Despite all of Wall Street's conflict and contention, a fortunate few companies enjoy unanimous support among professional analysts. If the market's movers and shakers all believe these companies will beat the long-term averages, well, surely they will -- right?
Not so fast! With help from the 180,000 members of Motley Fool CAPS, we'll see whether these high-flying favorites deserve analysts' unwavering support. Just because Wall Street loves 'em doesn't mean you have to. Analyst sentiment is just the jumping-off place for your own research.
No. of Analysts
52-Week Price Change
Magnum Hunter Resources
Source: Motley Fool CAPS and Finviz.com.
Last year was seemingly the year of hepatitis C, as pharmaceuticals went gaga buying up biotechs developing treatments. Roche bought Anadys, Bristol-Myers Squibb bought Inhibitex, Gilead Sciences bought Pharmasset. Flying under the radar is the work Dynavax Technologies is doing with hepatitis B.
Although no one has stepped forward to buy it out just yet, Dynavax has had some promising results from the work it's doing with Heplisav, a vaccine for the illness. The FDA is reviewing its application for the treatment and will make a decision by February; it's also under review by European authorities. With other drugs under development, including an asthma treatment being funded by AstraZeneca, Dynavax looks like it's ready to capitalize on its hard work, though not everyone is so sure. And though the CAPS community is also pretty supportive, with 94% of those rating the biotech marking it to outperform the broad indexes, the middle-of-the-pack three-star rating it's garnered suggests they think there are better places for your money.
Two-star Sunesis Pharmaceutical is also seen as having a promising pipeline, plus collaborative agreements with Millennium Pharmaceuticals and Biogen Idec, and the market's responded to its prospects. But the CAPS community believes these drug developers need to prove themselves before according them higher ratings. The FDA approval process is a well-known minefield of traps.
Tell me in the comments section below if either of these two promising drug companies will be able to move to higher plateaus.
What the frack?
Moving from tiny drug developers to gargantuan oil industry services player Halliburton, we find a company that's been wracked by the debate over fracking. As environmentalists crusade against the process of hydraulically fracturing subterranean rock formations by injecting fluids under high pressure to get at the oil and gas locked within, industry players like Halliburton, Heckmann, and CARBO Ceramics have all been affected.
Both Heckmann, which supplies and disposes of the water and fluids used in the fracking process, and CARBO, which provides ceramic beads to keep the fissures propped open, have seen their shares tumble 60% from recent highs.
Fracking is responsible for a large portion of Halliburton's revenues. Completion and production services account for 79% of its operating revenues, and fracking played a large role in the 84% surge in revenues it enjoyed in the segment last year. While analysts expect the debate over fracking and the glut of natural gas to take its toll on Halliburton for the coming quarter, they still see it enjoying 15% annual growth in earnings of the long haul.
The inventory is also playing against Magnum Hunter Resources, which has substantial holdings in the Williston Basin. But like others in the industry, it made a move to the natural gas liquids market that traditionally enjoyed higher margins. But with NGLs being the "obvious" place to drill for everyone, margins are beginning to erode. Just like with investing, when the sensibility of where to drill is clear to everyone, the easy money has likely already been made.
Speaking of erosion, the whole premise of NovaGold Resources' reason for existing has been just about washed away as Barrick Gold decided their Donlin Creek gold mine joint venture no longer meets its investment criteria. With current market conditions, the project no longer makes economic sense. Perhaps in the future it will, so Barrick is still moving forward with getting the necessary permits, but it's otherwise being put into mothballs.
Having sold off just about everything else to concentrate on the JV, NovaGold finds itself in a difficult position. I recently noted that maybe it won't decide to sell off its Galore Creek project now, but "it has a lot less levers to pull now than it did before." I rated it to underperform the broad market averages on CAPS, but tell me in the comments box below where you think NovaGold goes from here.
Agree to disagree
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Editor's note: A previous version of this article incorrectly stated that Dynavax is receiving milestone payments from GlaxoSmithKline for work it's doing with Heplisav. Dynavax does have a partnership with GlaxoSmithKline on its TLR inhibitor program but retains worldwide rights to Heplisav. The Fool regrets the error.
Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Heckmann and CARBO Ceramics. Motley Fool newsletter services have recommended buying shares of Halliburton and Gilead Sciences. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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