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 weekly. 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.
Capstone Turbine has found itself and its microturbines competing in a world of giants for the better part of a decade now. Profitability still isn't there on a bottom-line basis, yet Capstone has used prudent fiscal management and innovation to drive results to the point that I'm ready to go out on a limb and predict a profitable year in 2013.
In Capstone's most recent quarter it noted gross margin of 9%, a full 300-basis-point improvement over the previous year, all while its DSO and inventory turn improved and its cash burn lessened. In every respect, Capstone is turning the corner to profitability. Capstone's record backlog also speaks to enterprise customers' desire to improve energy efficiency as standard electricity costs continue to rise. With bigger competitors out there, it could take time for Capstone's microturbines to catch on in a big way, or even for the company to boost production once it does become profitable, but with the stock at roughly $0.95 per share, I'm beginning to think that the price may just about be right for investors to begin taking a chance on this turbine producer.
Brooks Automation, which provides instrumentation and automation solutions for the semiconductor manufacturing and life sciences sectors, has seen its earnings estimates falling rapidly in recent months. Like Applied Materials , which has cautioned multiple times recently that a global slowdown in chip orders was going to hamper results, the global slowdown in tech spending is clamping down on Brooks' near-term outlook -- although I'm not nearly as concerned about its long-term prospects.
To begin with, Brooks Automation's life sciences segment is growing by leaps and bounds. Revenue jumped 25% in its most recent quarter and can be attributed to the simple fact that many health-care-related research tools (e.g., genome sequencing) are getting cheaper and more accessible. Instrumentation in this segment looks poised to grow by double digits for multiple years to come.
Brooks' acquisition strategy and prudent fiscal management should also help boost its share price. A recent acquisition of Crossing Automation should be immediately accretive to earnings. Also, Brooks boasts $2.21 in cash per share with no debt, a sign of management's desire to use its cash flow wisely. At just 75% of book value, it's not going to take much of a turn in the chip-making sector to send Brooks higher. This one is definitely on my value screen radar!
Clearly I must be on crazy pills, because Exelixis received an FDA approval for Cometriq (formerly cabozantinib) last week for the treatment of metastatic medullary thyroid cancer, or MTC for you long-disease-name-ophobes, and the stock actually dropped! Are we in another universe here? Because the data that caused its approval was insanely good!
Late-stage data on Cometriq showed that relative to the placebo it nearly tripled progression-free survival to 11.2 months from four months and it demonstrated a very good 28% response rate compared to zilch, zero, nada for the placebo. With figures like this, it's all but assured that Cometriq is going to squash AstraZeneca's Caprelsa, which gained FDA approval last year as an MTC treatment, and take nearly the entire sum of the 2,250 MTC cases diagnosed within the U.S. annually. I understand that a drug's success can be vastly different when comparing it to different types of cancers, but I'm having a hard time not seeing Cometriq gaining additional indications given its data and the incredible safety profile of the treatment.