Blood in the Street? Go with BLUD

One of the things we like to discuss at Invest With An Edge is how some sectors perform well while others struggle.  You can profit by buying into stronger sectors and avoiding weaker ones.  We’ve built a successful trading strategy based on that simple concept.  You can see this in January, as the major sectors have diverged from one another.  So far in 2009, the Financials have lost -17.7% (even after today’s +12.8% bounce) and Transports have shed -11.4%.  Over the same period, Health Care has climbed +1.0%.

By extension, some stocks will often outperform their larger sector.  The trick is finding which stocks will beat the sector.  A good bet is to go with the strongest stock in that particular sector at the time of your pick.  That way, the company you select at least has the momentum of the sector backing it.  Typically the medical industry performs better than the overall market in a downturn.  This recession has been no different.  That’s why we looked in Health Care for a stock.

As we dug deeper into Health Care, one company surfaced that was worth our attention.  Immucor Inc. (BLUD) is a blood testing equipment manufacturer specializing in pre-transfusion diagnostics – hence the ticker BLUD.  Established in 1982, they brought their first patent to market four years later.  Since then they’ve become a leader in blood diagnostics and blood bank technology.  In this niche field, they became known for developing the first FDA-approved full automation blood typing and antibody screening system.  It may not be very exciting to a layman, but it’s absolutely essential to a safe and efficient blood supply – a crucial component for any Health Care system.

Immucor is a small-cap company.  With a market capitalization around $2 billion, their annual revenues were $281.8 million last fiscal year.  Quarterly year-over-year growth hovered around 7.3%, an impressive clip in this economy.  With over $92 million in cash and $0 debt, Immucor is well positioned to thrive in a difficult market.  Their primary competitor Bio-Rad Laboratories (BIO) is not as concentrated in the blood diagnostics market.  In fact, there is very little competition in this particular field.

On January 7, Immucor released earnings for the quarter ending 11/30/08.  Their fiscal profit rose by 7% based on higher prices and increased global sales.  It was the company’s best quarter ever.  As a result, BLUD shares rose from below $24 to over $29 today – breaking above a peak set in November.  This is a good sign for continued upward momentum. We see strong potential for a $34 stock, possibly higher as investors look for a good place to put cash to work.  Fear is pervasive but not so strong investors can’t see a trending stock and solid fundamentals.  If you’re looking to profit from essential blood testing equipment with little competition, go with BLUD.