Wall Street Loves These Stocks. Should You?
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. But 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
CAPS Rating (out of 5)
52-week Price Chg.
|Chesapeake Granite Wash (NYS: CHKR)|
|EXCO Resources (NYS: XCO)|
|Skyworks Solutions (NAS: SWKS)|
|YM BioSciences (NYS: YMI)|
|Zalicus (NAS: ZLCS)|
*Chesapeake Granite went public 11/11/11
A dry hole
There's something of a pell-mell rush away from the dry gas market and into natural gas liquids, as everyone tries to capitalize on the higher profit margins that liquids enjoy. So it should be no surprise that Chesapeake Granite Wash, the royalty trust spinoff of Chesapeake Energy, is also focusing on oil and NGLs, if for no other reason than that the Granite Wash region, where it's directed to drill, is awash in such resources. The risk remains that if everyone abandons dry gas for liquids, the high margins that drillers are enjoying will evaporate, though at less than seven times earnings estimates, it seems like a lot of the concern is priced into the trust's stock.
Unfortunately, that relief isn't available to EXCO Resources, as the ratings agencies downgraded its credit further into junk territory, because it's almost wholly reliant on dry gas for revenue. Without any real recovery under way in pricing, its options are limited, and it doesn't have the liquids market to tap into. Billionaire investor Wilbur Ross has been banking on a recovery, though, buying tens of millions of dollars worth of stock, and betting that the industry will make hay on coal's woes.
Pain avoidance therapy
It's the long-term that analysts are eyeing when they look at biotech sensation YM BioSciences, which got a much-needed boost when it reported positive data in ongoing early- and mid-stage trials for its treatment of myelofibrosis. I've previously noted my bearishness towards outperformance, because the market for the drug doesn't appear to be particularly large, as once thought, and a rival's drug is already on the market. A once-daily dosage versus twice daily doesn't seem like enough of a change to displace the leader here. No doubt it will get a boost from further positive testing results, but I think there's a long road to go before the real results are in.
It's a different story at another biotech, Zalicus, which actually has a product on the market, and another potential big winner under development. While investors have been watching the ups and downs of its pain-management therapy, Exalgo, because it's the one product it's actually been selling, they also need to keep an eye on Synavive, a treatment for immuno-inflammatory disorders. Top-line results are expected next month that could cause its stock to rise in anticipation.
Although its shares have been cut in half over the past year, it's recovered more than 40% from its low point, after partner Covidien agreed to let Watson Pharmaceuticals produce an Exalgo knock-off. But as I pointed out at the time, it reserved the 32 mg dosage for itself, because it's counting on that version to be a big seller. Because Zalicus has a possible winner in Synavive coming up for review, and a better seller of its successful pain management treatment on the horizon, I've marked it to outperform the broad indexes on CAPS. Let me know in the comments box below, or on the Zalicus CAPS page, if you agree that the biotech has lots of ground it can and will make up.
Chipmaker Skyworks Solutions hasn't had to worry about competition, per se, eating into performance. Rather, it just needs to make sure Apple keeps selling iPhones, and it can continue coasting on its coattails. The latest quarter from the consumer gadget giant had some worrying it lost its mojo, as iPhone sales dipped below expectations; but with the iPhone 5 expected to hit the shelves this fall, it's more like the tide rushing out as a tsunami builds up in the ocean and then comes crashing down, obliterating everything standing in front of it.
Already analysts are predicting 50 million units to sell on the iPhone 5's debut, so that should wash away any concerns investors might have about Skyworks faltering. With a backup plan of being included in Samsung's latest and greatest smartphones, the chipmaker seems poised for some smooth sailing.
I've already bet on a strong showing on CAPS, and with 129 All-Stars also weighing in on Skyworks, only 10% think it can't beat the Street from here on out. So tell me in the comments box below, or on the Skyworks Solutions CAPS page, whether you agree it will be calm waters for this chipmaker.
Agree to disagree
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The article Wall Street Loves These Stocks. Should You? originally appeared on Fool.com.Fool contributor Rich Duprey owns shares of Apple, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Chesapeake Energy and Apple.Motley Fool newsletter services have recommended buying shares of Covidien and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. 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.