TARO manufactures, markets and distributes OTC and prescription pharmaceuticals primarily in the Unites States,Canada and Israel, offering topical corticosteroids and antifungal cream products. For the FY ended 12/31/00, net sales rose 24% to $103.8M. Net income increased 81% to $10M. Revenues reflect the introduction of new products. Earnings also benefitted from increases in gross margins due to improved manufacturing efficiencies.

April 10, 2001

Taro Pharmaceutical markets and distributes prescription and OTC pharmaceutical products. The company’s main focus has been the off-patent dermatological market, but recent FDA approval on its generic drug for cardiac arrhythmias has got investors on a buying spree. Also adding interest to the rally has been the potential for the company to split its stock. Currently, TARO has 10.71 million shares outstanding and 50 million authorized, well enough for a 2:1 stock split. Although the company has never split its stock before, the recent run to all time highs looks promising. Moving to the chart, the stock is clearly on a breakout now that higher levels are being confirmed by an expansion in volume. On Tuesday, TARO soared to a new 52-week high of $50.50 on good volume of 203,400 shares traded. A move above this level in the upcoming week could be a good signal for traders to place their orders. Support will likely reside at the 5-dma of 47.64. TARO’s strong uptrend is bolstered by good technical readings in the MACD and OBV indicators, which suggests that a sustainable move is possible. We’ll look for potential entry points to arise when TARO pushes though $50.50 on daily volume above the three-month average of 144,400 shares. We’ll set our stops at $44 for downside protection.

Picked on April 10th@ $49.45
Change since picked 0.00
Stop Loss @ $44.00

April 19, 2001

The ongoing growth in managed care organizations, which typically are heavy buyers of generic drugs, is another potential catalyst that is keeping TARO shares on the rise. As for the chart, after clearing resistance set back on 4/11/01, shares continued rallying today. At this point, TARO shares look free to run. We can, however, expect some resistance to come at $55, but after this test we don’t see the next challenge coming until $60. Looking at the short-term technicals, the MACD is continuing a sharp uptrend, suggesting higher prices could be in the works. The stochastics are a bit rich at 95, but with TARO’s extended uptrend, this is a normal occurrence. We want to point out that Wall Street is certainly staying bullish on the stock, as all three firms following the stock hold a Buy rating. As far as an entry point is concerned, conservative traders may want to wait for a close above $55 on volume above the three-month ADV of 146,800 shares. Given TARO’s extended uptrend, we are now recommending that stops be raised to $51.

Picked on April 10th@ $49.45
Change since picked +4.20
Stop Loss @ $51.00

April 17, 2001

With a record $35 billion in sales of branded drugs going off patent over the next five years, the market for generic drugs is expected to rise sharply. This should be a major benefit for TARO, which derives nearly half of last year’s revenues from its generic products. Turning to the chart, TARO shares gave a sharp bounce off the 10-dma of $48.37 in Tuesday’s session and advanced as high as $50.50 before ending the day at $49. Volume fell significantly under the three-month average as 90,300 shares were traded. Light volume has been an underlying theme over the past several trading days, which is what we like to see during a consolidation. The technical indicators are also pointing to higher levels, as the MACD and Money Flow continue to remain strong. We want to note that resistance has started to form at the $50 mark and will hold our initial barrier. Any moves higher over the next few days will likely trigger a bullish crossover in the stochastic. New positions could be considered if the stock breaks through and closes above $50 on volume that puts the stock on track to meet or exceed the three-month ADV of 148,181 shares by days end. Our stops will remain at $44.00 to keep losses in check.

Picked on April 10th@ $49.45
Change since picked –0.45
Stop Loss @ $44.00

April 12, 2001

Prospects for Taro have become noticeably brighter as of late. Over the past year, the company received seven FDA approvals and saw annual revenues exceed the $100 million mark for the first time ever. In Thursday trading, shares of TARO did give back a little ground from Wednesday’s sharp rally and closed the session at $50.65, down 14 cents. What was encouraging, though, was the lightness of volume. The stock normally logs around 146,500 shares based on a three-month average, but Thursday’s decline came on volume of just 59,700 shares. This is a clear indication of a lack of sellers at present levels. Bearing this in mind, we feel there’s a good chance the stock will continue to exhibit more upside momentum. To that end, we’ll look for initial resistance to come at the $52.10 mark (all-time high). A potentially harder barrier will follow at $55. Support will come at the half-century mark, with an additional base at the 4/10 intra-day low of $48.24, bolstered by the 10-dma of $47.80. Traders could consider entry points when TARO shares bounce off support or break above $52.10 on volume of at least 75,000 shares traded by noon. We’ll continue to hold a firm stop at $44.

Picked on April 10th@ $49.45
Change since picked +1.20
Stop Loss @ $44.00