I follow quite a lot of companies, so the usefulness of a watchlist to me cannot be overstated. Without my watchlist, I'd be unable to keep up on my favorite sectors and what's really moving the market. Even worse, I'd be lost when the time came to choose which stock I'm buying or shorting next.
Today is "Watchlist Wednesday," so I'm discussing three companies that have crossed my radar in the past week -- and at what point I may consider taking action on these calls with my own money. Keep in mind, these aren't concrete buy or sell recommendations, nor do I guarantee I'll take action on the companies being discussed weekly. What I can promise is that you can follow my real-life transactions through my profile, and that I, like everyone else here at The Motley Fool, will continue to hold the integrity of our disclosure policy in the highest regard.
After months of intense bickering, GlaxoSmithKline hammered out a deal this week to purchase Human Genome Sciences
The deal makes a lot of sense from the perspective of both companies. Glaxo is HGS' marketing partner on Benlysta, the lupus treatment approved by the Food and Drug Administration last year. HGS, in turn, could use the safety of Glaxo's deep pockets. It's also worth noting that HGS and Glaxo are partnered together on two of HGS' phase 3 clinical trials. Really, it's a smart deal on paper for both companies.
The question now becomes: Can Glaxo turn Benlysta around? Sales for the drug should have bolted out of the gate, but grew only 21% sequentially over the previous quarter. The natural ebb and flow of the disease coupled with the drug's high annual cost has deterred doctors from prescribing the drug as often as HGS had originally anticipated. That could mean Glaxo is taking on quite a risk paying $3 billion for HGS, especially considering that darapladib, HGS' phase 3 atherosclerosis drug, failed to impress in clinical studies thus far. Time to start sweating, Glaxo shareholders!
Sticking with the biotech sector, if you haven't taken me up on my many attempts to get you to add Jazz Pharmaceuticals to your Watchlist, maybe you'll consider listening to me this time. Jazz has been the little engine that could in the biotech sector and has been growing both organically and through acquisitions.
In September, Jazz announced the acquisition of Azur Pharma, which immediately added to Jazz's bottom line, diversified its product portfolio, and boosted its cash position even further. However, it's Jazz's ability to execute that makes it a "pound the table"-type stock. When I first recommended the company last year, it had raised its EPS forecast to around $3 per share. Jazz finished fiscal 2011 by reporting EPS of $3.52. In January, when I predicted Jazz had a chance to nearly double in 2012, Wall Street's forecasts stood around $4 per share in EPS. Those forecasts have since jumped to $4.66.
Jazz's growth is all thanks to its blockbuster narcolepsy drug Xyrem, which saw sales grow by 72% in the first quarter, as well as its continued ability to launch and grow drugs from its pipeline. At a forward P/E of just 10, this company should be firmly planted on your radar.
Any time a former highflier hits a new 52-week low, I tend to pay close attention. JDS Uniphase, a provider of optical products and performance equipment to the telecommunications sector, has been absolutely hammered along with the rest of the communications equipment companies as big telecom companies have curtailed an increase in spending. Smartphone and tablet data is booming, but that hasn't translated into a large increase in infrastructure build-out... yet.
We witnessed further evidence of this slowdown yesterday, when equipment supplier Alcatel-Lucent
However, for JDS Uniphase and the fiber-optic sector in general, which is very well-capitalized, a minor hiccup in spending can be easily remedied by controlling production and inventory levels. I wouldn't go so far as to say JDS Uniphase is on my buy list, or even CAPScall-worthy just yet, as its profit projections could deteriorate further. But I am saying that over the long term, demand for fiber-optic products is only going to explode higher and JDS could be a nice pickup if it continues to drop.
Is my bullishness or bearishness misplaced? Share your thoughts in the comments section below, and consider following my cue by using these links to add these companies to your free personalized Watchlist to keep up on the latest news with each company:
- Add GlaxoSmithKline to My Watchlist.
- Add Jazz Pharmaceuticals to My Watchlist.
- Add JDS Uniphase to My Watchlist.
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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He's a total nerd when it comes to making lists. 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.
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