This year has been one for the record books, with the
(INDEXDJX:.DJI) and the
(INDEXSP:.INX) setting new highs, the Federal Reserve continuing
quantitative easing, and the government shutdown and the debt
ceiling debate interrupting regular spending habits -- all of which
affected stock market action. As the year winds down, Minyanville
is looking forward to 2014. Of course, the markets are
unpredictable, but we've put our heads together to choose 10 stocks
that will be worth paying attention to in the coming year.
Microsoft: The Once (and Future?) King of Tech Is Getting a
New CEO and a Fresh Start
By Michael Comeau
) announced that controversial CEO Steve Ballmer would step down
within 12 months. And so Microsoft will have just its third CEO
since its founding in 1975.
The challenges are obvious: Microsoft has to A) gain a bigger
foothold within the mobile computing industry, B) keep the legacy
PC industry afloat as long as possible, and C) build a better brand
The latter objective may be the most important, and most
Too many consumers view Microsoft with disdain, or worse, apathy,
because of past product quality issues and poor product planning.
The Xbox brand has a large and loyal following, but gaming has
never been a serious profit center for Microsoft.
With a fresh start under a new leader from the outside, will
consumers view Microsoft any differently?
We're about to find out.
Michael Comeau edits Minyanville's
Buzz & Banter
and is also a regular columnist on Minyanville.com, focusing on
and consumer stocks. Read more of his work for Minyanville,
Exelixis: An Admittedly Unconventional Biotechnology
By David Miller
) is an admittedly unconventional pick from the biotech space. It's
not one of the new IPO class of billion-dollar, barely Phase I
companies. It's not unknown and certainly not overloved, though I
think it's been overlooked.
The company's only focus is advancing Cometriq (aka cabozantinib).
Already on the market for the treatment of relatively uncommon
medullary thyroid cancer, Exelixis is seeking broader approvals in
the treatment last-stage prostate cancer, second-line kidney
cancer, and second-line liver cancer. There are positive Phase II
data on the drug in these indications, so the clinical trial risk
isn't as high as other companies. So why is the company overlooked?
The first trials in the prostate cancer space are a bit of a
head-scratcher to some of us who fancy ourselves experts in such
things. But most of all, there was nothing interesting going on in
2013 -- bad news for our, "what have you done for me lately"
That changes dramatically in 2014. The so-called "COMET" trials in
prostate cancer return data. If positive -- and that's not a given
-- they'll open up the lucrative prostate cancer space.
Much less appreciated is melanoma data coming in the first half of
2014 from cobimetinib, a drug
(OTCMKTS:RHHBY) acquired from Exelixis. If positive -- and most
people I know think the trial will be positive -- this unlocks a
$400 million initial market in front-line melanoma. Exelixis gets
30-50% of the US profits from cobimetinib and a 10-15% royalty on
ex-US revenues. Almost none of the buy-side analysts have
cobimetinib revenues in their models, so positive data will almost
certainly lead to hikes in price targets.
David Miller is the Portfolio Manager for hedge fund Alpine
BioVentures. David is also the former CEO of the independent
research firm Biotech Stock Research.
In addition to co-founding BSR, Mr. Miller currently co-teaches
an entrepreneur's workshop for the Center for Student
Entrepreneurship at the University of Washington - Bothell. He is a
regular contributor to Minyanville's
Buzz and Banter
. Read more of his work for Minyanville,
Disclosure: Miller has a position in EXEL.
Rockwell Medical: Disruption in Progress
By Jonathan Moreland
Safe, boring businesses can be vulnerable to disruptive technology.
) is both safe and potentially disruptive, and looks like a good
bet to alter the staid dialysis business from within.
Rockwell is one of only two major suppliers of dialysate (a
chemical used in dialysis) in the US. Unfortunately, this stable
business is not particularly profitable due to pricing pressure
from much larger competitor,
). Caps on reimbursement from Medicare and Medicaid for dialysate
don't help either.
Rockwell's dialysate business has, however, opened a valuable
channel for this trusted supplier to sell related, higher-margin
products through to a very concentrated customer base. That's what
Rockwell has been focused on doing for years, and the risks of its
past efforts are finally translating into rewards for shareholders
via two new products: Triferic and Calcitriol.
Triferic is a potentially disruptive drug that replaces the need
for iron to be intravenously delivered into dialysis patients. It
has both clinical benefits for patients, and economic benefits to
dialysis providers by reducing the need for costlier drugs now used
in the process.
Both the efficacy and safety of Triferic were clearly shown by
clinical trials that wrapped up last summer. Rockwell can now file
a new drug application (NDA) for Triferic in early 2014, with
expectations of getting the drug in place to attack a $600 million
annual market opportunity by the end of 2014.
Rockwell also looks likely to get its new generic vitamin D
product, Calcitriol, to market by the end of 2013. All that's left
in the process is to receive FDA manufacturing approval. Calcitriol
is also used in dialysis, and it's the lowest cost option around,
targeting a larger market estimated at $350 million per year.
I bought into Rockwell in early August 2013 for its
sum-of-the-business value, after a troika of insiders with
excellent track records generated a clearly bullish
InsiderInsights Company Rating for RMTI
. While the stock is up by nearly 200% since then, the risk in the
Rockwell investment thesis is also much lower now that Triferic's
clinical risk has passed. Also to the dismay of persistent short
sellers, the company's liquidity risk is now negligible after it
successfully raised cash earlier in 2013.
Management believes its cash balance is sufficient to cover
continuing operating losses until Triferic is launched in late
2014. Rockwell's income statement should improve before then,
however, from Calcitriol's revenue contribution and sharply lower
R&D expenses. When they hit the market, both Calcitriol and
Triferic should also prove to be an easy, cost-saving sell to
Rockwell's established customer base, which includes close partner
(and potential acquirer?)
While experience shows that the FDA can find unexpected ways to
disappoint those awaiting its decisions, the odds of FDA events
being favorable to Rockwell appear very good. Yet with risk now
much reduced, Rockwell's upside potential appears far from fully
priced in. Even a risk-averse investor like me thinks this is one
special situation worth "buying high" with the reasonable
expectation of "selling higher."
Jonathan Moreland is the Founder and Director of Research at
InsiderInsights.com, which offers users a weekly newsletter,
real-time insider trading data, and analytics. Every day,
Minyanville publishes a story featuring InsiderInsight's top
insider trades filed with the SEC. Those stories can be viewed,
Salesforce.com: A Grand Metaphor for the Great
By AndrÃ© Mouton
There's a special place in my heart for metaphors, and I'll be
(CRM) because, in some ways, the enterprise solutions company has
become a grand metaphor for the Great Rally. The stock shows us so
many of the trends we've come to expect in the last few years:
rising market cap, falling volume, persistent short interest. There
are plenty of bears, but instead of restraining the market, they've
only fed it. The second half of 2013 has been absolutely brutal to
the shorts, and capitulation may be in the air -- but I wouldn't
bet on it. It's one thing to catch a falling knife, and another to
stare down a freight train.
In terms of its business strategy, Salesforce.com is truly a
creature of the present. The focus on top-line growth, the long
chain of acquisitions to achieve that growth, the use of stock
options to fund the business, and the preference for non-GAAP
earnings that hide the scope of those stock options-- I could be
describing any number of popular tech companies. If the world were
always sunny, we wouldn't need roofs; and so long as markets are
being generous, these companies can nurse their perennial losses
without getting investors wet.
With the rally entering its sixth year, it might be wise to keep an
eye on the weather forecasts. This means watching companies that,
like Salesforce.com, have captured the market's hopes (and its
wallets), and which have the most to lose should that enthusiasm
give way to fear.
AndrÃ© Mouton is an independent investor who cut his teeth in
the dot-com crash and chewed his lip in the financial crisis. He is
a former writer for Offbeat Magazine in New Orleans and a touring
(but not itinerant) musician, who now lives in New York. Read more
of his work for Minyanville,
The 2014 Debt Collector
By Duncan Parker
Virginia Beach, VA-based
Portfolio Recovery Associates
(PRAA) has experienced an incredible run of growth that doesn't
look to be ending anytime soon. The 2014 US economy will likely
best be described as "concerning." As such, companies with
slow-paying debtors will hire companies like Portfolio Recovery
Associates to collect on their behalf while keeping their own
balance sheet looking solid. From a fundamental standpoint,
Portfolio Recovery's balance sheet deserves an A+. Its opportunity
to charge off around $100 million in goodwill (deferred taxes) in
the future highlights savvy management at the helm. Its small
market cap (around $3 billion) means exponential growth is very
Click to enlarge
From a technical lens, a pullback seems possible near-term. Why? My
guess is its affiliation with numerous indices could cause this
baby to be thrown out with the bath water if we experience a
pullback from another debt ceiling debacle. Therefore, Portfolio
Recovery Associates is likely more of a second-quarter 2014 buy.
Keep this one on the radar!
left his position as a Financial Advisor at Merrill Lynch in
2012 to focus his time on a handful of high-net-worth clientele and
further develop systematic trading algorithms.
He is now a Managing Member of Queen Anne's Revenge, LLC/LP, an
RIA and hedge fund employing quantitative strategies through data
mining seasonality trends with technical analysis in equities,
options, futures, and foreign exchange markets. He is a regular
contributor to Minyanville's
Buzz and Banter
Read more of his writing for Minyanville,
Flotek Industries: A Long-Term Fracking Play for
By Brandon Perry
As America continues on the path of energy independence, I have
been looking for some good long-term fracking plays. My favorite in
the space is
This company is on the Chemicals side rather than on the
Exploration & Production side of things. From a fundamental
perspective it has just about everything you want: P/E around 20
with a growth rate of close to 40, giving it a low PEG of around
0.5. Plus a return on equity of 29! Net margins are around 15 where
10 is more typical, so management is running an efficient company.
It has multiple product streams for further penetration with
existing customers. Product lines include drilling products as well
as all the various chemicals required for the fracking process. I
see the fracking chemicals becoming a lead -n type of product to
get its foot in the door and allow for additional product sales
once it has established a relationship with the customer.
The balance sheet has high liquidity, with a current ratio around
1.5. Balance sheet management has been top-notch, in my opinion.
The cash-flow statement is a little concerning on the
free-cash-flow side at first, but it is distorted by the recent
acquisition, as well as by refinancing measures to reduce interest
rates on long-term debts. These adjustments have hit cash flows
near-term but build sustainability in the long run.
Technically, the company's stock price is in a strong uptrend,
which is exactly what you look for in a small growth company. I
could easily see this thing doubling in a year, and doubling again
in five years. It is pretty much a "catch it on the 50-day dip"
type of stock.
Click to enlarge
Brandon Perry is the president of Perry Investment Management,
LLC. In addition to managing money, Brandon teaches Financial
Planning at his Alma Mater, UT Austin, writes the financial columns
for Influential Magazine, contributes to Minyanville's
Buzz and Banter
, and is very active in helping people with their finances in his
church. Read more of his writing for Minyanville,
Disclosure: Perry has a position in FTK
FedEx: A Reliable Economic Indicator With a Strong Balance
By Oliver Pursche
How will the economy fare, and will the Fed begin to taper its
asset purchases in 2014? These are the principle questions on
investors' minds. The transportation sector has long been viewed as
a leading indicator of economic activity, and by many as a
forecasting tool for the stock market's direction (i.e. Dow
This is why I think
(FDX) is one of the stocks to watch now and in 2014. I prefer FedEx
(UPS) and other transportation and delivery companies because it
continues to gain market share from its competitors, particularly
in the US, making it an even more reliable indicator. Moreover,
much like the overall market, FedEx is displaying strong technical
momentum at this time. Revenues for the company are expected to
rise 4% in 2014 about in line with the median forecast for revenue
growth of the S&P 500 constituents. Similarly, EPS for FedEx is
expected to rise by just over 13% next year, also a near mirror
image of the S&P 500 as a whole.
From an investment perspective, I like FedEx because of its strong
balance sheet and easy-to-understand business model. Revenues and
earnings should grow nicely over the next few years and the company
has a healthy, growing net cash flow from operations. Lastly,
heading into 2014, I am favoring cyclical companies, in particular,
those that should continue to benefit from falling commodity (e.g.
gasoline and energy) prices.
Oliver Pursche is the President of boutique money management
firm Gary Goldberg Financial Services, is in charge of all business
operations, and serves on the firms' Investment Committee,
Executive Committee, and Board of Directors. Pursche is also a
Co-Portfolio Manager of the
GMG Defensive Beta Fund
(MPDAX). Read more of his work for Minyanville,
Disclosure: FDX is a holding in MPDAX and some separate
accounts at GGFS.
Nike: Count on the boys from Brazil
By Justin Sharon
Given the still-sorry state of the economy in Greece, perhaps I
am tempting fate to select a stock named after its goddess of
victory as my top equity of 2014. Yet
(NKE) can score big again next year, not on account of ancient
Athens, but thanks to an increasingly modern nation some 6,000
miles to the south.
Brazil will host soccer's World Cup, a month-long quadrennial
extravaganza of the planet's most popular sport set to be seen by
people. This tournament, along with the 2016 Olympics also
occurring in Rio, provides a perfect catalyst for further upside in
To be sure, Nike is neither an undiscovered story nor a pure
play. The globe's largest maker of sporting goods, newly added to
the Dow, it needs no introduction. But let's start with a few
facts. Shares have risen every year for the past half decade, and
are hitting the highest level in their history even as I write. (An
approximately 72% stock-price surge over the last 12 months puts
the S&P 500 Index, itself no slouch over the same period, to
shame.) The company recently reported a 22% jump in annual net
income and did more than $2.4 billion of business in China,
allegedly an Achilles heel for its athletic shoes. Equity analysts
came away from an early-October investor day in Oregon enthused
about prospects for margin expansion, fewer foreign currency
headwinds, improved pricing power, leaner inventories, and a lower
tax rate, amid myriad other catalysts.
Meanwhile the monumental reach of this company, which outfits
everything from golf to tennis, and also owns Converse, can even be
seen in the plight of poor
(PERY).On Wednesday , with markets scaling fresh summits, that
sorry stock tumbled 22.96% to post the worst performance on all of
(INDEXNASDAQ:.IXIC). Its sole bright spot? The Nike Swim brand this
fashion firm has a licensing agreement with.
But a World Cup occurring in football-crazed Rio, right next to
its iconic statue of Christ the Redeemer, is manna from heaven for
marketers. Amid such priceless publicity, expect the 'Swoosh' to
Justin Sharon authors Minyanville's stock upgrades and
downgrades articles every morning. He has extensive experience on
Wall Street, most recently at the Private Client unit of Merrill
Lynch. A 12-year spell in its research department encompassed the
eras of Blodget, boom, bust, and Bank of America. Read more of his
work for Minyanville,
National Fuel Gas: Mind Your Own Fracking Business
By Howard Simons
When we take a look at the energy industry through the lens of
history, an interesting and somewhat unexpected trend emerges that
can be summarized as heavier to lighter in the fuel source. Once we
got beyond the basics of inefficient one-year captures of sunlight
in the form of wood and figured out multiyear captures of sunlight
in the form of fossil fuels, we went from coal to fuel oils to
kerosene to gasoline and then eventually to natural gas.
Dreamers think we will shift one fine day from hydrocarbons to
hydrogen, but I have been listening to that nonsense for more than
40 years now. As Germany is finding out the hard way, if you want
an omelet you have to break some eggs, and that means fossil fuels
or nuclear; if you want high-cost intermittent energy, have I got a
deal for you with wind and solar. And, yes, the best substitute for
imported petroleum is domestic petroleum; stick that in your
distillation tower and crack it.
The world is chock-full of methane; the trick always was extracting
and transporting it economically. Now that large-scale fracking has
proven its value in the former, the value proposition will
concentrate once again in the latter. This is why I find a firm
National Fuel Gas
(NFG), an integrated natural gas company located in Williamsville,
New York, intriguing.
Undiscovered? No; no issue with a 45.25% one-year total return
falls into that category, and its forward P/E of 22.35 hardly makes
it cheap. But it is in all segments of a growing industry and is
well-situated geographically to take advantage of a regional market
where supply is constrained politically by New York's aversion to
fracking. Should New York allow widespread fracking in the
Marcellus Shale, National Fuel Gas is positioned to go along for
Howard Simons is the President of Rosewood Trading, Inc. (AKA
Simons Research), and strategist to Bianco Research.
He writes on macroeconomic and financial market topics
including fixed-income, commodities, currencies, derivatives and
equity markets, and is the author of
The Dynamic Option Selection System: Analyzing
Markets & Managing Risk
. Read more of his work for Minyanville,
Following the Early Path of Google
By Sean Udall
There is so much to say on
), and one tidbit has already been telegraphed. The trading in
this name is going to be highly volatile and offer plenty of ammo
for both the bulls and the bears. I'm an "on the record" bull and
have been for some time. In fact, I've been writing since the
(LNKD) IPO, if not earlier, that I felt Twitter would eventually
become the most valuable of all the social media companies --
I'll also note that while the world was freaking out over
Facebook crashing into the mid to low $20s and even the high
teens, I was a table-pounding buyer of the stock. As much as I
liked Facebook in the low/mid $20s, I would like Twitter even
more starting around $35 and anything below. Will it ever trade
that low? I doubt it.
So let's sum Twitter up with some Q&A:
1. Is Twitter expensive? Very.
2. Did it go up too much on the first day? Probably.
3. Has it maxed out? No way!
4. Will it be the most valuable social media stock? I firmly
5. Will it suck the
from many other Web 2.0 stocks, such as
(ANGI), and even Facebook? Again, I fully believe so.
6. Is Twitter a threat to Facebook? This one is harder to
answer, but I'd say yes at the margin. Facebook is strong and
diverse enough to stand on its own, but growth money will flow
from Facebook to Twitter over time.
7. Is Twitter a one-trick revenue pony? Not at all. In fact, I
see Twitter having at least five distinct revenue streams and
maybe as many as 10. However, to me, one of the key drivers to
the company's future upside lies in eventual monetization of its
Big Data analysis pipe. This could be the company's
second-biggest revenue driver and also carry the highest gross
margins. In my view, Twitter feeds Big Data analysis in more
verticals and with richer information than any other social media
Bottom line, I think Twitter has a very promising outlook. The
stock will likely trade in crazy spike-and-gap moves in both
directions for a while. But I also think it will follow the early
(GOOG). And for Google, once it reported its second quarter as a
public company, all thoughts of the stock trading far too richly
completely went away.
Sean Udall is an investment strategist,
, and proprietary trader with extensive experience across a wide
variety of asset classes, including equities, fixed income,
currencies, and derivatives. He's a recognized trader, prolific
writer, and the founder of the
, a technology-focused investment newsletter from Minyanville.
Read more of Sean's commentary,
Follow me on Twitter:
Disclosure: Udall has positions in Facebook and Twitter.