 
Plenty of us have plenty of those, and fat cell research might not run into the ethical debate that other stem cell research is receiving.

The stock has hit 14 new highs in the past 20 trading sessions and hit new highs in four of the past five sessions. Price appreciation in the past 65 days has been 100%, and BarChart's technical indicators are hitting 13 out of 13 "buy" signals for a 100% buy rating.

On Wall Street, the five analysts following the stock have four buy recommendations and one underperform rating (which hasn't changed since January 2008.) The analysts' consensus for sales growth is 17.7% with EPS growth of 54.5% expected next year.

I always try to see what some of the other sites think about a stock in case I missed some negative signals. On Wall Street Survivor, Mark's checklist has a Survivor Sentiment rating of 5 of 5, a fundamental rating of 5 of 5 and a technical rating of 5 of 5. The Motley Fool CAPS members think the stock will outperform the market 132 to 20 with the All Stars giving it a 34 to 9 vote. The Wall Street guys Motley Fool follows vote 4 to 0.

This stock passes the three tests I use:
  • The stock is hitting new highs better than 50% of the time and has a BarChart technical indicator rating of better than 80%
  • If Wall Street brokerages are following the stock, they are not trashing it. Why would I buy something if brokerage firms are publishing negative reports and having their brokers call clients soliciting sells? I don't spit in the wind
  • I try to get confirmation from other rating sites that the stock has better than a 50/50 chance to beat the market.

I'm adding Cytori Therapeutics to my Wall Street Survivor public portfolio because it meets my three major criteria. If I can't find a stock that meets my criteria, then I don't buy anything that day.

 

I'm also doing a little trimming my portfolio. I never sell a stock because I found a better stock, but I do sell a stock from my portfolio if it fails to keep trading above its 50 day moving average. This week both Korea Electric Power (KEP) and the Limited Brands (LTD) began trading below their 50 day moving averages, so they were trimmed.

Disclosure: No positions in CYTX at the time of publication.

Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides. Please leave a comment below or email FinancialTides@gmail.com

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