Why American Apparel, Glu Mobile, and Achillion Pharmaceuticals Are Today's 3 Best Stocks

The S&P trudges higher on the kickoff of earnings season, while small-caps American Apparel, Glu Mobile, and Achillion Pharmaceuticals lead individual stocks to the upside.

Jul 11, 2014 at 5:15PM

We haven't been able to say this often recently, but the broad-based S&P 500 (SNPINDEX:^GSPC) limped into Friday's close with a modest gain, but still finished the week lower by nearly 1%.

Longview

As is typical with most Fridays, economic data was fairly light. The big report that investors were able to wrap their hands around today was the release of the monthly Treasury budget report. According to the figures, the Treasury ran a welcomed but expected surplus of $70.5 billion in June, up nicely from the $130 billion deficit reported in May. While budgetary issues rarely affect the day-to-day activities of the market, the long-term health of the U.S. economy is dependent on running in the black more than the red, especially with $17.6 trillion in national debt.

The other factor which had the S&P 500 bouncing around near the flatline was the official kick-off of second-quarter earnings reports this week. Generally speaking, it takes a week or two before earnings reports ramp up and flood the market, but investors are clearly eager to see if corporate growth is truly slowing down, or if the polar vortex in the first quarter was a one-time event.

By day's end, the S&P 500 trudged its way higher by 2.89 points (0.15%), to close at 1,967.57. Despite the tame move in the S&P 500, the following three stocks motored decisively higher.

Leading the charge to the upside was embattled apparel retailer American Apparel (NYSEMKT:APP), which gained 14.6% after completing a deal with hedge fund Standard General that secured the company $25 million in financing. As part of Standard General's lifeline, American Apparel will be required to overhaul its board of directors, and will lean on recently ousted CEO Dov Charney as a strategic advisor going forward.

Www
Source: Philip, Flickr.

I have to say that the situation at American Apparel has been nothing short of odd. I highlighted Charney as a questionable CEO in Jan. 2013, and challenged his merits as CEO and the company's chances of success back then. Since that time, it appears that things have gone from bad to worse. Being thrown a lifeline by Standard General may buy the company some time, but it does nothing to fix its endemically weak sales trends. American Apparel is giving off all of the danger warnings, and investors should heed those red flags and stay far away.

Mobile app developer Glu Mobile (NASDAQ:GLUU) surged by 11.7% after its CEO Niccolo de Masi noted in an interview with Bloomberg that its Kardashian game "might be our biggest game of the year." Glu Mobile's games are free to play, but the company makes money by luring users into making optional in-app purchases that can give them perks during their game play. Furthermore, research firm Cowen & Co. estimates that Kardashian could have annual revenue-generating potential of $200 million, which would be a game changer for Glu, which is only marginally profitable and expected to bring in just $161 million in revenue this year.

On one hand, Glu is an intriguing company with plenty of growth potential. It's clear that, by honing in on public figures and current events, Glu has been able to pull at users' heartstrings, and get them to play its mobile apps. Yet, the mobile app development space can be very hit or miss. This isn't to say that Glu won't succeed; but it does mean that paying a high multiple for an app developer often isn't wise because poor-performing games are bound to arise. I'd certainly suggest adding Glu Mobile to your watchlist; but, as an investor on the outside looking in, I'd rather wait for a sizable pullback before considering this as a viable investment opportunity.

Lastly, clinical-stage hepatitis C drug developer Achillion Pharmaceuticals (NASDAQ:ACHN) rose 8.7% after receiving positive commentary from Wells Fargo analyst Brian Abrahams. According to a note released earlier today, Abrahams believes Achillion's phase 1b study involving ACHN-3422, its nucleotide NS5B polymerase inhibitor, is proceeding as planned, and doesn't anticipate any safety or cardiovascular issues with the study.

Www
Source: Saint Louis University, Madrid Campus, Flickr.

This note actually carries weight, because Merck recently agreed to purchase Idenix Pharmaceuticals for $3.85 billion, a hefty premium to its previous closing price, despite it having a wholly clinical-stage hepatitis C pipeline. Many investors suspect that Achillion could be the next buyout target. I, for one, don't buy that chatter, and wouldn't suggest you invest in Achillion with the expectation of a buyout. Until Achillion can manage to get an investigational drug out of midstage studies, it remains nothing more than a watchlist candidate, at best.

Achillion's hepatitis C pipeline may offer plenty of potential, but compared to this revolutionary product, Achillion is likely to be eating dust! 
The best biotech investors consistently reap gigantic profits by recognizing true potential earlier, and more accurately, than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not just how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns, you will need The Motley Fool's new free report on the dream team responsible for this game-changing blockbuster. CLICK HERE NOW.

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, and recommends Wells Fargo. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers