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. 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.
Normally when I add a company to the Watchlist, I have a purpose behind it -- i.e., I think it's going to make a big move up or down, and I feel confident in the direction of that movement. That is (but isn't) the case with biotechnology company Amarin, which I think is set for a huge move. The direction, however, remains as much of a mystery to me as it does investors.
Yesterday's news that AstraZeneca (NYSE:AZN) was purchasing Omthera Pharmaceuticals for up to $443 million (including $120 million in royalty incentives if sales targets are reached from its pipeline of drugs) sent ripples throughout the fish oil sector. Omthera's lead drug candidate, Epanova, is currently in late-stage trials to treat high triglyceride levels and help lower the chance of cardiovascular disease for high-risk patients. If approved by the Food and Drug Administration, it would be a direct competitor to Amarin's FDA-approved fish oil treatment, Vascepa.
On the downside, having AstraZeneca as a partner clearly gives Omthera an edge. AstraZeneca has an experienced sale and marketing team, and the simple fact that it snagged Omthera for only 45% the market value of Amarin is a concern for Amarin shareholders betting on a buyout. On the other hand, Omthera's buyout is a signal that with America growing wider in the waistline and cardiovascular diseases on the rise, that Big Pharma is looking toward fish oil drugs as a possible way to add some growth to their bottom line.
We really won't know a lot until Vascepa gets a few quarters of sales under its belt, but Amarin is sure to move big one way or another.
The nightmare continues for Exelon shareholders, who've been unable to catch a break since the recession. Yesterday, a downgrade from Deutsche Bank sent shares reeling nearly 8% as the research firm anticipates that capacity pricing will fall in the future and hurt Exelon's revenue growth. Tack on the fact that Exelon is already the nation's largest nuclear energy provider and nuclear energy is by far the most expensive at the moment, and you have problems on top of problems.
As for me, I still remain unconcerned about Exelon's future. For one, Exelon remains committed to expanding its portfolio of renewable energies. In 2011 it entered into a 230MW solar project in California with First Solar (NASDAQ:FSLR) and followed that with another 16.1MW project in Maryland last year, also with First Solar. With Chinese overcapacity crushing prices, both enterprises like Exelon and efficiency leaders like First Solar are benefiting with cheaper long-term energy costs and bigger sales volume.
I also find it very likely that Exelon will get some sort of government subsidy in the future to build additional nuclear facilities. Despite the fears surrounding nuclear energy, it's a clean-burning fuel source that could go a long way to helping America attain its energy independence.
A lot can happen between now and 2016, so I wouldn't allow one downgrade from Deutsche to rock your investment thesis.
Tesla Motors (NASDAQ:TSLA)
I know I just included Tesla in the Watchlist stocks a little more than a month ago, but this run-up is nothing short of ridiculous in my book. Tesla has transcended to the top of my prospective short-sale list shortly after reporting its first-ever quarterly profit and slightly raising its production forecast for the year to 21,000 units. The positives continued, with Tesla repaying the government's loan nine years earlier than it needed to.
However, there are also considerable worries I have with this electric vehicle manufacturer. To start with, I'm not sure how investors can trust a darn thing that Tesla's management promises when they have missed their production deadlines at least twice as often as they've hit them. Only in the past two quarters has production delivered met the forecast. Previous to that, production and design often fell well short of estimates or took longer than expected. Not surprisingly, even the Model X SUV was pushed back a full year! I don't understand how investors can't see that production is this company's weakest link. It doesn't matter if the demand is there if it can't ramp up production to meet that demand!
Valuation is another very big concern. With Tesla having roared to the stratosphere it's now valued at 75 times book, 13.5 times sales, and a blistering 113 times next year's earnings! This year the company is only expected to break even and yet it's nearly quadrupled! When the Fools disclosure policy permits, I'm very seriously considering purchasing puts in Tesla Motors as this run is simply unsustainable.
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:
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. 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, and recommends, Tesla Motors. It also recommends Exelon. 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.