By Paul Goodwin
Editor, Cabot China & Emerging Markets Report
Here are the 24 Top Stocks of 2011. I screened the entire market to eliminate penny stocks and thinly traded issues that didn’t average 50,000 shares traded per day.
The overarching lesson of this list is that biopharmas are frequently the hottest things around. This list of 24 stocks has 10 of them. But a quick stroll through the charts of these stocks shows the importance of buying right, and, even more important, selling right.
The only other notable sector is energy, which had three stocks on the list, including one producer, one transport company and one envirotech business. That’s not much to go on if you’re looking for a sector trend.
The list also has two tech stocks (SIMO and PKT), but the two don’t really have anything in common. The two healthcare stocks (HSTM and HS) were close enough to indicate that the healthcare industry, especially the part that’s bringing IT into the enterprise, may have some legs.
I’ve noted when a stock has been covered by one or more of Cabot’s publications.
1. Pharmasset (VRUS, +489%) was already having a good year, but gapped up huge in November when it was announced that the company would be taken over by Gilead Sciences (GILD) for about $11 billion in cash. Pharmasset’s strong portfolio of hepatitis C drugs was the big lure. [A five-time Cabot Top Ten Trader pick in 2011.]
2. Silicon Motion (SIMO, +382), the fabless Taiwan chipmaker, rode the continuing strength of the consumer electronics sector and the company’s energy-saving system-on-a-chip technology to great returns. [Covered in Cabot China & Emerging Markets Report.]
3. Inhibitex (INHX, +321%) is another pharma stock that added a takeover price premium to its already successful price appreciation. Inhibitex’s candidate drugs also battle hepatitis C as well as shingles and chronic infections.
4. Medivation (MDVN, +204%) is another biopharma that focuses on (you will pardon the expression) “castration-resistant prostate cancer.” You’ve probably already twigged to the dominance of pharmas in the top ten, and we’re not even halfway through the list. Good for you. [A Cabot Top Ten Trader pick.]
5. Golar LNG (GLNG, +196%) specializes in the liquification, transportation, regasification, distribution and trading of natural gas, which has been booming from the huge domestic finds in shale formations. [A three-time Cabot Top Ten Trader pick.]
6. Questcor Pharmaceuticals (QCOR, +182%) has one main drug, Acthar, which addresses multiple sclerosis and other conditions, and it’s a blockbuster. It began its long run in March 2010, but stumbled badly in January. [A six-time Cabot Top Ten Trader pick and covered in Cabot Small-Cap Confidential.]
7. Liquidity Services (LQDT, +163%) is an online surplus and salvage auctioneer, and its success in an environment in which lots of businesses are failing makes perfect sense. Just as 2011 began, the stock finished up a three-month correction. Timing.
8. Procera Networks (PKT, +151%) is a computer networking software firm whose chart shows an unusually deep two-month correction starting in mid-July. That corresponded with a broad market pullback, but top ten finishers usually avoid that kind of shakeout action.
9. Pharmacyclics (PCYC, +144%) is developing anti-cancer drugs, but hasn’t had any approved by the FDA yet. A big July–August surge supplied much of the horsepower for the stock’s big year.
10. Elan (ELN, +140%) is an entirely appropriate company to round out the top ten, because it’s (surprise!) a biotech company, making the score pharmas six, everything else four. Elan’s Tysabri (to treat MS) just keeps making money.
11. Ariad Pharmaceuticals (ARIA, +140%) has a strong development pipeline, but the star is Ridaforolimus, which is in clinical trials against several types of cancer. The stock corrected big in August, but finished the year at new highs.
12. Select Comfort (SCSS, +138%) is a management and marketing story, as the company’s Sleep Number adjustable-firmness beds aren’t a recent innovation. The secret here was steady growth early and late in the year and controlling the damage during the market’s weak spells. [A five-time Cabot Top Ten Trader pick.]
13. Conns (CONN, +137%) is a name you probably haven’t heard if you live outside Texas, Louisiana and Oklahoma. This regional appliance, electronics, office equipment and furniture dealer benefited from a big bounce after a steep correction in 2009–2010.
14. Curis (CRIS, +136%) has a potential blockbuster drug in vismodegib, a treatment for advanced basal cell carcinoma that has an approved New Drug Application. This puts Curis (and its collaborator Genentech) in the catbird seat.
15. Oncothyreon (ONTY, +133%) presents a familiar story: a biopharma with a high-potential drug in late-stage clinical trials. The drug here is Stimuvax, which treats non-small cell lung cancer. A four-month blastoff from April to June did the trick for ONTY. [Covered in Cabot Small-Cap Confidential.]
16. HealthStream (HSTM, +129%) is an exceptional stock for a list like this because its rally began back in early 2009, with a couple of pauses to consolidate along the way. The company’s online learning and research sites for medical workers look like a solid business.
17. Sturm Ruger (RGR, +119%) makes guns, and business has been great. The stock exploded off a tight four-month base in February and overcame two corrections to finish the year strong.
18. Dominos Pizza (DPZ, +113%) is what we call a “tractor” stock, one that just keeps chugging ahead. Its uptrend began in late 2008 and had its only major correction in Q2 2010. [A Cabot Top Ten Trader pick.]
19. Spectrum Pharmaceuticals (SPPI, +113%) repeats the common theme of biopharmas with blockbuster drugs, but Spectrum’s Fusilev (cancer) and Zevalin (lymphoma) are actually approved and on the market. [Selected by Cabot Small-Cap Confidential.]
20. Richmont Mines (RIC, +111%) is a Quebec company that’s finding gold close to home. The company has taken over a million ounces of gold out of Canadian soil, and investors signed on enthusiastically in two big waves in 2011.
21. Coffee Holding (JVA, +111%) illustrates both the potential and the dangers of growth investing. The four months from March through June shot JVA from 4 to 26 (over 700%). But the last half of the year cut it off at the knees. Whew!
22. HealthSpring (HS, +106%) is a managed care company that focuses on the Medicare population. The stock began to really cook in the middle of 2010 and capped its run with a gap up in October on the news that Cigna would acquire it.
23. ADA-ES (ADES, +103%) sells environmental technologies and chemicals to coal-burning electric power plants. The stock’s big rally actually began in December 2010, but after many rocky months ADES got healthy again in November.
24. Cabot Oil & Gas (COG, +101%) began the year in rally mode, then got caught in the spin cycle in August and September. October brought a great bounce, but COG has hit a wall recently. Buyer beware. [A five-time Cabot Top Ten Trader pick and a Cabot Market Letter selection.]