Why BioTelemetry, Globalstar, and ArthroCare Are Today's 3 Best Stocks

It certainly wouldn't qualify as a bloodbath, but make no mistake about it -- it was the worst day the broad-based S&P 500 (SNPINDEX: ^GSPC  ) has seen in quite some time.

The primary culprit that caused the markets to dive precipitously throughout the day was the release of January's ISM report, which measures manufacturing activity in the U.S. In December, the ISM Index registered robust expansion with a reading of 56.5. This month economists had expected much of the same; instead they got a reading of 51.3, well below estimates. This figure would insinuate a manufacturing sector that's growing much slower than expected and could halt this multiyear stock rally in its footsteps.

Construction spending was another somewhat sore spot despite meeting the Street's estimates. Construction spending in December rose just 0.1% after popping 0.8% in November. Slowing construction growth could weigh on the jobs market and the housing sector if it drops much further.

By days end, the S&P 500 had been absolutely clobbered, finishing lower by 40.70 points (-2.28%) to close at 1,741.89, its lowest close since mid-October. Yet in spite of this huge drop, three stocks still managed to rocket to the upside.

Leading the charge higher was cardiac monitoring device maker BioTelemetry (NASDAQ: BEAT  ) (formerly CardioBeat) which jumped 22.1% after announcing a patent litigation victory in its case against Mednet Healthcare Technologies. The ruling, as BioTelemetry's press release points out, notes that Mednet infringed on five of BioTelemetry's patents. The outcome resulted in BioTelemetry acquiring Mednet for $16 million, of which $5.5 million was in cash, $0.8 million in common stock, and the assumption of $9.7 million in debt. What's truly notable for BioTelemetry is that Mednet produced more than $25 million in revenue annually, and should be accretive to EBITDA by $4 million to $5 million. I'd call that quite a victory for BioTelemetry shareholders.

Shares of Globalstar (NYSEMKT: GSAT  ) , a satellite-based mobile voice and data communications service company, also shot higher today by 14.8% despite a lack of company-specific news ... today, at least. Last week, however, Globalstar introduced Sat-Fi, its revolutionary new voice and data solution which allows standard mobile Wi-Fi-capable devices to connect to Globalstar's satellite network. The one factor that's really held Globalstar back is accessibility, and the introduction of this merging of standard mobile devices with Globalstar's satellite network should provide a boost to its top-line growth. I will personally be sticking to the sidelines until Globalstar's losses shrink considerably, but I do consider last week's tech solution a big positive and a step in the right direction.

Finally, and moving back to the medical device sector, surgical products developer ArthroCare (NASDAQ: ARTC  ) gained 8.2% after rival Smith & Nephew (NYSE: SNN  ) agreed to acquire the company in a $1.5 billion deal for $48.25 per share in cash. The deal certainly makes sense on paper with ArthroCare and Smith & Nephew both focused on the highly lucrative knee and shoulder repair surgeries. As the baby boomer population ages, one can only imagine the demand for these products is going to rise. ArthroCare actually finished the day higher than its buyout price signaling hope from investors that a competitor will enter the fray with a higher bid. As for me, I'm not convinced that will happen and see Smith & Nephew and ArthroCare as a good fit for one another.

These three stocks soared today, but they may have a hard time keeping up with this top stock in 2014
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  • Report this Comment On February 03, 2014, at 5:51 PM, a2gsg wrote:

    the reason why Globalstar (GSAT) went up today was this:

    Chardan: Globalstar Inc. (GSAT): Raise Price Target to $6.

    We are raising our price target on Globalstar to $6 based on increased

    confidence the company will be able to utilize its spectrum for

    terrestrial use in the US, improved trends in its satellite

    constellation and greater likelihood the company will be able to use

    its spectrum for terrestrial use in international markets. Our price

    target reflects a per MHz-POP valuation close to $1.00 and an

    EV/EBITDA multiple on its satellite operations of about 7.5x.

    Globalstar's proposal to the FCC preserves the ability of unlicensed

    users to access the lower half of the bonded Wi-Fi channel at 2.4 GHz.

    At the same time, only Globalstar, or its partner, will be able to

    utilize the entire 22MHz channel. In addition most wireless devices

    will gain the capability to access this additional Wi-Fi channel with

    a software upgrade. These two factors, access to the full 22MHz

    channel, and a potential low-cost and quick roll-out of a nationwide

    service argues for a higher per MHz-POP valuation.

    Our price target would increase substantially if we included value for

    the company's L-Band spectrum, or international approval of a Channel

    14 Wi-Fi proposal, or continued improvement in the satellite

    constellation's results. Assuming the international market is as large

    as the domestic market, the expected value of the spectrum would

    double. Assuming the company can monetize the L-band spectrum, that

    could add $3 or more to the valuation and more if it is able to

    monetize the international L-band spectrum as well. The improvement in

    the satellite constellation network has a much lower impact on the

    total value than changes in monetizable spectrum and MHz-POPs from a

    larger geographic footprint, but gives the company greater ability to

    fund network development.

    It has taken longer than expected for the FCC's Notice of Proposed

    Rulemaking (NPRM) to be published in the Federal Register. When it is

    published, the 75 day comment period begins, followed by a 30 day

    reply comment period. At that point the FCC will probably consume a

    few months crafting the final rule. Assuming the Federal Register

    publishes the NPRM soon, the comment periods will be over around May

    and a new rule complete in Q3. While the FCC process runs its course,

    the company continues to engage potential partners on how to best

    utilize the spectrum should a favorable ruling by the FCC occur.

    In the meantime, the company continues to see favorable trends in its

    satellite constellation business. Duplex subs increased q/q in both Q2

    and Q3, evidence the company is succeeding in reviving its duplex

    business. We have assumed in our model duplex net adds accelerate in

    2014 with the penetration of new geographies and the introduction of

    new products. South America in general and Brazil, specifically, is a

    key target market that is expected to contribute to continued duplex

    growth in 2014. The company has also introduced a consumer handset,

    the SPOT Global Phone, that leverages Globalstar's distribution

    channel. In our model duplex subs increases from 84 thousand at the

    end of 2012 to almost 88 thousand at the end of this year and almost

    108 thousand at the end of 2014. The recent introduction of the Sat-Fi

    product could provide a major boost to our estimates in 2015.

    We have duplex ARPU increasing over our forecast period. Duplex ARPU

    in 2012 was $17.42. We have $22.46 in 2013 and $31.13 in 2014. Duplex

    ARPU has steadily increased over the past few quarters as Globalstar's

    second generation constellation has been expanded and put in service

    and the goal is to drive ARPU much higher, possibly over $40 in the

    next couple of years.

    Valuation is less sensitive to changes in EBITDA from the

    constellation and much more by the spectrum value. We assume the

    company is worth a higher spectrum value given it in effect will have

    access to a full 22 MHz of spectrum, potential build-out costs will be

    low, and time to build out a network short. Some comparable spectrum

    transactions have gone for much more than $1.00 per MHz-POP, so we do

    not think our valuation is pushing the envelope, In addition, our

    target only reflects the spectrum value in the US and only the Wi-Fi

    spectrum...SNIP

    James McIlree, CFA

    Chardan Capital Markets

  • Report this Comment On February 04, 2014, at 8:29 AM, mxsailor wrote:

    Amen

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