I follow quite a lot of companies, so the usefulness of a watchlist to me cannot be overstated. Without my watchlist, I'd be unable to keep up on my favorite sectors and see what's really moving the market. Even worse, I'd be lost when the time came to choose which stock I'm buying or shorting next.
Today is "Watchlist Wednesday," so I'm discussing three companies that have crossed my radar in the past week -- and at what point I may consider taking action on these calls with my own money. Keep in mind, these aren't concrete buy or sell recommendations, nor do I guarantee I'll take action on the companies being discussed weekly. What I can promise is that you can follow my real-life transactions through my profile, and that I, like everyone else here at The Motley Fool, will continue to hold the integrity of our disclosure policy in the highest regard.
Elan (NYSE: ELN )
If at first you don't succeed ... try a second time, and then give up if that doesn't work either!
Elan is in a world of hurt this week after its marketing partners Johnson & Johnson (NYSE: JNJ ) and Pfizer (NYSE: PFE ) discontinued the majority of their clinical studies for bapineuzumab (a.k.a. bapi) after a second failed clinical trial in just a matter of weeks. Bapi, which is an experimental Alzheimer's treatment, failed to meet its endpoints in both trials, significantly reducing the chance of its being effective in further trials.
In response to this failure, Elan will be writing off the entire value of the drug, $117.3 million, in its upcoming quarter, and once again turning its entire focus to promoting its multiple sclerosis drug, Tysabri. On the upside, Elan's spending will be dramatically reduced as it focuses solely on promoting Tysabri. On the downside, and as I warned just weeks ago, Elan is more or less a one-trick pony. Tysabri's sales are nearing maturity, and Elan's pipeline is anything but impressive. Even with the company down considerably on this news, shares could have much further to fall if it doesn't make serious strides on strengthening its pipeline soon.
Knight Capital Group (NYSE: KCG )
"Whoops" doesn't quite sum up last week's shenanigans. Knight, the premier market-order router in the United States, suffered a software glitch of astronomical proportions last week, losing about $10 million per minute, as new software drove up prices of nearly 150 stocks and left Knight holding stocks at very unfavorable prices. In just 45 minutes, Knight's $440 million trading loss threatened to bankrupt the company.
Luckily for Knight, the company received a much-needed $400 million capital infusion over the weekend from a consortium of investors including Blackstone Group, Getco, Stephens, Stifel Nicolaus, Jefferies Group, and TD AMERITRADE. These six companies purchased $400 million worth of preferred shares that they will be able to convert to stock at $1.50 per share, less than half of Knight's closing price when the deal was struck. In short, Knight's deal comes at a steep price, as its shares outstanding will more than triple to roughly 350 million.
This still could be a nice value to be had if Knight can regain the confidence of its customers, but investors should temper their expectations as these new investors flood the market with new shares.
Heckmann (NYSE: HEK )
This isn't the limbo, but just how low can you go, Heckmann?
Heckmann, an environmental-services specialist responsible for removing and treating water used by energy companies to retrieve oil and natural gas, reported earnings yesterday that failed to impress. Overall revenue skyrocketed higher by 132% year over year to $90.8 million as the company reported a net profit of $0.07. Believe it or not, Heckmann blew by Wall Street's EPS estimates by $0.05, but it fell well short of the $98.9 million the Street had been looking for. Worries continue to persist that a reduction in natural gas drilling and fracking could mean a reduction in business for Heckmann.
As for me, I'm stunned by how strong the company's bottom-line profit was. Adjusted EBITDA more than doubled, and the company enjoyed a nice income-tax benefit for a change. To echo the sentiments of my Foolish colleague Travis Hoium, I see a bright future for Heckmann, which is now well capitalized and on its way to regular profitability. How low can Heckmann go? Not much lower, methinks!
Is my bullishness or bearishness misplaced? Share your thoughts in the comments section below, and consider following my cue by using these links to add these companies to your free personalized Watchlist to keep up on the latest news with each company:
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