Why Vitacost.com, Zogenix, and Shutterfly Are Today's 3 Best Stocks

The S&P 500 flutters around the flatline, while Vitacost, Zogenix, and Shutterfly all soar by double-digit percentages.

Jul 2, 2014 at 5:15PM

It isn't often that I've been able to say this lately, but the mixed economic data we received today led to an equally mixed reaction from the broad-based S&P 500 (SNPINDEX:^GSPC), which waltzed around the unchanged line throughout much of the day.


The biggest story was the release of the ADP Employment Report earlier this morning, which yielded the creation of 281,000 private sector jobs in June. This is the largest increase in private sector jobs in a year-and-a-half, and a potential signal that the labor market is continuing to improve. Coupled with the fact that weekly initial jobless claims have been hovering close to a seasonally adjusted 300,000 -- a multi-year low -- it's quite plausible that the U.S. unemployment rate could shrink closer to 6% when employment data is announced by the government tomorrow.

In contrast to the ADP Employment data, May's factory orders data, and the weekly release of the Mortgage Bankers Association's loan origination data, both weighed on the S&P 500.

U.S. factory orders for May declined a worse-than-expected 0.5% compared to forecasts that had called for a dip of just 0.3%. The drop was blamed on a 0.4% decline in military goods orders, and reversed an increase in factory orders of 0.8% last month. While it's probably not worth getting into a twist over a one-month decline, continued weakness in factory orders could spell trouble for the U.S. economy.

The MBA's Mortgage Index for the past week fell by a fractional 0.2%, which follows last week's dip of 1%. Normally, a fractional move lower wouldn't be such a big deal; but considering that housing inventory for sale is rising, and 30-year lending rates are heading toward their lowest point in a year, it's a bit disconcerting to see prospective and existing homeowners shying away from locking in historically low lending rates. If this pattern persists, the housing sector could find itself in a world of trouble.

By day's end the S&P 500 digested this mixed data and ended modestly higher by 1.30 points (0.07%), to close at 1,974.62.


Despite the S&P 500 finishing close to the flatline, Internet-based dietary supplements retailer Vitacost.com (NASDAQ:VITC) certainly didn't! Shares advanced a market-topping 26.9% after Kroger (NYSE:KR) announced it was buying the company for $280 million in cash, or $8 per share, a 27.4% premium to yesterday's closing price. The deal shouldn't come as too much of a surprise to investors, considering that its largest shareholder in February asked the company to explore strategic alternatives to boost shareholder value.

The big question, of course, is whether the deal makes sense for Kroger, and if Vitacost shareholders received a fair price. Considering that the move will expand Kroger's online presence in the rapidly growing nutritional products segment, I'd suggest that Kroger's size could make this deal earnings accretive almost immediately. From the perspective of Vitacost, while some shareholders might be disappointed with the final buyout price considering its niche opportunity in the online vitamin market, I'd call $280 million a fair share considering that it was only projected to be marginally profitable, if at all, in 2015.

Small-cap specialty pharmaceutical Zogenix (NASDAQ:ZGNX) added 18.6% after updating Wall Street and investors on the development of more abuse-resistant formulations of its severe pain medication Zohydro ER.

Source: HazPhotos, Flickr.

According to Zogenix, it anticipates filing a supplemental New Drug Application with the Food and Drug Administration in October 2014 for a new abuse-resistant capsule, which could hit pharmacy shelves as soon as early 2015. Zogenix believes this will cut down on the potential for abuse by injection or nasal administration. Also, Zogenix is working with Altus Formulation to create an abuse-resistant tablet that it expects to file an sNDA for in the first-half of 2016.

As I stated earlier today, it's great to see Zogenix being proactive about physicians' concerns regarding the abuse potential of its FDA-approved pain med. If Zogenix is able to get both of these new formulations approved, it's possible that a sales surge in 2016 could turn the company profitable on a full-year basis. But, investors should also consider the risks involved here, which include a very crowded arena of chronic pain drugs, as well as Zogenix's ongoing losses before choosing to take the plunge.


Source: Iris, Flickr.

Finally, digital photo-based products and services provider Shutterfly (NASDAQ:SFLY) flashed to a 14.9% gain by day's end following a report from Bloomberg that noted that the company is working with investment bank Qatalyst Partners to find a buyer for the company. As the report also states, "preparations are at an early stage and may not lead to a transaction," but that interested parties could include private-equity firms, as well as e-commerce companies.

Although Shutterfly's top-line growth has been consistently good, its bottom-line performance has left a lot to be desired by investors. The reality is that its business model is easily susceptible to competition and margin fluctuations, which means that it needs to be incredibly successful in molding its brand image; otherwise, its share price could fall. I would suggest that at greater than 100 times forward earnings, there are enough reasons to avoid chasing this speculation higher, and would, instead, encourage you to watch Shutterfly safely from the sidelines.

These three stocks may have soared, but keeping pace with this darling stock that Warren Buffett just bought might prove impossible! 
Imagine a company that rents a very specific and valuable piece of machinery for $41,000 per hour .(That's almost as much as the average American makes in a year!) And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new free Motley Fool report details this company that already has more than 50% market share. Just click HERE to discover more about this industry-leading stock... and join Buffett in his quest for a veritable landslide of profits!

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 has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. 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.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

Something big just happened

I don't know about you, but I always pay attention when one of the best growth investors in the world gives me a stock tip. Motley Fool co-founder David Gardner (whose growth-stock newsletter was rated #1 in the world by The Wall Street Journal)* and his brother, Motley Fool CEO Tom Gardner, just revealed two brand new stock recommendations moments ago. Together, they've tripled the stock market's return over 12+ years. And while timing isn't everything, the history of Tom and David's stock picks shows that it pays to get in early on their ideas.

Click here to be among the first people to hear about David and Tom's newest stock recommendations.

*"Look Who's on Top Now" appeared in The Wall Street Journal which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.