Considering his condition, only a brave financial forecaster would tell investors to ignore some advice from Warren Buffet. Still, that’s what Bank of America’s Savita Subramanian is now recommending to investors.
While investment sages often say that the best strategy for retail investors is to buy and hold an index fund that tracks the S&P 500, Subramanian, head of equity and quantitative strategy US ownership at BofA, don’t think that’s the best way forward right now.
She said that mutual index funds are still “overcrowded” and that the best days of large-cap stocks are in the rearview mirror. What investors should really do to maximize returns is lean on small-cap value stocks.
“I think what you want to do in the long run is buy small cap [and] set it and forget it,” said the strategist.
With this in mind, we scoured the TipRanks database and pulled out two names that matched a given profile; both are small-cap members of the Russell 2000 index and both are rated Strong Buy by analyst consensus. Not to mention significant upside potential is on the table here.
RAPT Therapeutics, Inc. (RAPT)
Small cap stocks with big upside potential will naturally lead us to the biotech sector. With a market cap of just under $990 million, RAPT Therapeutics is one such name. The goal of biopharmaceuticals at the clinical stage is a big one; to eliminate inflammatory diseases and cancer in our lifetime. The company intends to do this by leveraging its proprietary drug discovery tool and developing small molecules that target the chemokine receptor CCR4 in both cancer and inflammation.
As with any small biotech company, that’s the key pipeline, and to date, two of the company’s drug candidates have been in clinical development.
On the inflammatory side, the leading candidate is RPT193; In the Phase 1b study in patients with atopic dermatitis, RPT193 showed clinically meaningful improvement in several exploratory endpoints. The drug is currently being tested in an ongoing Phase IIb study, with data readings predicted in 2H23.
The leading cancer drug candidate, FLX475, is being developed for various tumours and has now moved into a two-phase Phase II study, where it is being evaluated as both a single therapy. therapy and combination therapy (with Merck’s Keytruda (pembrolizumab)).
For Guggenheim analyst Yatin Suneja, the bullish case rests primarily on the potential of RPT193. With a solid biological basis, a favorable word-of-mouth profile with promising initial Stage Ib data, and a relatively low likelihood of Phase IIb success (doesn’t have to be as strong as Dupi’s), he writes. we’re optimistic about ‘193’s success in derm allergy (we expect Phase IIb data in 2H23; key value-driving potential catalyst for stocks) and asthma (Stage) IIa starting Q1 2023).”
“If approved,” Suneja continued, “we estimate the highest ~$2 billion in global sales for RPT-193 in atopic dermatitis (~$1.2 billion spent). risk-adjusted), with additional potential for success in asthma and additional Th2 indications for ‘193 and by additional pipeline contents from their discovery program.”
Accordingly, based on the above, Suneja rates RAPT stock as a Buy, while his $55 price target presents a chance for ~90% upside in one year. (To see Suneja’s achievements, click here)
All of Suneja’s colleagues agree with his optimistic thesis; based on the full number of Buys – 7 in total – the stock received a Strong Buy consensus rating. Going by the $43.5 average target, the stocks are set to generate a 12-month ~50% return. (See RAPT . stock forecast)
Kura Cancer Company (KURA)
We’ll stay in the biotech segment for our next small-cap stock. As the name suggests, Kura Oncology is another company that targets cancer therapies; This it does by harnessing the power of precision drugs to selectively target cancer cells. The aim is not only to increase clinical benefit but also to focus on areas where unmet need is greatest.
Pipeline candidates include treatments for solid tumors and blood cancers. The leading candidate is Ziftomenib (KO-539), a potent and selective enzyme inhibitor, currently being evaluated in a Phase 1b clinical study (KOMET-001) in patients with leukemia. Recurrent/refractory acute myeloid (including patients with NPM1 mutations or KMT2A rearrangements).
Tipifarnib, the company’s second candidate, is a potent, selective, and orally bioavailable farnesyl transferase inhibitor (FTI). This drug has been indicated as Breakthrough Therapy for the treatment of HRAS-mutated HNSCC patients. A Phase 1/2 (KURRENT-HN) study of tipifarnib along with the PI3Kα inhibitor alpelisib, to address the larger genetic subset of HNSCC patients, is currently ongoing. A Phase 1 (KURRENT-LUNG) study of tipifarnib in combination with osimertinib in the treatment of EGFR mutated, locally advanced/metastatic, EGFR mutated non-small cell lung cancer was also initiated. .
The company also recently announced that FDA has given full approval to the Investigative New Drugs (IND) application of KO-2806, Kura’s next-generation farnesyl transferase inhibitor (FTI), indicated for the treatment of: advanced solid tumors. The company expects to begin Phase 1 research in the third quarter of 2023.
Kura’s pipeline caught the attention of Bradley Canino of Stifel. While the analyst highlights potential pitfalls ahead, he sees reason to be optimistic.
“We expect ziftomenib to be approved 1 year after Syndax in R/R NPM1m AML, which negatively impacts our initial ziftomenib projections,” Canino said. “However, we believe Kura has the ability to balance pricing and sales over time with the rapid growth of ziftomenib combinations. We see the first combined data, likely in the second half of 2023, when KURA’s stock overhangs on differentiation syndrome and competitive timelines are removed. We remain convinced that KURA’s farnesyl transferase inhibitor (FTI) program is a small part of the valuation process and requires patience, but are optimistic that initial proof of concepts can be generated using selective targeted therapy.
So how does all this translate to investors? Canino rates KURA stock as a Buy, while his $25 price target means a ~81% increase from current levels. (To see Canino’s achievements, click here)
This is another stock that has the full support of the Street; with a total of 6 Buys, the analyst view is that KURA is a Strong Buy. The average goal is an exhilarating goal; at $28.67, this provides the opportunity for a one-year stock price gain of 107%. KURA has a market capitalization of just under $950 million. (See KURA stock forecast)
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Disclaimer: The opinions expressed in this article are those of prominent analysts only. Content is used for informational purposes only. It is very important that you do your own analysis before making any investment.
