Best Stocks 2011: Siga Technologies
by Dennis Slothower, editor Stealth Stocks
Last year for my favorite stock pick, I recommended IMAX which more than doubled. This year I would like to recommend Siga Technologies Inc. (SIGA), a bio-defense company that o"ers the same kind of upside potential for 2011.
In 2004, the US started an initiative called Project BioShield, which gave the government the right to purchase and stockpile vaccines and drugs to fight anthrax, smallpox and other potential agents of bio-terror.
SIGA is a leader in the development of pharmaceutical agents to fight potential bio-warfare pathogens and their ST-246 drug is considered to be the only known cure for smallpox, which the government is keenly interested in.
Permalink: [631] Top Stocks To Buy - Best Stocks 2011
Recently, BARDA has stated their intent to award SIGA a $500 million contract, with options that potentially could be as high as $2.8 billion in orders. However, SIGA is being challenged in court by a competitor as being too big as a company to qualify for the government contract.
In fairness, BARDA has announced plans for a market survey to determine, whether there are any qualified small businesses with the capacity to produce an adequate supply of smallpox antiviral medication for the National Strategic Stockpile. It is unlikely that a small company will be able to meet the government's needs as the drugs expire and need to be constantly replaced.
It is expected that SIGA will win this contract and if so investors could be rewarded with a double or triple in appreciation.
Best Stocks 2011: Timberline Resources
by Gene Arensberg, editor Got Gold Report
Timberline Resources (TLR) is a soon-to-be gold producer that we believe has been overlooked by the market. However, we doubt it will remain overlooked for much longer.
Overall, I consider this a strongly undervalued stock that is highly likely to have a string of excellent news in 2011.
Not exactly a household name, Timberline's management teamed up with the premier underground mining and development company in North America, Small Mine Development (SMD), to develop the Butte Highlands gold deposit just south of Butte, Montana.
Timberline provided the project; SMD provides the development funding and knowhow to bring the gold ore out from under Nevin Hill.
When we visited the future mine in June of 2010, the 16-foot tall and 14-foot wide development ramp had already been excavated nearly 1,000 feet down. Timberline shareholders benefit from the SMD partnership because the company did not have to heavily dilute the share structure in order to raise the development capital
to get the gold ore out of the ground.
In addition, the company will spare investors the cost of building an expensive processing mill because the ore can be hauled to nearby existing third-party processing facilities already permitted and operational in Montana. Once the development capital has been recovered through production, the partners will share the net proceeds of the gold mined at Butte on a 50/50 basis.
Timberline estimated in 2010 that the cost of production for the gold would be less than U.S. $500 the ounce given the richness (high grade) of the deposit. With gold above $1,300 the ounce that means that the Butte Highlands project should enjoy significant positive cash ?ow once production, estimated to be about 50,000 to 70,000 ounces per year, begins.
The mine could be operational for approximately ten years at that production level, perhaps longer if there are additional resources discovered just ahead.
Best Stocks 2011: Yongye International
by Jim Trippon, editor Global Profits Alert
Yongye International (YONG) is a leading developer, manufacturer, and distributor of plant and animal nutrient products in the People's Republic of China.
Its plant nutrient product can significantly increase the plant's output and nutritional value and improve its taste.
As a result of receiving greater value in the marketplace, Yongye says its product helps increase farmers' incomes and improves their living standards. Directly addressing the need for greater e#ciency and more environmentally friendly require?
ments in the agricultural sector, Yongye's products dramatically increase the quality of crops and yields, and improve the health of livestock, according to the firm. The company is striking for its valuation with a bargain basement PEG ratio of only 0.15 Yongye has impressive financials with gross margins above 57 percent and a profit margin of 24.86 percent. Earnings per share are expected to climb 43 percent next year.
While the company has only been in operation a short amount of time, its predecessor, Inner Mongolia Yongye Company, had over 15 years' operational history which it has passed on to Yongye.
From this experience, Yongye International says it aims to inherit its predecessor com?pany's managerial experience and corporate culture to continue emulating its long-term success.
Learn more about this financial newsletter at Jim Trippon's Global Profits Alert.
Best Stocks 2011: Aastrom Biosciences
by John McCamant, editor The Medical Technology Stock Letter
We are recommending Aastrom Biosciences (ASTM) as our top stock recommendation for 2011 because we believe that they are the clear leader in the regenerative stem cell space.
The company is focused on the development of autologous cellular therapies for the treatment of cardiovascular diseases utilizing its Tissue Repair Cell (TRC) technology. We are impressed with the Phase II clinical data sets we have seen in Critical Limb Ischemia (CLI) and ASTM will start a Phase III development program to treat CLI patients in 2011.
More importantly, we believe that ASTM has the experienced and motivated management team with a proven track record of creating shareholder value. Tissue repair cell (TRC) technology is ASTM's platform for processing a patient's bone marrow cells into a therapeutic treatment. The collected sample of bone marrow will contain mostly hematopoietic and endothelial stem cells.
Simply put, ASTM's technology increases the amounts of other types of cells in a way that mimics the response to a wound, increasing the sample's regenerative properties. When the cells are re-inserted into the patient they act in harmony to regenerate the vasculature (in the case of CLI).
ASTM has published convincing research, corroborated by independent experts, that a mixed population of stem and progenitor cells is optimal for regenerating tissue, and it makes sense intuitively that many cells will work better than a single type since the body naturally uses many di"erent cell types acting in concert. In addition to the CLI clinical program, ASTM also has an ongoing program to use the TRC technology to treat dilated cardiomyopaty (DCM).
DCM is an enlargement of the heart due to weakening, leading to further degradation of cardiac function and associated with end- stage heart failure.
The only option left for these patients is a heart transplant, but ASTM's technology may help to regenerate the heart and add time and quality to these patient's lives. Both of these clinical programs and ASTM's TRC technology are protected by a strong intellectual property portfolio.
We are very familiar with ASTM's new CEO, Tim Mayleben, who took over the reins at the Company late last year.
Mr. Mayleben served as COO of Esperion Therapeutics, where he led the raising of more than $200 million in venture capital and institutional equity funding. On top of that, far and away his most impressive achievement was when Tim led the negotiations that triggered the acquisition of Esperion by Pfizer in December 2003 at a huge premium.
Tim has significant operations experience and has no pie-in-the-sky illusions regarding the di#culty of navigating new technologies through the FDA gauntlet. We have found through the years that it is much harder to get new technologies to market than anyone has forecasted.
This puts an even higher premium on quality management, as the promise of a technology is not enough in the hands of poor leadership. The upcoming year is shaping up to be an excellent time for ASTM. The company has recently raised cash that will enable them to start their Phase III progrma for CLI patients in 2011. We could also see the CLI Phase II data published in a peer-reviewed medical journal, which would be an important validatation of the Company's technologies and drug dvelopment candidates.
Interestingly, publication of Phase II data was one of the main drivers that got Esperion bought by Pfizer for a huge premium.
We have been impressed with ASTM's management team and have growing confidence that they will continue to deliver and create value for their shareholders. With the recent financing out of the way we believe the stock is poised to regain momentum. We are recommending ASTM as a buy under $3.50 with a one year target of $7.
Best Stocks 2011: Canadian Oil Sands Trust
by David Dittman, contributing editor Canadian Edge
Canadian Oil Sands Trust (COSWF) has clearly lagged broad-based and energy-sector benchmarks alike over the trailing 12 months. A series of unplanned turnarounds at the Syncrude operation, of which Canadian Oil Sands owns 36.7 percent, have analysts questioning whether rising costs will ever allow Canadian Oil Sands to really benefit from elevated oil prices.
And the very skeptical wonder if actual output will ever match Syncrude's capacity potential. All in all, after years of hype and outperformance the bar is now set rather low for Canadian Oil Sands. The stock is likely to revert back to its usual pattern of trading in sympathy with crude oil prices, a relationship that did break down in 2010.
New demand from Asia, old demand in the developed world and a desire from investor for hard assets will keep the per barrel price of oil elevated over the next 12 months.
Canadian Oil Sands will restrain the excruciating growth of unplanned turnaround costs, and Syncrude will get on the path to realizing its potential.
At the new rate of CAD0.20 per share per quarter, the stock will yield about 3 percent. The stock has taken a hit in the second half of 2010, and management has shown it will boost the payout to re?ect upside oil-price surprises. Soon-to-convert Canadian Oil Sands Trust is a solid total return play on one of the world's most intriguing resource stories, set up for capital appreciation as well as dividend growth. Buy it up to $28.
Best Stocks 2011: Catlin Group
by Vivian Lewis, editor Global Investing
Insurers benefit when things go wrong. That explains our latest pick, Catlin Group (CNGRY). Incorporated and regulated in Bermuda, listed primarily in London as CGL, the stock's ADR is equal to two British shares.
It is the largest syndicator at Lloyd's of London, the reinsurance business. It's also a favorite holding of institutional investors.
It very conservatively invests its premiums, in cash and fixed income with only 2.5% in hedge funds, yet it managed to produce a return on equity of 1.8% in H1 and of 2.9% in 2009 and Q3.
It keeps raising its dividend, more steadily if you buy in sterling than the ADR. Given its current yield of 6% I'm satisfied with the payout but Citigroup analysts say it will go to 7.7%..
It's a family businees, under CEO Steve Catlin, established as a Lloyd's underwriter in 1984.
It's green, funding the Catlin Arctic Survey to measures the thickness and density of ice foes in the Arctic Sea and carbon dioxide absorption (ocean acidification). Nice but not why to buy.
Rather, you should buy because Catlin is a globally diversified insurance business operating 88-89% in US dollars. It is quick to develop new businesses to benefit from macro-economic trends.
It shifted its casualty lines from insuring British solicitors and surveyors, to hot button more profitable US insurance lines: medical malpractice; directors and o#cers (D&O) insurance; cover for architects, engineers, and construction and design professions; and environment risk.
Catlin justifies these new lines (priced by its experienced actuaries) as "short tail" controlled latent risk cover for underserved niches.
Longer-tail risk is very selectively underwritten by Catlin based on claims made. (Tails refer to the extremes of a normal curve, the unexpected events. Longer-tails mean unexpected payouts.)
"Crysalis" is innovative oil production insurance, launched in Feb for oil and gas drillers. New business is booming post-Gulf of Mexico, and not just from US drillers.
BP's disaster explains the rush for Crysalis cover. BP had a Bermuda "captive" (self-financed) insurance firm.
What it will be able to collect for its captive, say industry sources, is $1.5-3.5 bn. Against this, the economic loss from the Gulf disaster is $40 bn. And since the Macondo sank, BP shareholders losses from the stock's drop topped $73 bn, a compelling argument for buying insurance. Crysalis standard contracts cap the amount of cover per event at $200 mn, and per company at $100 mn, shortening the tail.
Not everything went Catlin's way. Its first half earnings were nipped 8% from prior year by Chilean earthquake claims and the Gulf of Mexico. However, we had a benign hurricane season.
And for all the dollar's appeal, getting a decent investment return is not easy in the present QE2 environment.
If in?ation takes o", claims will be higher and coverage from investment income lower. But then Catlin can raise its premiums. And it may have shifted the policies it o"ers into another currency.
Citi expects the total payout next year for this "undervalued" (rated low risk, high return) share to come to 23.4% in sterling, and 16.6% in dollars at its target price of $12.80. Citi's 2010 profit forecast is $369 million, vs $243.8 million in 2009 and $384.9 million in 2008. (Per share, the hit was even greater in 2009 because Catlin did a rights o "ering to invest more during the crisis.).
Its Sept. quarter saw Catlin premium income up 9% and earned income up 13%. Market cap is $1.982 billion, with the ADR stock at $11.50. It has an A.M. Best A rating from the insurance watchdog.
Its combined ratio, a key metric, is 97% -- meaning expenses are 97% of premium income so underwriting was 3% to the good before any investment income. Buy CNGRY.
Best Stocks 2011: Ecopetrol
by Frida Ghitis, contributing editor Global Investing
Back in the days when Colombia was a political and military battleground, and leftist rebels regularly bombed the oil pipelines, investing in Colombian oil was only for people prepared to take enormous risks.
Now the landscape has changed considerably. Indeed our top stock idea for 2011 is now Columbian oil firm Ecopetrol (EC). To be sure, the war is not over. Colombian soldiers still fight leftist guerrillas, and drug money still fuels the fight.
But the tide has turned and now oil is ?owing fast through those rebuilt pipelines. Better yet, Colombia's fast-growing oil industry is welcoming investors.
The primary vehicle for investing in Colombia's booming oil business is Ecopetrol, which started decades ago as a government-owned monopoly.
In 2003, when the country had already embarked on its own reinvention, the so-called 'economic security' plan, Ecopetrol was restructured by a government that wanted it to become internationally competitive.
Colombia's oil output has grown 50% since just 2006. That's not all EC, because other companies participate in what is an increasingly more market-friendly economy. Ecopetrol produces about 60% of Colombia's total output. In fact, however, EC's production has left the national numbers in the dust. Heavy crude production jumped 111% from 2006 to 2009. And the numbers have continued gushing skywards in 2010.
Almost all the company is still owned by the government, but the push is on to sell larger pieces of it. The latest plan is to sell stock worth 10 percent of the company. Exploration is moving at a fast clip, with new and large finds coming on a regular basis. Widening its horizons, EC has joined a number of partnerships and is now exploring in the US Gulf of Mexico, Brazil and Peru.
At the end of Q2, EC announced stellar results; Q2 income jumped 137% y-o-y to $940 million. But the real news was the plans for the future. Ecopetrol announced plans to invest a staggering $80 billion during this decade, with most of it going towards exploration and production.
EC shares have climbed more than 70% over the past year, pointing to a possible drop before the shares resume their upward trajectory. The shares are valued at a trailing PE of 31. Production should continue to grow, and if the global stirs back to life, oil prices will remain firm, making EC keep climbing. This stock is not risk-free: a drop in oil prices or an unexpected deterioration of the security situation in Colombia could punish the stock."
Best Stocks 2011: Equity Residential
by Amy Calistri, editor The Daily Paycheck
With fewer people tapping the housing market, apartments are filling up fast. That's one big reason I like Equity Residential (EQR) for 2011. Equity Residential is an S&P 500 company and the largest real estate investment trust (REIT) of its kind.
We grew up with the perception that buying a home was a dependable and savvy investment. But in reality, from 1940 to 2004, housing prices only appreciated an average of 2% annually, according to data from the US Census.
And according to a recent report released by Ned Davis Research, that's probably the best we can hope for in the foreseeable future. In the near term, prices might not rise at all until unemployment drops to 6%.
Would we have made the same decision to leverage ourselves with 30 years of debt for an investment that, after in?ation, was barely a break-even proposition? As we learned from our parents' experience, the next generation of potential home buyers will be colored by our experience.
Roughly 20% of them see their parents with a home that is worth less than when they bought it -- and not worth as much as the debt their parents owe. In other words, this is the start of a long-term shift in behavior -- one where people are more inclined to rent than own. Apartment real estate did su"er during the recession. But occupancy is starting to rise to meet the existing supply.
Equity Residential owns or has investments in more than 470 apartment complexes in 18 states and the District of Columbia.
Even in this environment of historically high unemployment, EQR is making modest headway. In the third quarter of 2010, EQR's rental revenue grew 1.3% for the units it held more than one year. And funds from operations (FFO) rose to $0.55 per share, compared with $0.53 from a year earlier.
The trend for occupancy was also positive. In the third quarter 2010, occupancy was 95%, up from 93.7% in the same period a year ago. Real estate has already shown it is no stranger to risk. But I believe EQR's upside potential outweighs the potential downside risk.
Founded in 1966, EQR has demonstrated it knows how to handle the ebbs and tows in its market. It is well positioned to take advantage of the new demand for apartments. And if unemployment shows even modest improvement, EQR could provide some sweet gains in 2011.
Best Stocks 2011: ProShares UltraShort Yen
by Keith Fitz-Gerald, editor The New China Trader
Bloomberg recently reported that China has recorded two straight months of reducing its holdings of Japanese debt. This suggests that the Japanese yen has reached the point where it's become too "strong" for its own good - or at least for China's taste. Considering China has become the world's de facto financier, we'd be wise to pay attention.
Savvy top-tier traders know that we saw China taking similar actions a few years ago with regard to dollar-based holdings... right before the dollar began its most recent slide and other "currencies," like oil, gold, silver, and rare earths, began their appreciation.
My guess, based on 20+ years of experience, is that the yen is now in the crosshairs. We haven't seen similar pricing since April 19th, 1995, when it traded at 79.95 to the U.S. dollar.
I believe that with Japanese debt at 253% of GDP (more by some estimates), the yen is likely to fall, if not because it's risen too high too fast, then because countries like China have decided they want to take profits.
Here's what to do now if you want to play along: Buy ProShares UltraShort Yen (YCS) at market. This is my top speculation for the new year. Or, if you want an even more speculative play, try purchasing YCS call options. Let's talk brie?y about my expectations.
This is a trade that could take a while to come to life so patience is clearly in order. We are, after all, dealing with governmental policy as the catalyst. Normally that's a problem, but in this case, I think it's the fuel we're looking for. Even if the Japanese government doesn't want to bring its currency into line with historical averages, the markets will if given enough time.
Best Stocks 2011: RealD
by Mike Cintolo, editor Cabot Market Letter
To choose my top stock pick of the year, I looked for new stocks (recent IPOs are usually under-owned by institutions, which can help the stock price) with big ideas. It's hard to find an idea much bigger than RealD (RLD), a play on the popularity of 3D movies.
The company is the leading provider of 3D technology to theaters and TV makers. At the end of September, 9,300 movie screens were using its technology.
In addition, another 2,000 movie screen are likely to be converted in the fourth quarter. Yet RealD is just scratching the surface of its potential, as tens of thousands of screens around the world are likely to move to 3D in the quarters to come, and since the firm gets paid on a per-ticket or per-movie basis, each installation creates a huge stream of income.
RealD isn't making money yet (though it's close), but revenues are ramping at 50%-plus rates as the company concentrates on grabbing as much market share as it can. And, longer-term, the 3D TV market could be a huge boost as well. As we said, it's a big idea, and the stock, which just came public in July, is o" to a good start. We think it will have a great 2011.
