The Stocks Wall Street Loves
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 highflying favorites deserve analysts' unwavering support.
CAPS Rating(out of 5)
CAPS Bullish Sentiment
Number of Wall Street Analysts
52-Week Price Change
|SandRidge Energy (NYS: SD)||*****||97%||17||29%|
|Travelzoo (NAS: TZOO)||**||72%||3||(11%)|
|Zalicus (NAS: ZLCS)||***||95%||10||(24%)|
Source: Motley Fool CAPS.
As you can see, there's a wide range of results so just because Wall Street loves ' em doesn't mean you have to. Use the list as a jumping off place for your own research.
Hitting the gas
Natural gas still makes up the vast bulk of SandRidge Energy's production, but the company's focus has decidedly changed toward oil, and its CEO has said, "Oil is our future."
SandRidge's oil production doubled last quarter after the addition of Arena's assets to its portfolio, or 70% of the increase it saw, but the still means organic production was up 30% at a time when natural gas production fell 11% from the year-ago period. And even though it realized higher prices for its natural gas assets, oil prices climbed 42% year on year, illustrating the correct bet SandRidge made in switching gears. Chesapeake Energy (NYS: CHK) is following a similar playbook.
The risk for investors is that it's increasing its capital spending program despite carrying a large debt load. It's going to double its rig count in Oklahoma and Kansas and is raising its capital-expenditure plan this year to $1.8 billion followed by a similar amount next year. But it has just $4.6 million in cash on its balance sheet against almost $2.9 billion in debt.
To help pay for the growth, it IPO'd SandRidge Permian Trust and is considering selling off other assets. The strategy has the blessing of Wall Street and a large portion of the CAPS community, though Charlie9665 is worried it's spending beyond its means.
Let us know in the comments section below or on the SandRidge Energy CAPS page whether you think management is on the right track, and add it to your watchlist to be notified of the latest developments.
Not discounted enough
Based on the strength of its local deals newsletter, Travelzoo reported that profits soared 62% in the third quarter as it recorded the fastest growth in revenues in the last five years. It was heavy advertising on its new local-deals promotions that caused it to badly miss expectations last time out, but it enjoyed 14% growth in newsletter subscriptions from last year, and they were up 3% sequentially.
Yet I still find a lot of risk here. Deals of the day have low barriers to entry, and there is no competitive moat to protect companies. One of the things Groupon had going for it was its brand awareness, but now that everyone offers local deals, the value of its IPO continues to shrink.
Travelzoo may very well get lost in a menagerie of companies offering discounts, too, including online travel agents Expedia (NAS: EXPE) and priceline.com (NAS: PCLN) , which responded with its own "Tonight Only" offerings to combat the flood of deal discounters.
Almost a third of the CAPS All-Stars rating Travelzoo think it will end up being caged in by the plethora of companies in its space, but add the travel site to your watchlist to see if it proves the critics wrong, and see what others are saying by heading over to the Travelzoo CAPS page.
Pain and immuno-inflammatory-disease drug developer Zalicus is another stock that's been knocked around, particularly after second-quarter revenues fell on losses. Zalicus generates revenues through R&D collaborations with Novartis, Amgen (NAS: AMGN) , and Japanese pharmaceutical Eisai. It also got half a million dollars from Covidien for sales of Exalgo. Analysts expect royalties for Exalgo to hit $36 million over the next two years, with and Synavive now in midstage trials, the prospects still look strong for growth.
Yet as the Fool's Rich Smith wonders, would you rather "buy a profitable, slow-growth pharmaceutical giant today, or pay 37 times sales for the chance of owning a bargain tomorrow?" Since that was written, Zalicus' P/S ratio has fallen to a more manageable 17 times, allowing investors to wonder whether now is the time to fuss about purchasing shares.
With a strong pipeline of drugs, CAPS member MichiganDave thinks Zalicus makes a good bet here: "This biotech has several new drugs in various stages of development plus they have partnered with other drug makers on already developed and on sale products. Present market jitters are the cause of recent price problems but when that all clears, this Stock will put smiles on the faces of investors who demonstrated the strength to buy and stay."
Add Zalicus to the Fool's free portfolio tracker and tell us on the Zalicus CAPS page if you sense this is a good place for your money.
Agree to disagree
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page.
Sign up today for the completely free service, and tell us whether these stocks deserve to have Wall Street marching lockstep.
At the time this article was published Fool contributorRich Dupreyholds no position in any company mentioned. Check out hisholdings and a short bio.Motley Fool newsletter serviceshave recommended buying shares of Novartis, Travelzoo, priceline.com, Chesapeake Energy, and Covidien. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.