Two things are happening right now that investors should have on their radars.
The first is that some microcap stocks are doing very well. This is evidenced in part by the iShares Microcap ETF (IWC) gaining 18.85% and the First Trust Dow Jones Select Microcap Index Fund (FDM) gaining 34.72% in 2021.
The second thing investors should be aware of is that biotechnology stocks, in particular, are producing exciting opportunities within the microcap market.
What is Happening in Biotech?
The field of biotechnology has entered something of a “golden age.” New treatment advancements are coming quickly, creating opportunities for investors.
In particular, companies creating new treatments and preventions for diseases are standing out. The companies that are seeing big increases in value often have strong drug candidate pipelines, and many already have popular drugs on the market. On the other hand, companies without a strong pipeline could see their value tank, so that is something to be cautious of.
Of Course, Investing in Microcap Stocks Comes With Risk …
Many investors shy away from putting their money into microcap companies due to their volatility.
There is typically less information available about these companies, and they also may be more susceptible to external pressures, which can often result in large price swings.
For those investors interested in microcap stocks, Ikena Oncology, Inc. (NASDAQ:IKNA) is an excellent example of the positives happening in the microcap market.
Ikena, a clinical-stage biotechnology company, develops patient-directed, biomarker-driven therapies for cancer patients.
Among the treatments in its pipeline are:
- IK-930, an oral small-molecule inhibitor of the transcriptional enhanced associate domain
- IK-175, an oral inhibitor of aryl hydrocarbon receptor
Strong Earnings Report Spurs Price Increase
On the back of that strong pipeline, Ikena released its fourth-quarter earnings report in March of this year. The report showed that Ikena beat analyst estimates for earnings per share by $0.59 and revenue by $15 million.
Those results prompted Credit Suisse Analyst Judah Frommer to issue an Outperform rating for Ikena. Frommer’s ultimate price target for the company is $24.
Ikena was trading at 4.08 on April 7. The company also has a market cap of 147.55 million.
Hedge Funds Are Getting Interested
Another factor driving investor interest in Ikena is the fact that eight hedge funds are now holders of the stock, including OrbiMed Advisors, which owns 2.9 million shares worth more than $36 million USD.
All of these reasons show why microcap stocks in general, and Ikena more specifically, may deserve closer inspection from more investors.
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