3 Top U.S. Stocks to Watch in February

These companies all have possible major catalysts in 2019 that could lead to large gains for investors.

Tyler Crowe
Tyler Crowe, Sean Williams, and Brian Stoffel
Feb 22, 2019 at 9:18PM
Industrials

With the market roaring back after a brief decline at the end of 2018, finding great investments at the right price is getting a little harder. One of the things worth considering as your next move is investing in companies that have some monumental things happening in 2019 that could be catalysts for growth. 

So we asked three of our Motley Fool contributors to each highlight a stock with major catalysts in 2019 that could be a big deal for the stock price. Here's why they picked Axon Enterprise (NASDAQ:AAXN), Intercept Pharmaceuticals (NASDAQ:ICPT), and Tellurian (NASDAQ:TELL)

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The two things I'm really watching with Axon

Brian Stoffel (Axon Enterprise): Axon -- the company behind TASER stun guns, Axon body cameras, and the Evidence.com software-as-a-service tool -- has yet to announce when fourth-quarter earnings will be released. Last year, they came out on Feb. 27. Assuming the company stays in that time frame, I'm eagerly awaiting results.

When the company reports, however, I won't be focused on the headline numbers like revenue and earnings. While those are important in their own right, there are two more specific things I'll be looking at: Evidence.com seats booked, and comments on the rollout of Axon Records.

The crux of my own investment in Axon is the fact that Evidence.com is protected by a huge moat in terms of high switching costs. Once police departments start storing and analyzing body camera footage on Evidence.com, they would be loath to switch. That's why I consider each additional seat (officer) on the platform so important. For perspective, the company ended last quarter with 325,200 cumulative seats booked.

And though Axon Records isn't expected to be released until the second half of 2019, I'll be listening closely to the conference call to make sure the release is on time. This service -- which has a huge addressable market -- promises to use body camera footage and artificial intelligence to fill out paperwork for officers and cut down on the time they spend at their desks. If it works as promised, Axon Records has the potential to be a huge tool for the company.

The binary event of the year 

Sean Williams (Intercept Pharmaceuticals): Without question (and I do speak of this in partly biased fashion as a shareholder), the U.S. stock to watch in February is Intercept Pharmaceuticals.

The reason Intercept gets my nod is that it recently reported what could arguably be the most anticipated binary event of the year in the biotech space: phase 3 results in the Regenerate trial for Ocaliva as a treatment for nonalcoholic steatohepatitis (NASH). In easier-to-understand language, NASH causes fibrosis of the liver. It affects between 2% and 5% of the U.S. adult population; is expected to be the leading cause of liver transplants by the following decade; has no cure; and can lead to liver failure, liver cancer, or death, if untreated.

Intercept had two co-primary endpoints for the Regenerate study: 1) a statistically significant improvement in fibrosis (at least one stage) without a worsening of NASH, and 2) NASH resolution. The results did show a statistically significant reduction of at least one stage for 23.1% of stage 2 and 3 liver fibrosis patients receiving the 25 mg Ocaliva dose, the highest dose tested. This was practically double the 11.9% of patients in the placebo arm who saw a significant reduction in fibrosis. As for NASH resolution, there was a positive trend for the Ocaliva-dosed patients (10 mg and 25 mg), but it wasn't considered statistically significant (8% for the placebo, 11.2% for 10 mg, and 11.7% for 25 mg).

Aside from just meeting one of its primary endpoints, a lot of focus was put on safety. Though the severe adverse events profile was pretty consistent across the board, there was a notable increase in mild-to-moderate pruritus (itching) cases in the high-dose Ocaliva arm, as well as withdrawals from severe pruritus in the high-dose group. It'll be particularly interesting to see what the Food and Drug Administration's panel has to say about Ocaliva from a safety standpoint, albeit it is already approved to treat primary biliary cholangitis. 

Long story short, Intercept is aiming to file for approval in the second half of this year, which would put the drug on track for perhaps a mid-2020 launch -- or possibly a tad sooner -- if approved. As a first-to-market type medicine, Ocaliva is going to have a short but unobstructed pathway to potentially billions in revenue. I still believe the company to be modestly undervalued, but am eager to see what the future holds.

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Check out the latest Intercept and Axon earnings call transcripts.


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Big announcements coming soon

Tyler Crowe (Tellurian): Tellurian, a start-up company looking to build a liquefied natural gas (LNG) export facility in the U.S. Gulf Coast, is on the precipice of making some major announcements that will determine the fate of the company in the next few months. It recently received the final environmental impact statement from the federal government, one of the last regulatory hurdles, and earlier this month it signed a memorandum of understanding with a major LNG buyer in India that will invest in Tellurian's export facility. 

For the past few years, Tellurian's entire investment thesis has been predicated on the hope that the company could get past these regulatory hurdles and sign up equity partners to help finance the project. That's why these two recent events are so significant: They are the first signs that what was once a long-shot investment is not quite as long a shot. Over the next few months, we should expect more news related to signing up equity partners and management giving the final investment decision sometime in the first half of 2019.

There are still a lot of things that need to go right for Tellurian to realize its potential as an LNG exporter, but these early announcements are promising signs. Those who consider this stock early on in the development process could be handsomely rewarded.