Northstar Neuroscience (NSTR)

Company:	Northstar Neuocience
Web Site:	http://www.northstarneuro.com
Purchase Price:	$1.56
Current Price:	Click Here

Northstar is a biotechnology research company specializing in cortical stimulation therapies for the rehabilitation of stroke victims. The price of their stock tanked after a disappointing clinical trial, dashing the hopes of investors that the company will gain FDA approval in the near future.

This is not unusual in this industry sector: speculators flock to a firm that has a product in trial in hopes that it will succeed and turn a fast profit. Some people even buy the stock on the margin in hopes of making an exponential profit, then have to dump their holdings when the price falls below a certain level, which causes a glut in the market, exaggerating the downward trend.

The key word there is "exaggerating." Failing one trial seldom sinks a firm, and Northstar has sufficient capital (over $80 million in liquid assets, according to the same press release) to recover. '

My plan for this investment is to accumulate shares at its deflated price, cash out enough to cover my costs when the base price recovers, then hold the remainder in expectation that their next trial will create a similar feeding frenzy. I've had mixed success with that tactic in the past, but given their capital reserves, I feel that Northstar is a reasonably good candidate.