Investors are always hunting for the next big stock -- the dream stock whose price increases several times over when the market finally discovers it. It's easy to look back and see what the 10 best stocks of the past decade were. But for my part, I'm more interested in the tools that can not only help me find new stock ideas, but also have the resources necessary to evaluate tomorrow's greatest companies.
There is a tool that offers a variety of resources to help with finding tomorrow's leaders: Motley Fool CAPS, a 125,000-plus-member community of investors helping each other beat the market.
We've enlisted CAPS to screen for biotech companies and get the story behind some of the more highly rated stocks. CAPS' nifty screener will help us find stocks with:
- A market cap of at least $100 million.
- A three-year revenue growth rate of at least 20%.
- A price-to-earnings ratio of less than 25.
- At least 400 people making a call on the company.
Then we'll tap the collective intelligence of our CAPS members to see whether these companies present real opportunities -- or whether the numbers fail to tell the true story.
Opinions with the numbers
Below is a sample of stocks our screen returned. If you want to run this screen yourself, click here (keep in mind that results will be updated with the market).
|
Company
|
Revenue Growth Rate,
Past 3 Years
|
CAPS Rating
(5 stars max.)
|
|
Teva Pharmaceuticals (Nasdaq: TEVA)
|
24.0%
|
*****
|
|
Mylan (Nasdaq: MYL)
|
21.0%
|
*****
|
|
ViroPharma (Nasdaq: VPHM)
|
20.9%
|
*****
|
|
Celgene (Nasdaq: CELG)
|
51.6%
|
****
|
Data and star rankings from CAPS. All data as of Jan. 2.
Teva Pharmaceuticals
Israeli company Teva Pharmaceuticals is the world's largest generic drugmaker, with about 80% of its sales coming from North America and Europe. It recently completed its $7.5 billion buyout of Barr Pharmaceuticals, a deal which was open to potential delays when the Federal Trade Commission requested additional information this past fall, but will now help boost Teva's sales in the U.S. and Eastern and Central Europe.
The company has successfully done many "at-risk" drug launches (in which Teva markets a generic before a competitor's patent validity is decided in the courts) including a recent challenge by AstraZeneca. The two settled, which allows Teva to sell a generic version of AstraZeneca's asthma treatment Pulmicort Respules until 2019, when the latter expects its patent to expire. The strong track record gives nearly 97% of the 1,226 CAPS members rating Teva Pharmaceuticals confidence that it will outperform the market.
Mylan
Teva's smaller rival Mylan purchased Indian drugmaker Matrix Laboratories in 2006, and the generic drug business of Merck KGaA of Germany in 2007, which more than tripled the company's revenue. The acquisitions should allow it to compete better with its bigger rivals like Teva and Novartis.
With its much smaller size, JPMorgan analyst Chris Schott thinks Mylan has a lot of room to grow and recently noted that he believes the company will expand overseas and benefit from expanded generic use in countries like Japan. Mylan has also been pretty deft with "at-risk" launches itself. As a result, it recently announced that it'll launch generic versions of Novartis' Femara. More than 94% of 455 CAPS members rating Mylan see the company beating the S&P going forward.
ViroPharma
Not many companies can brag of gains in their stock in 2008, but ViroPharma joined other biotech stocks like Gilead Sciences (Nasdaq: GILD) and Amgen (Nasdaq: AMGN) in this class. The key is plenty of cash flowing into the firm's coffers, making ViroPharma a cash-rich small cap that many CAPS members believe has solid potential. The company is expected to expand its cash-generating ways, thanks to its recent acquisition of Lev Pharmaceuticals, which will bring Cinryze to market alongside its current drug, Vancocin. At this point, more than 97% of the 1,180 CAPS members rating ViroPharma think the company can continue to buck the down market and outperform the S&P
Celgene
Celgene is another biotech that generates strong free cash flow with a large pipeline of cancer drugs, earning it solid returns in 2008 and capping a massive run over the past decade. Large pharmaceutical companies continued to shop for biotechs in 2008, like Eli Lilly's (NYSE: LLY) purchase of ImClone Systems, and some CAPS members believe Celgene could be an attractive candidate. With strong future growth still expected, more than 95% of the 1,212 CAPS members rating Celgene are bullish.
Let 125,000 members be the judge
The collective wisdom of a huge pool of investors can help give context to a page of numbers developed through a stock screen. But even with an entire community of qualified opinions acting as the judge, individual investors are still the jury and should perform their own due diligence.
Run your favorite factors through the Motley Fool CAPS screener. It's totally free, and we think you'll like the results.
On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool's own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.
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