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5 Big Surprise Stock Winners of 2011 - views
MILLBURN, N.J. (Stockpickr) -- 2011 is drawing to a close. While both professionals and do-it-yourself investors try to prognosticate the year ahead in advance, we're always dealt our fair share of surprises -- both good and bad.
Also check out “5 Big Surprise Loser Stocks of 2011.”
Overall, 2011 was not a good year for the biotech industry. The Amex Biotech Index has declined close to 20% so far in 2011. The Nasdaq Biotech Index and its corresponding ETF, iShares Nasdaq Biotech Index ETF (IBB), rose about 10% in the same period.
The difference in relative performance for those two indices was Pharmasset (VRUS), which represents approximately 11% of the Nasdaq Biotech Index but is not at all in the Amex Biotech Index. So it is fair to say that biotech ex-Pharmasset performed poorly in 2011.
According to the company’s Web site, Pharmasset is “a clinical-stage pharmaceutical company committed to discovering, developing and commercializing novel drugs to treat viral infections. Our primary focus is on the development of oral therapeutics for the treatment of hepatitis C virus ('HCV'). We currently have three product candidates and a series of preclinical candidates nearing preparation for clinical development.”
The key product for the company is its treatment for hepatitis C. On Nov. 21, Gilead (GILD) agreed to buy Pharmasset for $137 per share. At the time, the stock was selling for $72.67. Prior to that deal being announced, Pharmasset shares had risen 234% on the year. (It shows up on a list of Five Drug Stock Winners of 2011.)
Pharmasset is definitely the woulda-coulda-shoulda stock of the year.
Ladenburg Thalman: +118%
Ladenburg Thalman (LTS) is an old boutique investment bank / brokerage firm based out of Miami. Given its size, relative obscurity and low stock price, Ladenburg Thalman is overlooked in the investment world.
Worth noticing, however, is that after 12 consecutive losing quarters, Ladenburg Thalman posted breakeven results for the first and second quarter of this year. This was achieved on the back of record revenue generation for this firm. The stock rose 18% in the first half of 2011.
The company has made several small strategic acquisitions this year to help boost its future business. Insider buying has also helped to move the stock in the second half of 2011. What really helped the stock to climb was a series of announcements in early November when the company initiated a 5 million-share repurchase program in conjunction with its third-quarter earnings report.
Sturm Ruger: +118%
Sturm Ruger (RGR), which I highlighted in September as one of 7 Top Stocks That Should Continue to Outperform -- manufactures guns and ammunition. This was a hot sector during 2008 and 2009 when people were buying guns during the recession and in fear that an Obama presidency would ban the sale of handguns. Of course, none of that became reality. Nevertheless, 2009 was a banner year for the company, but 2010 was flat.
Surprisingly, 2011 was another record year for Sturm Ruger, and 2012 is expected to be better. The company’s operational strength even caught the analysts off-guard as year-to-date earnings of $1.55 beat consensus estimates by 33 cents. I hate to use this word, but the only way to describe Sturm Ruger’s success was as a result of "execution."
Domino's Pizza: +114%
Domino’s Pizza (DPZ) is one stock that I was able to take advantage of in the second half of the year. In July, I was looking for stocks that would benefit from the end of the NFL lockout. Domino's had just reported its second-quarter results of 40 cents, which beat consensus analysts’ estimates of 36 cents and were 21% greater than the prior year’s quarter. Revenue of $384.9 million outpaced analysts’ expectations by $8.1 million and grew 6.2% year over year. (Please note that the revenue growth may appear low due to an accounting allusion as one must consider that 26 units were sold to franchisees during the period, thus converting sales to franchise fees and distorting revenue growth in the process.) Domestic same-store sales rose 4.8%, and international same-store sales rose 7.4%. Finally, operating margins rose 100 basis points to 28.8%.
Domino’s Pizza was also successfully reducing its debt for several quarters. My price target on the stock was set at $33, as I outlined in my newsletter The LakeView Restaurant & Food Chain Report. The company continued to perform above expectations throughout the summer, finally made an all-time high in the fall and then peaked in early December at $35.30. I sold my shares at $34.75.
Domino's shows up on a recent list of Cramer's 7 Stocks for Your Buy List.
Cabot Oil & Gas: +101%
2011 was not a great year for the oil and gas business. The Oil Service Sector Index (OSX) has declined more than 10% so far in 2011. Natural gas prices remain weak and declined nearly 25% this year.
So why has Cabot Oil & Gas (COG) jumped 101% this year? It all comes down to shale -- and in particular the Marcellus Shale.
In the third quarter, Cabot Oil & Gas achieve a record production of natural gas in the Marcellus Shale in Susquehanna County, Pa. Capacity is expected to increase in the Marcellus Shale, so despite falling natural gas prices, total revenue and profit are expected to rise.
Clearly, the rise in the company’s share price is more about speculation in the future than current operating results as the stock sells for 56 times earnings and pays a miniscule dividend.
-- Written by Scott Rothbort in Millburn, N.J.