The Motley Fool

UK investors are buying Sareum Holdings. Should I?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Middle age senior woman sitting at the table at home working using computer laptop clueless and confused expression with arms and hands raised.
Image source: Getty Images

When a market minnow attracts more buying interest than heavily-traded FTSE 100 shares such as Lloyds Bank, Rolls Royce and International Consolidated Holdings, it’s worth paying attention. Today, I’m looking at one such stock, Sareum Holdings (LSE: SAR).

Last week, Sareum was the second most popular buy on share-dealing platform Hargreaves Lansdown. Should I be buying its stock too?

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Wait – what is Sareum?

Sareum is a Cambridge-based drug developer focused on tackling cancers and autoimmune diseases. Its most advanced programme (Chk1) is currently in Phase 2 of clinical trials. However, it’s Sareum’s other development programmes (TYK2/JAK1) that appear to have got investors in a frenzy.

Last week, the company announced that it had raised £1,470,000 (before expenses) by issuing shares at a price of 4.9p. Interestingly, this money has come from just one “high net worth individual” who had already invested in Sareum. 

This money will be used to advance the aforementioned TYK2/JAK1 programmes. Right now, the company has the goal of completing its preclinical studies for its SDC-1801 inhibitor drug in Q3 of its financial year. From here, clinical trials — including the potential application of its inhibitors to Covid -19 — will commence. 

So, time to buy the shares?

Not so fast. There can be no doubt that Sareum has been a wonderful investment in recent times. Anyone buying a month ago would now be sitting on a gain of roughly 175%. The result is even better for those who’ve been holding for the last year (1,150%). And yes, some positive data in the coming months could certainly see the shares soar even higher in 2021.

However, there’s are also reasons for thinking Sareum may have peaked.

Drug development is notoriously risky from an investing perspective. For every drug that succeeds, thousands do not. Delays are also very common. Indeed, Sareum has already stated that the completion of preclinical studies is “subject to successful progress”. Should the wait be longer than expected, some holders will inevitably jump ship. Moreover, clinical trials aren’t cheap and management has already stated that they are “subject to funding“. 

I’m also inclined to take a cue from what’s been seen in other Covid-related stocks over the past year. One example of this would be hyper-popular diagnostics firm Novacyt.

Having multi-bagged over the second half of 2020, Novacyt’s momentum has since reversed in a spectacular fashion. Priced at 1,190p a pop in January, the stock closed at just under 391p last Friday. Sure, I’m arguably comparing apples with oranges here. Even so, the on-off ‘coronavirus buzz’ could lead Sareum’s share to behave in a similar manner. 

Beware the dip

While I congratulate anyone already holding Sareum, the recent spike seen in its share price would make me nervous if I were a potential investor. It’s particularly worth highlighting that the company was also the third most popular sell by Hargreaves Lansdown clients last week. After such a strong run, some profit-taking is inevitable. However, this suggests that the Sareum’s near-term performance is firmly in the hands of traders, rather than long-term investors. 

At times like this, I remind myself that no share price rises in a straight line. So, if I were tempted to buy Sareum today, I’d only consider investing money I could afford to lose. There’s no shortage of promising small-cap stocks out there.

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.