If you're a subscriber of my
$100,000 Real-Money Portfolio
, then you know I've been focusing on stocks that have the
potential for serious multi-year gains. By definition, this means
stocks that are out of favor right now. And in the face of a tough
stock
market
this spring, many have them have stayed out of favor.
The portfolio is off roughly 7%, but I'm undeterred because I
know I own a basket of compelling long-term opportunities and
expect my patience to be rewarded -- handsomely.
The key for these stocks is to start delivering on the thesis
I've laid out for them. As an example, I was early to the game with
my pick of battery maker
Exide Technologies (Nasdaq:
XIDE
)
, as the company went on to
offer
another dismal quarter after I bought it. Yet Exide has
begun to turn the corner
, with
shares
beginning the month trading at just $2.30, but since rallying 35%
to above $3. I'm still underwater with this pick, but I expect the
company's
turnaround
efforts to slowly being recognized by more investors, eventually
getting this stock back above $5, where it stood last summer.
The FDA validates this biotech stock
Another pick in portfolio is showing signs of life as well. Shares
of
Ligand Pharmaceuticals (Nasdaq:
LGND
)
are up more than 20% this week on word that the Food & Drug
Administration (FDA) is likely to approve the drug carfilzomib when
it votes on July 27. This is a blood cancer drug being developed by
Onyx Pharmaceuticals. (Nasdaq:
ONXX
), which traded up a hefty 40% on the news.
Why is this good news for Ligand?
Because this drug has been paired with Ligand's captisol
technology, which has clearly boosted the drug's efficacy in
clinical trials. Captisol works to make existing drugs more stable,
leading to more precise dosing, which I discussed
in February
.
As I noted back then, Onyx's "carfilzomib could be on the market a
year from now. The company and the analysts who follow Ligand say
this drug also has the potential to be a blockbuster." Now, it
appears that sales will begin in 2012, not in 2013 as I
anticipated, which means that Ligand's 2.7% royalty streams on
carfilzomib sales will help bring in cash as soon as the third
quarter.
The opportunity for captisol -- in tandem with carfilzomib --
may be even greater than many analysts had been expecting. Onyx
apparently intends to test the drug in higher doses, which would
call for a higher usage of captisol as well. As of now, analysts
expect carfilzomib generate $350 million to $550 million in sales
by 2016, which translates into $10-15 million in annual royalties
for Ligand by then. Onyx is also working with another
captisol-enhanced drug -- Opromozib -- which is currently slated to
enter Phase II clinical trials.
I am equally intrigued by the validation that likely (though not
guaranteed) FDA approval brings to the technology. Ligand is
working with a range of other drug firms, and a rejection might
have led those partners to second-guess their own captisol-related
drug development efforts.
[block:block=16]Risks to Consider:
As is the case with any biotech, it's virtually impossible to
gauge any sort of timeline of future activity. Many of the key
drivers for this stock are out of Ligand's hands and in the hands
of partners. This stock could be dead money for a few quarters, or
we may hear of more stock catalysts in coming months. That's why I
implore investors to think of this and other stocks in my portfolio
as multi-year opportunities.
Obviously, I'd love to secure major gains much sooner, but
these stocks are quite inexpensive precisely because the timing
of an upward move for each of these stocks is unclear. I only
know that, for the most part, these stocks are trading near a
floor in terms of valuation.
Action to Take -->
We're getting close to the start of
earnings season
. In coming weeks, I intend to give you a fresh deep look at the
stocks in my portfolio because I want you to have a clear sense of
what to expect on upcoming conference calls.
For now, please know that everyone one of these stocks still
retains the initial investment thesis that attracted me to them.
More to the point, these stocks could hit a rough patch if the
market takes a fresh tumble. So if you own any of these stocks,
then please stand firm. Long-term patience will be rewarded in many
of these names.
[
Note:
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All prices are as of Thursday, June 21.
|
|
Security (Ticker)
|
Shares
|
Initial Purchase Date
|
Avg.
Purchase Price
|
Recent Price
|
Current Value
|
Buy Under
|
Target
|
Total Return
|
| Ford Motor (
F
) |
1,095.4 |
01/04/12 |
$11.44 |
$10.45 |
$11,447 |
$13 |
$20 |
-8.7% |
| Alcoa (
AA
) |
501.8 |
01/06/12 |
$9.32 |
$8.69 |
$4,360 |
$12 |
$16 |
-7.0% |
| Cree (
CREE
) |
400 |
01/12/12 |
$23.22 |
$24.04 |
$9,616 |
$25 |
$40 |
-0.3% |
| Exide (
XIDE
) |
1,500 |
02/01/12 |
$3.41 |
$3.10 |
$4,643 |
N/A |
N/A |
-9.5% |
| Citigroup (
C
) |
400.1 |
02/06/12 |
$31.68 |
$28.28 |
$11,315 |
$36 |
$50 |
-10.9% |
| Ligand Pharma (LGND) |
350 |
02/13/12 |
$14.87 |
$16.49 |
$5,772 |
$17 |
$30 |
11.0% |
| Marathon Oil (MRO) |
200 |
02/24/12 |
$35.01 |
$24.00 |
$4,833 |
$40 |
N/A |
-31.4% |
| Calgon Carbon(CCC) |
400 |
03/14/12 |
$15.38 |
$13.60 |
$5,440 |
N/A |
N/A |
-11.7% |
| Echelon (ELON) |
1,000 |
03/30/12 |
$4.51 |
$3.34 |
$3,340 |
$7 |
N/A |
-26.0% |
| MDC Partners (MDCA) |
512.8 |
04/09/12 |
$10.57 |
$9.71 |
$4,979 |
N/A |
N/A |
-8.1% |
| Freeport-McMoran (FCX) |
200 |
04/24/12 |
$37.00 |
$33.92 |
$6,784 |
N/A |
N/A |
-8.4% |
| Zoltek (ZOLT) |
600 |
05/11/12 |
$9.16 |
$8.66 |
$5,196 |
$11 |
N/A |
-5.6% |
| Weatherford Industries
(WFT) |
500 |
05/21/12 |
$12.48 |
$12.24 |
$6,120 |
$15 |
N/A |
-2.1% |
| GoodYear (GT) |
600 |
06/08/12 |
$10.32 |
$11.44 |
$6,864 |
N/A |
N/A |
10.7% |
| |
| |
Security
Holdings |
$90,708 |
|
|
| |
$ Cash
Holdings |
$1,732 |
|
|
| |
Total
Return since January 2012* |
$92,440 |
|
-7.6% |
* Individual security
returns are shown as of the date each security was
added to this portfolio. Individual security
gains/losses include both capital gains and all
dividends paid. However, total returns for the
portfolio and the S&P are listed since the
portfolio was funded with $100,000 of real money on
Jan. 4, 2012.
Visit this link
to view a listing of all previously-closed
$100,000 Real-Money Portfolio
holdings. |
|
-- David Sterman
David Sterman does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC owns
shares of XIDE, LGND in one or more if its "real money"
portfolios.