Monday 8 February 2021

OCGN And GOVX Are Two COVID Vaccine Plays On The Rise, Warrants Offer The Best Upside

On December 22, we issued a bullish report on Ocugen, Inc. (OCGN) called "Why Ocugen Is Set To Soar Again Tomorrow". OCGN closed at $0.81 that day after the company announced that it is teaming up with Bharat Biotech to Co-Develop COVAXIN™, a Whole-Virion Inactivated COVID-19 Vaccine, for the US Market. It tripled in price to $15.81 on Monday, representing nearly a 20x gain in less than two months from our call. Over the weekend, we named GeoVax Labs, Inc. (GOVX) as our latest COVID vaccine pick in "With OCGN On The Rise, GOVX Is The Next COVID Vaccine Stock Ready To Soar".  It rose 35% to $7.48 on Monday. We are up to 948 followers despite not giving out a lot of alerts, a fact that we think is indicative of a successful, diligent and prudent stock picking history. If you like our picks you can follow our blog by clicking the follow button on the top of the left hand panel as well as follow our Small Caps, Big Gains blog where we put up our Canadian picks. You can also follow us on Twitter @StockTradePicks which has over 4,700 followers.

GOVX has a ton of potential since it has only a $32 million market cap even after today's rise. For context, OCGN has a $2.5 billion market cap now and had a $131 million market cap when we called it. OCGN obviously is more advanced with a deal to bring an existing vaccine to the market while GOVX is in the development phase. But GOVX has received NIH funding and is working on a one shot vaccine that's effective against multiple strains with fewer side effects. We think that a market cap in excess of $100 million to $250 million is fair for GOVX given comparables. Especially Vaxart, Inc. (VXRT), which is trading at a billion dollar market cap despite a recent setback in its COVID vaccine results.

As GOVX is on the rise, investors should be aware of the warrants under the symbol GOVXW, which offer tremendous upside right now. The warrants have an exercise price of $5.00 and expire in 2025. Although the stock closed at $7.48, the warrants closed at $2.28, making them trade below their intrinsic value and providing an arbitrage opportunity. At any time the variance between the warrants and the stock is greater than $5.00, investors should sell the stock and buy the warrants and pocket the difference. 

Even when the warrants trade above their intrinsic value, they are still worth it to buy. Let's say that an investor has a chance to buy 10,000 shares of stock for $75,000 or 10,000 warrants for $25,000, that investor is risking $50,000 less money for the exact same upside when buying the warrants. If the stock goes to $20, the warrants will be worth $15 and the profit is $125,000 either way. But the big difference is that the percentage gain from $2.50 to $15 is 500% versus 167% on the stock from $7.50 to $20. Conversely, if the stock was to drop back to its low of $2.50, the stock investor would lose $50,000. The warrant investor's loss is capped at $25,000. Even paying $30,000 for 10,000 warrants is worth it given the scenarios, but it looks like right now the warrants can be had for little to no time value above the intrinsic value. 

Disclosure: We are long GOVX, GOVXW

What's next for microcap stocks? TradeMiner identifies seasonal trends and market cycles, the Penny Stock Prophet and Microcap Millionaires finds the next big small cap plays in various industries while Addicted to Profits makes trades from a Canadian perspective.

There are also some good books available on microcap stocks and day trading such as:

Mastering Microcaps: Strategies, Trends, and Stock Selection (Bloomberg Professional Library)

The Little Black Book of Microcap Investing: Beat the Market with NASDAQ/AMEX Microcap Stocks, OTCBB Penny Stocks, and Pink Sheet Stocks

Microcap Magic: Why The Biggest Returns Are In Stocks You've Never Heard Of

How to Day Trade for a Living: A Beginner’s Guide to Trading Tools and Tactics, Money Management, Discipline and Trading Psychology

How to Day Trade: A Detailed Guide to Day Trading Strategies, Risk Management, and Trader Psychology

A Beginner's Guide to Day Trading Online (2nd edition)

Stock Investing for Beginners: Marijuana Stocks


Here are some other good stock market resources. This includes technical analysis and day trading, dividend stock investing, gold and commodities, sector rotation, options trading and microcap trading strategies:

The dividend stock report from dividendstocksonline.com

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