Why Solazyme, Zynga, and Computer Programs & Systems Are Today's 3 Best Stocks

The S&P 500 gives back more than half of yesterday's gains even as Solazyme, Zynga, and Computer Programs & Systems all rocket higher.

Jan 31, 2014 at 5:15PM

The focus for the broad-based S&P 500 (SNPINDEX:^GSPC) again turned to earnings today as weak top-line growth remained on center stage and upended what has been a steady stream of mixed economic data.

Trying its best to push the index to the upside was personal spending data and the final consumer sentiment reading for the month of January.

Personal spending for December, a key economic month for retailers since it includes holiday spending, rose 0.4% versus market expectations for a rise of just 0.2%. This would lead investors to the idea that retail sales figures for this holiday season may not be as bad as many economists have predicted.

Similarly, the final reading for January's Thomson Reuters/University of Michigan consumer sentiment reading rose to 81.2 from a preliminary reading of 80.4 earlier in the month, signaling that consumers are feeling slightly more confident about their short and long-term economic situations, as well as the economy as a whole.

Working against this data, however, was a weakened Chicago PMI and a higher employment cost index. The Chicago PMI, a measure of manufacturing activity in the Midwest, shrank to a reading of 59.6 in January (which by all indications still assumes healthy expansion) from 60.8 in December. Employee costs also rose 0.5% in December, compared to expectations for a 0.4% increase. Higher labor costs and slowing manufacturing sector expansion are two key ways to slow any stock rally down.

By day's end, the S&P 500 decided that weak revenue growth in select reporting companies outweighed this mixed data, pushing the iconic index lower by 11.60 points (-0.65%) to finish at 1,782.59, erasing a little more than half of yesterday's rebound.

Leading all companies to the upside today was renewable oils and bioproducts producer Solazyme (NASDAQ:SZYM), which rocketed 32.8% higher after announcing that commercial operations for its algal oils have commenced at an Archer Daniels Midland (NYSE:ADM) facility and an American Natural Products facility, both in Iowa. The production, which is anticipated to hit 20,000 metric tons per year, could hit as high as 100,000 MT/year in subsequent years, according to Solazyme's press release. The initiation of commercial production has been a long time coming, so now it's time for the opinions to take a back seat and to see if Solzayme's concrete results in upcoming quarters can support its nearly $900 million valuation.

Struggling online social gaming developer Zynga (NASDAQ:ZNGA) soared 23.6%, after announcing its fourth-quarter earnings results and undertaking a few surprise moves. For the quarter, revenue tumbled 43% to just $176.4 million, as bookings fell to $146.7 million and adjusted EBITDA dipped to $2.6 million from $45 million in the year-ago period. Cost-cutting, however, reduced its adjusted loss to $0.03 per share from $0.06 in the year-ago period. What has Wall Street excited is the announcement that Zynga will lay off 15% of its workforce in order to save $33 million-$35 million annually, and its $527 million purchase of NaturalMotion in order to expand its mobile offerings. The Street seems pretty content with Zynga's strategy of cutting internal costs and buying growth, but the online gaming industry is so fickle and competitive that Zynga still looks like a ship destined to sink -- at least in my view.

Finally, health care information technology provider Computer Programs & Systems (NASDAQ:CPSI) added 17.6% after announcing its fourth-quarter results and providing fiscal 2014 guidance. For the quarter, CPS delivered a 7% increase in revenue to $51.3 million as net income expanded modestly to $0.90 per share. These results were a bit mixed, as the Street expected only $0.84 in EPS but $1.5 million more in revenue. However, that was quickly forgotten as CPS' fiscal 2014 forecast called for $205 million-$215 million in revenue and $3.25-$3.40 in EPS. Current consensus estimates had only projected $2.99 in full-year EPS. This beat shows exactly how vital IT services have become to helping lower costs and improve efficiency in the health care industry, and gives me reason to believe that CPS could still have further upside potential.

These three stocks soared today-yet they may have little chance of keeping up with this year's top stock!
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Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of Solazyme. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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