Here is 1 short push action that is actually a smart choice to buy and hold
Short presses seem to have become a kind of national pastime. Several heavily exposed stocks have exploded this year, largely because they were targeted by Reddit users looking for opportunities to make big bucks very quickly.
Many of these stocks could have been lucrative to trade as short sellers rushed to hedge their positions. However, most of them are not good choices for long term investors. Their underlying business momentum is still not good despite the rise in their stock prices.
There is at least one notable exception, however. Here is a short term stock that is actually a smart choice to buy and hold for the long term.
Crush it in COVID-19 testing
Lightning Genetics‘ (NASDAQ: FLGT) stocks have more than tripled so far this year. Some of these gains were the result of a short squeeze. Almost 30% of Fulgent’s float was sold short at the end of January.
However, there is also another reason behind the health care stockimpressive performance. Fulgent absolutely crushed it with its COVID-19 testing products and services.
In 2020, Fulgent has moved from its main genetic testing products to focusing on COVID-19 testing. In the third quarter of last year, it generated nearly $ 102 million in revenue, a whopping 880% year-over-year jump. Most of that growth came from its COVID-19 tests.
The company’s reverse transcription polymerase chain reaction (RT-PCR) COVID-19 test has received Emergency Use Clearance (EUA) from the United States Food and Drug Administration (FDA). Fulgent also offers a next-generation sequencing COVID-19 diagnostic test and antibody test for laboratory use only. Doctors and healthcare facilities can even order a three-in-one test to diagnose COVID-19, influenza A and influenza B. Additionally, Fulgent and Picture Genetics have teamed up for a home COVID test.
Will Fulgent’s COVID-19 revenue growth slow? Sure. As more people are vaccinated, COVID-19 test volumes are likely to decrease. However, the new coronavirus will not go away. It will continue to mutate, with the emergence of new strains. Fulgent will likely continue to generate solid revenue from COVID-19 testing for a long time to come.
But wait – there is more
Don’t overlook the rest of Fulgent’s business, however. In the third quarter, the company’s non-COVID revenue climbed 57% quarter over quarter. This is impressive growth in itself.
Fulgent initially focused on genetic testing for rare pediatric diseases. It then extended to screening tests for cardiovascular and neurological disorders and cancer. Today, the company offers a wide range of genomic tests.
There are of course other players in the genomic testing market. How can Fulgent win? The company has two main competitive advantages. First, the flexibility of its technology allows Fulgent to quickly launch new products and services. Second, Fulgent benefits from a market leading cost structure.
Businesses typically beat their competition by being better, faster, or cheaper. Fulgent ticks at least two of those boxes.
The long and the short
It’s possible (and perhaps even likely) that Fulgent’s share price will pull back significantly this year as the euphoria of the COVID boom and short squeeze wears off. Some Wall Street analysts practically hate the stock, with the average analyst price only targeting just over half of Fulgent’s current share price.
But Fulgent’s long-term potential is compelling. The global genetic testing market is expected to reach $ 10 billion by 2022. This is just the start. Expect a rise in consumer-focused genetic testing in the coming years.
Even with the stock’s huge surge this year, Fulgent Genetics’ market cap is less than $ 4 billion. Considering the company’s total addressable market and ability to execute, I think Fulgent could be worth a lot more by the end of this decade.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.