Why athenahealth, Puma Biotechnology, and bebe stores Are Today's 3 Best Stocks

The S&P 500 soars for a second straight day, while athenahealth, Puma Biotechnology, and bebe stores all rally by double-digits.

Feb 7, 2014 at 5:15PM

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.

Just when you thought it was safe to read economic data at face value, the monthly U.S. jobs report arrives and the "bad news is good news" mentality reemerges on Wall Street.

Helping to push the S&P 500 (SNPINDEX:^GSPC) decisively higher for a second straight session was the Labor Department report that just 113,000 jobs were added in January. While some of this weakness can be blamed on colder weather across much of the U.S., it also points to a weakening hiring environment. By comparison, most economists had pegged U.S. payroll growth in the 150,000-175,000 range. Despite a second month of weak jobs growth, the unemployment rate fell by 0.1% to 6.6%, a five-year low.

Investors viewed this report's weakness so positively because it could give the Federal Reserve cause to slow down the tapering of its monthly economic stimulus which is a mixture long-term U.S. Treasury and mortgage-backed securities purchases. The Fed has already trimmed $20 billion off its original $85 billion in monthly bond-buying, but weak job additions could be the catalyst to slow that rollback and relax lending rates for an even longer period of time.

Other encouraging news included the announcement that total consumer credit increased $18.8 billion in December to $3.1 trillion. While increasing consumer debt can certainly be worrisome, our economy is also dependent on consumer spending to drive GDP. This higher level of spending could signal that retailers are in for a better holiday season than many analysts expect when they begin to report their results.

By day's end, investors had pushed the broad-based S&P 500 higher by 23.59 points (1.33%) to close at 1,797.02, fully erasing Monday's nearly 41-point tumble, and tacking on its second consecutive day of greater than 1% gains.

Leading all stocks to the upside today with a gain of 25.1% was cloud-based electronic health records and care coordination software developer athenahealth (NASDAQ:ATHN). Shares of athenahealth rocketed higher after the company trounced Wall Street's fourth-quarter estimates by reporting a 48% jump in revenue to $171.6 million as adjusted earnings per share climbed to $0.57. Comparatively speaking, the Street was looking for $168.6 million in revenue and EPS of just $0.44. Huge spikes higher during earnings season are starting to become the norm for athenahealth; which is certainly benefiting from uncertainties surrounding Obamacare that are pushing medical practices toward cost-saving and efficiency-improving cloud platforms like athenaNet. However, at approximately 130 times forward earnings much of athenahealth's growth has likely been baked into its share price. As such, it's a company I'll happily watch from the sidelines.

Sticking within the health care sector, Puma Biotechnology (NYSE:PBYI) shares advanced by 18.2% after the company announced a favorable patent ruling from the European Patent Office. According to Puma's press release, the EPO upheld its patent with regard to treating cancer patients with the T790M mutation, which privately held Boehringer Ingelheim had opposed. But here's the kicker: Puma has no intent of developing neratinib (its lead experimental breast cancer drug) to treat T790M mutation cancers at the moment. In other words, today's rally is a bit of a head-scratcher from an investing perspective. The real focus should be on neratinib's progress. I'm very curious to dig into the data and see how the drug actually performs in treating breast cancer rather than relying on Bayesian predictive models when the company releases its final midstage results.

Finally, bebe stores (NASDAQ:BEBE) rallied 14.6% after the women's apparel and accessories retailer reported a narrower than expected second-quarter loss and topped Wall Street's revenue forecasts. For the quarter, Bebe reported a 4% decline in sales to $130 million on a 1.9% decline in comparable-store sales. The company's net loss increased slightly to $0.07 per share from $0.06 in the prior year. However, the Street consensus had been for a wider loss of $0.14 per share on just $121.6 million in sales. Before you get too excited, though, keep in mind that Bebe's third-quarter guidance points right back to an EPS loss in the low-to-mid teens, proving that the landscape remains very difficult for retail apparel companies. I'd suggest sticking to the sidelines until bebe is back in the black.

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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 recommends Athenahealth. 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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