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Why National Interstate, USANA Health Sciences, and Myriad Genetics Are Today's 3 Best Stocks

By Sean Williams - Feb 5, 2014 at 5:15PM

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The S&P 500 dips modestly following the monthly ADP Employment Report as National Interstate, USANA Health Sciences, and Myriad Genetics all flew higher.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

This is beginning to sound like a broken record, but it was yet another day of mixed economic data, which sent the S&P 500 (^GSPC -0.12%) swooning early in the trading session, only to crawl its way back to modest losses by day's end.

Pushing the S&P 500 lower this morning was a less-than-exciting ADP Employment Report, which showed gains of 175,000 private sector jobs in January, more or less in line with expectations. Unfortunately, the ADP report showed gains of 227,000 jobs last month, marking a significant month-over-month decline. Also fresh in the memory of investors is December's weak jobs report from the government, despite December's strong ADP report. Investors' fears that we could see a repeat in January are clearly on display today.

On the bright side, the January ISM Services reading came in at 54, an improvement from the reading of 53 in December, and signaling a modest expansion in the non-manufacturing sector. A higher ISM Services figure would bode well for service-oriented business, which is good news because many have been hit hard to start the year.

By days end, the S&P 500 had fallen by just 3.56 points (-0.20%) to close at 1,751.64, well off its intraday low of 1737.92 earlier this morning. This also marked the lowest trading point for the S&P 500 since Oct. 18.

Topping the charts today was specialty property and casualty insurer National Interstate (NASDAQ: NATL) which rallied 30.9% after receiving a tender offer from American Financial Group's (AFG -0.30%) subsidiary, Great American Insurance Company, for $28 per share in cash without interest. The deal values National Interstate at 26% above its closing price yesterday, and is set to expire on March 6 unless GAIC extends the offer or rescinds it. Considering that National Interstate closed roughly $1 above the offer price, it's conceivable that investors expect another bidder to emerge, or for GAIC to boost its offer price. As for me, I'm not quite convinced that a better bid will emerge with National Interstate missing Wall Street's estimates badly in each of the past three quarters, and would suggest investors be satisfied with the $28 tender offer.

Nutritional and personal care products maker USANA Health Sciences (USNA 0.42%) rallied 17.4% after reporting better-than-expected fourth-quarter results, and guiding its fiscal 2014 forecast well ahead of estimates. For the quarter, USANA reported $1.27 in EPS, $0.07 ahead of estimates, as revenue rose nearly 11% to $186.2 million, more than $10 million ahead of Wall Street's forecasts. USANA benefited from a markedly lower tax rate, as well as higher product sales. Furthermore, USANA's 2014 full-year EPS guidance of $5.80-$5.95 on revenue of $790 million to $810 million is well ahead of the consensus estimate of $5.64 in EPS on $757.7 million in sales. With 11 straight years of record sales under USANA's belt and the company valued at just 12 times forward earnings, I'd certainly support the idea of additional upside in its shares.

Finally, molecular diagnostics company Myriad Genetics (MYGN -1.24%) surprised investors and soared 15.1% after delivering strong second-quarter earnings results, announcing an acquisition, and boosting its full-year guidance. For the quarter, Myriad announced a 37% increase in revenue, to $204.1 million, as adjusted EPS rose 57%, to $0.66. What really got investors excited was the $270 million purchase of privately held rival Crescendo Bioscience, which will expand Myriad's diagnostics portfolio to include the rheumatoid arthritis market. Because of this purchase, Myriad raised its full-year revenue forecast to a range of $740 million-$750 million on EPS of $2.09-$2.12 from its previous guidance of $700 million-$715 million in revenue, and $1.92-$1.97 in EPS. While it's clear that molecular diagnostics are going to be a key driver of personalized cancer treatments during the next decade, the potential for a huge Medicare rate reimbursement cut for its BRACAnalysis gene test, which comprised 69% of its total revenue during the quarter, may hamper its share price in the interim.

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.

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Stocks Mentioned

S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$4,140.06 (-0.12%) $-5.13
Myriad Genetics, Inc. Stock Quote
Myriad Genetics, Inc.
$27.12 (-1.24%) $0.34
USANA Health Sciences, Inc. Stock Quote
USANA Health Sciences, Inc.
$69.76 (0.42%) $0.29
American Financial Group, Inc. Stock Quote
American Financial Group, Inc.
$127.71 (-0.30%) $0.38

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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