Today's 3 Best Stocks

It's truly been a bizarre day, with the broad-based S&P 500 (SNPINDEX: ^GSPC  ) rallying in excess of 1% after economic data came in worse than expected.

Under normal circumstances, the markets would sell off on news that the U.S. Commerce Department made a downward revision to its final first-quarter GDP growth figure. Instead of the previous estimate of 2.4% growth, the U.S. economy grew by just 1.8% during the quarter. Again, that would normally send investors scurrying for cover; but with the Federal Reserve tinkering with the idea of paring back its monthly bond-buying program known as QE3, it's all the more reason for the Fed to continue with its monetary easing. A continuation of QE3 would probably mean extended low lending rates, which should spur enterprise loan activity and housing sector expansion.

When all was said and done, the S&P 500 added on 15.23 points (0.96%) to close at 1,603.26. While today's move higher was impressive, the gains of the S&P 500's top performers were even more noteworthy.

Audio products and electronics maker Harman International (NYSE: HAR  ) was today's top breadwinner, up 5%, following an announcement that it would be doubling its quarterly dividend from $0.15 to $0.30. The new projected yield of 2.3% moves it into a territory where income-seeking investors may actually give the company a serious look. Harman definitely had to do something because net sales shrank 3% last quarter as competition intensified and automotive sector sales slowed from their rapid recessionary rebound. I'm still not personally sold on Harman even after this dividend hike, but it's a step in the right direction.

Orphan drug developer Alexion Pharmaceuticals (NASDAQ: ALXN  ) was also a strong gainer, bringing home a 4.9% advance for shareholders in spite of no company-specific news. Although Alexion has just one FDA approved drug, Soliris, it's been able to command an incredible pricing premium – about $400,000 for a year of treatment – and could further expand indications of the drug to boost its revenue stream further. Even though Alexion has a robust five-year growth expectation of 24.5%, I'd exercise caution here with Soliris representing its only FDA-approved drug and practically its entire pipeline. One-drug biotech companies come with a lot of extra risks that diversified biotech companies do not possess, and Alexion certainly isn't cheap at 64 times trailing earnings.

The story was very similar for Biogen Idec (NASDAQ: BIIB  ) which jumped 4.7% despite lacking any company-specific news. However, Biogen's story is a lot different than Alexion's in that it does have a diversified pipeline of FDA-approved drugs with quite a bit of market share in treating various stages of multiple sclerosis. Sales of the company's relapsing MS drug, Tecfidera, appear to be flying off the shelves and should be well on their way to becoming a blockbuster given its fewer harsh side effects relative to competing medications. Biogen is a company worth keeping a close eye on moving forward.

It's no secret that biotech stocks have been soaring recently, but the best investment strategy is to pick great companies and stick with them for the long-term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" not only shares stocks that could help you build long-term wealth, but also winning strategies that every investor should know. Click here to grab your free copy today


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