Two Winners from Master Investors

01/28/2008 12:00 am EST

Focus: COMMODITIES

Ken Kam

CEO, Marketocracy, Inc.

Ken Kam, editor of Marketocracy Marketscope, says two stocks picked by Marketocracy’s best investors already have had big gains and could go higher.

Occidental Petroleum (NYSE: OXY) rose 60% in 2007 and is up seven times since the beginning of 2000. Most of this is due to the increase in crude oil prices from below $10 a barrel in 1999, but the company has made some astute moves and the latest deal with Libya confirms our belief that it will become a huge source for OXY.

When Libya reopened to western oil companies a few years ago, OXY jumped back in and won the biggest contracts in the first and best priced round of bidding. And OXY received back properties they had lost in 1986 when then-President Reagan imposed economic sanctions and ordered all US companies out of Libya.

That’s why these latest agreements with Libya are important. They’ve renegotiated and extended those agreements for another 30 years (or as long as they’re honored). While this doesn’t affect OXY’s balance sheet it should affect its income statement for years to come.

As the largest foreign holder of oil and gas acreage in Libya, run by a Lebanese CEO and with a long history in Libya, the company is well-positioned to supply light-sweet crude oil from one of the largest fields in the world in close proximity to markets in Europe. (The stock closed below $65 Friday—Editor.)

It’s hard to believe, but I think Elan (NYSE: ELN) still has more room to run. I originally recommended it in June 2005 at $7 after the company withdrew Tysabri, a multiple sclerosis drug, from the US market. The stock started 2007 at $14 and now trades below $23—another 60% gain and more than triple our original recommendation.

For all the gains we’ve seen so far, however, Tysabri sales have ramped up more slowly than I expected. After being reapproved by the Food and Drug Administration (FDA) nearly 17 months ago, Tysabri is used by less than 20,000 out of more than one million potential patients in North America and Europe.

Next year there is a good chance that Tysabri sales will hit an inflection point where sales can more than double in a short time. The longer Tysabri is on the market without any new [complications] turning up, the better the risk/reward tradeoff looks to MS patients and doctors who are on the fence—and there are a lot of them.

In addition to Tysabri, ELN has announced that they and their partner Wyeth (NYSE: WYE) are going to advance Bapineuzumab to Phase III trials for Alzheimer’s disease. What is really unusual about the announcement is that it came before the Phase II trial is completed. A multicenter Phase III trial can cost over $100 million. I can’t believe they would start such a program without good reason to believe that the Phase II trials were successful.

2008 could bring good news on Tysabri’s sales ramp and on the effectiveness of Bapineuzumab for Alzheimer’s. Either of these events could drive another double for Elan.

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