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 that 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.
Angie's List shocked Wall Street last week with revenue growth of 68% over the previous year and an even more amazing 24% drop in cost-per-customer acquired. While this is undoubtedly a step in the right direction, an Investor's Business Daily summary of the quarterly report that I came across comically and succinctly summed up Angie's List's entire history in a sentence: "That was its first quarterly profit in at least four years, and probably ever. It's never made a profit for a year."
According to the Indianapolis Business Journal, this was actually Angie's first quarterly profit... ever! Angie's List has expanded without regard for spending or profits for much of its existence and has racked up a frightening $219 million in accumulated deficits since inception. What's more, its business model, which relies on users to pay to read business reviews that businesses don't have access to, is extremely susceptible to economic downturns. It's taken 17 years just to get to a point where its customer acquisition costs are even low enough to justify the possibility of turning a profit, and the economy has been on the mend for nearly four years now. I almost have to wonder what utopian dream world we'd need to be in for Angie's List to succeed. Consider this stock a prime short-selling candidate at something on the order of 80 times forward earnings -- if it can turn an annual profit, that is!
NPS Pharmaceuticals (NASDAQ: NPSP )
It appears that the partygoers celebrating NPS' first FDA-approved drug, Gattex, for short bowel syndrome, may have overstayed their welcome. Since NPS received approval for Gattex on Dec. 21, shares have fallen 12%. Now, however, could be the perfect time to go bargain-hunting for a number of key reasons.
The first reason is Gattex's orphan drug designation, which gives it exclusive status and extends its patents for a long enough time frame that NPS has a chance to set up its marketing and pricing without fear of being overwhelmed by competitors.
The second point is that while orphan drugs often carry hefty price tags (Gattex's $295,000 annual price is enough to make most people cringe), Alexion Pharmaceuticals' (NASDAQ: ALXN ) rare blood disorder drug, Soliris, the most expensive drug in the world at an annual cost of $400,000, has sold phenomenally. Alexion's Soliris has set the precedent for other orphan drugs and made it easier for rare disease patients to get the insurance they need to get treated as well as given physicians the confidence to prescribe these rare therapies.
Finally, it's a simple case of valuation. NPS has projected peak sales of $350 million according to my Fool colleague Dan Carroll. However, it's estimated that 10,000 to 15,000 people in the U.S. suffer from short bowel syndrome. For NPS to hit its peak sales target, it'd only need to treat about 1,200 people annually. This seems like a pretty lowball figure, which makes NPS seem incredibly undervalued here.
Yamana Gold (NYSE: AUY )
When I dug deeply into the gold mining sector in early January, I was able to conclude statistically that Yamana Gold is the cream of the crop when it comes to gold miners. Apparently Wall Street didn't get that message, because shares of Yamana and spot gold in general have been trickling lower. If I were you, I'd suggest polishing your stock-sniffing skills and digging deeper into Yamana at these levels.
Of the 12 miners that I examined in January, only two had noticeable by-product production capable of meaningfully reducing their cash costs: Yamana, which boasted the lowest cash cost of all, and Goldcorp (NYSE: GG ) , which has also made a living from using metallic by-products to reduce its cash costs. Both also shared a somewhat unique quality, given the rising cost nature of mine development and maintenance, of boosting production in their most recent quarter. Goldcorp's saving grace is its Penasquito mine in Mexico, which is projected to produce 360,000 to 400,000 ounces of gold in 2013, more than double what it produced in 2010.
For Yamana, its El Penon mine in Chile is its heavy hitter, with production expectations of 450,000 to 500,000 ounces per year. Just last week, Yamana also indicated that reserves at Cerro Moro jumped 44% to 1.95 million ounces over its previous estimates. Furthermore, the measured ore grades at Cerro Moro of 14.6 g/t is phenomenally high.
As long as spot gold prices remain flat -- and personally I don't see how they wouldn't rise given the cauldron of uncertainty we're facing globally -- Yamana will continue to produce among the best gold margin in the industry. If China's economy can get completely back on track, the sky's the limit for Yamana.
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:
- Add Angie's List to My Watchlist.
- Add NPS Pharmaceuticals to My Watchlist.
- Add Yamana Gold to My Watchlist.
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