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 see 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 that 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.
BP Prudhoe Bay Royalty Trust (NYSE:BPT)
I went far beyond adding this one to my watchlist and actually added this one to my personal portfolio last week following its epic tumble that witnessed this trust losing more than 30% of its value in a week.
The reason for the drop was pretty simple: Both Seeking Alpha and an article in The Wall Street Journal have implied that BP Prudhoe Bay's market value was significantly higher than the $1.4 billion it stated it had left to pay out in annual dividends. Also, with the trust entitled to royalties up to the first 90,000 barrels produced each quarter, it doesn't help that it expects production to be short of that 90,000 mark for years to come.
But call me the eternal optimist, because I see the bearish thesis having multiple holes. One, it completely discounts the possibility that oil will rise between now and 2027 (when the trust predicts that it will cease to pay out dividends). The higher the price of oil goes, the higher its per-barrel royalty will rise and the more in dividends shareholders will collect. Furthermore, while BP Prudhoe Bay's chargeable costs per barrel are set to rise by 2020, between now and 2017 they are going to head higher by a meager $0.10 per year. This again leads back to the assumption that its royalties will remain higher than the implications of these previously bearish articles assuming the price of oil remains steady or rises. Only time will tell if I'm right, but it bears some watching!
Round 1... fight! The battle is set to begin between Medivation's Xtandi and Johnson & Johnson's (NYSE:JNJ) Zytiga following the approval of its prostate cancer drug Xtandi three months ahead of the PDUFA date by the Food and Drug Administration.
Xtandi, like Zytiga, is targeted at interfering with the production of testosterone in patients with metastatic castration-resistant prostate cancer that have been treated previously with docetaxel, but its pathway works differently than Zytiga. The market for prostate cancer drugs is gigantic -- it's the most commonly diagnosed cancer among men -- and some Wall Street analysts have pegged peak sales as high as $1 billion-$2 billion, which would make its current market value of $4 billion seem very reasonable.
However, let's keep in mind there will be hurdles along the way. For starters, Zytiga costs almost $2,000 less than Xtandi and J&J offers significant rebates and discounts for its drug. Also, let's not forget what a disaster Dendreon's (NASDAQ:DNDN) Provenge treatment has been. The drug's crippling $93,000 cost has stymied sales and has proven that obtaining FDA approval is really only half the battle. Keep your eye on Medivation moving forward.
Joy Global (NYSE:JOY)
Nobody is doing the happy dance these days when it comes to underground mining machinery manufacturer (say that three times fast) Joy Global. The company has been hit particularly hard by a slowdown in demand from China as well as weakness in coal orders as U.S. utilities continue to switch their facilities from coal-fired plants to cheaper-burning natural gas. Even Joy's backlog took a sizable hit, dropping to $2.8 billion from $3.1 billion in the previous quarter.
However, not all hope appears lost. Despite these woes, metal prices have been rapidly springing to life over the past few weeks (i.e., gold hitting $1,700/oz.), which might encourage miners to open their wallets and expand their production efforts. Don't forget, as well, that China and India, and even the U.S. for that matter, are still very much reliant on coal for the majority of their electric generation. At some point coal prices will bottom and Joy will see an uptick in orders.
Joy is still very profitable and generating a good amount of cash, so keep an eye on this stock.
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 BP Prudhoe Bay Royalty Trust to My Watchlist.
- Add Medivation to My Watchlist.
- Add Joy Global to My Watchlist.
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Fool contributor Sean Williams owns shares of BP Prudhoe Bay Royalty Trust, but has no material interest in any other 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.
The Motley Fool owns shares of Johnson & Johnson, Dendreon, Joy Global, and Costco. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson, and Costco, as well as creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that believes transparency comes first.