Why LSI, AerCap Holdings, and OncoMed Pharmaceuticals Are Today's 3 Best Stocks

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Following the worst week for the broad-based S&P 500 (SNPINDEX: ^GSPC  ) in months, it appears that today's economic data and the giving spirit of the holidays are ready to push the markets higher once again.

The big news moving the markets upward, in advance of the all-important Federal Open Market Committee interest rate and quantitative-easing taper decisions coming this week, was the revised third-quarter productivity figures -- upped to 3% (the highest level in four years) from a prior estimate of 1.9%. Higher productivity would signify that this recent market rally and the U.S. economic recovery could indeed have stronger legs than economists are forecasting.

In addition to the third-quarter productivity data, unit labor costs were revised lower for the period to a decline of 1.4% from a previous decline of 0.6%. Smaller labor expenses and increased productivity are the perfect formula for corporate profit expansion.

Given this news, the S&P 500 put its four-day losing streak decisively in the rearview mirror and motored higher by 11.22 points (0.63%) to close at 1,786.54.

Topping the charts and leading all stocks to the upside today was LSI (NASDAQ: LSI  ) . The storage and networking chip maker vaulted higher by 38.6% after agreeing to be purchased by Avago Technologies (NASDAQ: AVGO  ) for $6.6 billion, or $11.15 per share in cash, which will be financed through a term loan and a $1 billion investment from private-equity firm Silver Lake Partners. The move is expected to be immediately accretive to Avago's bottom line and is being orchestrated out of Avago's desire to diversify its product line into chips that help run data centers and servers that are becoming increasingly important as cloud-based spending balloons. I can't say I'm particularly thrilled with Avago taking on so much fresh debt, but I can certainly see how this deal makes sense for both parties involved.

Keeping the acquisition theme going, aircraft asset management company AerCap Holdings (NYSE: AER  ) soared 33.1% after announcing a $5.4 billion cash-and-stock purchase of AIG's (NYSE: AIG  ) aircraft leasing business, International Lease Finance Corp. The deal will give AerCap the leasing rights to nearly 1,000 aircraft and commitments to purchase nearly 300 additional new and fuel-efficient models. Wall Street is clearly excited, with AerCap's share price up around 50% over the past three trading sessions. With the price of fuel-efficient new aircraft rising, and debt levels within the sector high for many airline and logistics companies, leasing has become a smart alternative, leaving AerCap in the proverbial pilot's seat moving forward.

Finally, shares of clinical-stage biopharmaceutical company OncoMed Pharmaceuticals (NASDAQ: OMED  ) advanced 21.1% on the day despite no company-specific news. Today's move is likely a carry-over from OncoMed's announcement two weeks ago of collaboration with Celgene (NASDAQ: CELG  ) to develop up to six anti-cancer stem cell therapies. That deal will pay OncoMed $155 million in up-front cash, necessitate a $22.5 million stock equity investment from Celgene, and potentially provide more than $2 billion in possible milestone and development payments. Given that OncoMed's cash situation is no longer a worry, I'm not surprised to see the stock rallying once again.

Is this stock set up to become the next top performer in 2014?
There's a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2767017, ~/Articles/ArticleHandler.aspx, 4/18/2014 2:41:37 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement