Why Emeritus, Shutterstock, and Isis Pharmaceuticals Are Today's 3 Best Stocks

Poor housing data sacks the S&P 500 yet again, while Emeritus, Shutterstock, and Isis Pharmaceuticals all rise by at least 15%!

Feb 21, 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.

Wondering why the broad-based S&P 500 (SNPINDEX:^GSPC) is unable to gain traction today despite a number of strong earnings reports and following yesterday's slight dip in initial weekly jobless claims? Yeah... it's the attack of the dismal housing data, again.

Earlier today, we got the release of January's existing home sales figures, which declined 5.1% from December to a seasonally adjusted annual rate of 4.62 million, its lowest level in 18 months. As has been the story with January's data, the polar vortex was to blame, although housing, as a whole, has been in a fairly steady reversal since May of last year when lending rates bottomed. Investors and economists may be kind enough to give homebuilders a free pass this month due to the weather, but this trend is deeply concerning, at least to me, and could point to near-term weakness in the housing sector.

By day's end, the S&P 500 dipped by 3.53 points (-0.19%) to close at 1,836.25 after spending much of the day modestly in positive territory.

One company with seemingly limitless upside potential today was senior housing operator Emeritus (NYSE:ESC), which gained 35.2% after agreeing to be purchased by Brookdale Senior Living (NYSE:BKD) for $1.4 billion, excluding debt. Under the terms of the deal, Emeritus shareholders will receive 0.95 shares of Brookdale, and would effectively own 23% of the outstanding shares of the company once the merger is complete. Brookdale anticipates the deal being EPS neutral in 2014, and forecasts it adding $0.40 in EPS by the third year. The move certainly makes sense on paper, as cost synergies will help these two senior housing companies fight back against the expectation of declining Medicare reimbursement rates. However, over the long run, the Medicare reimbursement picture is still very cloudy, making Brookdale a riskier buy at the moment following today's announcement.

Commercial digital image library Shutterstock (NYSE:SSTK) looked picture-perfect today with an 18.9% gain after the company announced better-than-expected fourth-quarter results, and an optimistic full-year forecast after the closing bell last night. For the fourth quarter, Shutterstock delivered revenue growth of 38%, to $68 million, as the number of paid downloads increased 31%, to 28 million, and the number of images in its collection vaulted higher by 8.9 million, to 32.2 million. Net income, however, fell by roughly three-quarters, to just $7.9 million, or $0.26 per share in adjusted EPS. Comparatively, Wall Street had only expected Shutterstock to report a $0.21 EPS profit on $65.8 million in revenue. Looking ahead, Shutterstock anticipates full-year revenue will be in the range of $305 million-$310 million, which is modestly higher than the current consensus of $304.5 million. There's little denying that Shutterstock is gaining online acclaim, but at 70 times forward earnings, I'd consider passing on the stock here.

Finally, antisense drug developer Isis Pharmaceuticals (NASDAQ:ISIS) advanced 15.5% after announcing positive results from it and collaborative partner Biogen Idec's multiple-dose study for ISIS-SMN Rx involving children with spinal muscular atrophy. The results, which are based on the Hammersmith Functional Motor Scale-Expanded point scale, show an improvement of 1.5 points, 2.3 points, and 3.7 points at the 3 mg, 6 mg, and 9 mg dosing cohorts, respectively. In other words, there was notable improvement in muscle function in these patients. Furthermore, ISIS-SMN Rx was well tolerated at all doses, and an assay test designed to measure SMN protein in patients' cerebral spinal fluid noted a more than doubling in SMN proteins in the nine-to-14 month mark following their initial dosing. Isis plans to treat patients in an extension study with a 12 mg dose every six months. With few SMA treatments available, there's a really decent shot that, if approved, ISIS-SMN Rx could become an instant blockbuster. I've said it before and I'll say it again -- Isis is a biopharmaceutical company that you should have on your watchlist.

Emeritus, Shutterstock, and Isis all soared today, but they may be hard-pressed to keep up with this top stock in 2014
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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 Isis Pharmaceuticals. 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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