There are always things to pay attention to on Wall Street. Recently, the headlines have been filled with news about the government shutdown and the impact it might have on the U.S. economy and specific companies. But this big-picture event hasn't been the driving force at Ellie Mae (NYSE:ELLI), Dominion Energy (NYSE:D), or Celgene (NASDAQ:CELG). These three top stocks to watch are all being driven by different issues that might just fly under the radar if you aren't paying close enough attention.
Here's what's going on at each of these U.S. stocks and why you should care.
Real estate is cold -- and that could be a good thing for Ellie Mae
Brian Stoffel (Ellie Mae): There are a lot of big names reporting earnings over the next month. But the one company that I'll be watching closely is Ellie Mae. The software-as-a-service (SaaS) company provides the Encompass Network for professionals in the mortgage and real estate markets. Subscribers pay a monthly fee to use the network and a usage-based fee for each mortgage that goes through the system.
With interest rates on the rise, business has slowed dramatically at Ellie Mae -- especially when it comes to refinancing. That has sent the stock down 40% from its June 2018 highs. I already added shares in November and will be listening closely when the company reports earnings in early February.
But I'm not hoping for a surprise earnings "beat" or growth in revenue that eclipses expectations. Instead, I'm keenly focused on how many seats (read: users) have signed onto the Encompass Network. Despite the economic headwinds last quarter, the number of active Encompass users increased 5% year over year to 192,300.
If Ellie Mae can keep growing its client list -- even by small margins -- in such a tight market, that speaks volumes for its ability to grab market share. When times are tough, the biggest players, Ellie Mae among them, can actually grow stronger in the long run by pushing out upstarts with fewer financial resources. That's why checking on seats booked on Encompass will be so important to me in the month ahead.
The deals are getting done
Reuben Gregg Brewer (Dominion Energy): One of the largest utility companies in the United States, Dominion Energy, has had a lot of moving parts lately. But that started to change in January, with more resolution to come in the months ahead. Which makes now a good time to look at the company's 4.8% yield, the high end of the utility space.
The first big resolution for Dominion was the completion of the SCANA acquisition on Jan. 2. This deal expands Dominion's footprint in states that have historically seen growing populations. And while the merger brings with it SCANA's nuclear troubles, Dominion was careful to keep the deal within its expected cost range despite vociferous calls for better terms. A lot of uncertainty ended when this deal closed.
The next big hurdle is Dominion buying its controlled limited partnership, Dominion Energy Midstream Partners, LP. The company closed this deal on Jan. 28, simplifying its business by bringing the pipeline assets it had sold to Dominion Energy Midstream back in house. Despite the uncertainty surrounding such acquisitions, the utility looks set to live up to its financial projections of 10% earnings and dividend growth in 2018. And it did so despite the additional hit of tax law changes that required it to rework its funding sources.
The next wild card is still a little less certain, and that's the construction of the Atlantic Coast Pipeline. That's a multiyear project that won't be done anytime soon.
With two key acquisitions done, now is the time to start looking at Dominion. Investors may reevaluate their dour view now that these clouds are starting to clear. Indeed, the fourth-quarter earnings update (scheduled for Feb. 1) should be very interesting.
Waiting to be gobbled up
Keith Speights (Celgene): You might not think that Celgene would be a stock to watch right now. After all, the biotech is basically just waiting to be gobbled up by Bristol-Myers Squibb (NYSE:BMY). BMS announced plans to acquire Celgene on Jan. 3, 2019.
However, there's actually a lot of intrigue surrounding Celgene. For one thing, BMS's offer was for a cash and stock deal that valued the biotech at $102.43 per share. But that price tag reflects a premium of nearly 17% over Celgene's current share price. Assuming the deal is finalized, investors who buy Celgene stock now could be in for a nice return pretty quickly.
That leads to another thing to watch with Celgene: the possibility that the deal won't go through. The transaction must first be approved by the shareholders of both BMS and Celgene. If either side votes against the acquisition, the deal is off. In addition, regulators must approve the BMS buyout of Celgene. Granted, it's likely that there won't be any showstoppers, but you never know with these kinds of things.
There's also the remote possibility that another big drugmaker could make a play for either BMS or Celgene before the proposed acquisition closes. Some speculated that AbbVie (NYSE:ABBV) might be interested in BMS, although recent comments by the company's CEO appeared to make such a move highly improbable. Celgene shareholders would love for another party to enter the fray.
Regardless of what happens, Celgene remains a biotech stock to monitor closely. And it's one that could still make investors plenty of money.
Brian Stoffel owns shares of Ellie Mae. Keith Speights owns shares of AbbVie and Celgene. Reuben Gregg Brewer owns shares of Dominion Energy, Inc. The Motley Fool owns shares of and recommends Celgene and Ellie Mae. The Motley Fool has a disclosure policy.