5 Stocks Quietly Riding the Trends

11/30/2011 9:45 am EST


Michael Murphy

Former Editor, New World Investor

These companies are growing steadily in sectors where we’ll see the next megatrends appear, writes Michael Murphy of New World Investor.

Paramount Gold & Silver (PZG) said the first analysis of the waste heaps at their Sleeper Mine showed 0.27 grams per tonne of gold, with a likely recovery rate of 70%. So, let’s do the math:

  • 54 million tonnes (with a “-nes,” meaning metric ton, or 2,205 pounds) times .27 grams per tonne = 14,580,000 grams of gold
  • 14,580,000 grams of gold = 514,294 ounces of gold
  • 514,294 ounces of gold x 70% recovery rate = 360,000 ounces of gold
  • 360,000 ounces of gold x $1,700 an ounce = $612 million
  • Half for the recovery company that will pay all expenses, half for PZG = $306 million
  • $306 million / 140 million shares = $2.18 a share

Or, they hire a recovery company, pay the startup and operating expenses themselves, and keep something over $500 million or $3.50-plus a share.

Buy PZG under $4 for my $15 target when the company is acquired, possibly in 2011. There is a lot of good news coming, including the announcement that the Sleeper waste dumps contain $70 million worth of gold to fund the company.

Antares Pharma (AIS) is only days away from FDA approval of Anturol, and not much more than that from BioSante’s (BPAX) release of the Phase III LibiGel data.

Female sexual dysfunction, or Hypoactive Sexual Desire Disorder (HSDD), affects millions of women in the US, especially those past menopause. It is more common than erectile dysfunction, which is a $2 billion per year prescription business in the US. There currently are no FDA approved drug therapies for the treatment of HSDD in women.

Projections for the US market alone range from $2 billion to $5 billion in sales. Not only does Antares get a royalty on that, but they own the rest-of-world rights. AIS remains a top buy trading idea up to $3 for a $5 target by the end of 2011.

Dendreon (DNDN) said that in 2013 they’ll do a Provenge trial in earlier-stage prostate cancer, setting the stage for an important label expansion. Most of the new “competitors” to Provenge actually aim at later-stage patients, and success in earlier-stage patients would substantially broaden Provenge’s market.

In this trial, the placebo will be a true placebo, not the frozen Provenge that was used in the approval trials. The company expects a much higher overall survival advantage due to this change. The widely-quoted 4.1-month survival advantage was for Provenge competing against frozen Provenge, a little fact the Dendreon bears never mention.

DNDN is a top buy under $28 with a $50 target as they roll out Provenge, bring on more manufacturing capacity, and file for approval in Europe.

Sprint (S) and Clearwire are engaged in a game of chicken over whether Clearwire will make its $237 million debt payment due on December 1. They have a 30-day grace period, and I would not be surprised to see this whole issue resolved, with another partner announced, by the end of the year.

S is a top buy trading idea under $4 for my $8 target in 2012—which I expect to raise.

3D Systems (DDD) is acquiring Z Corporation, the leading multicolor inkjet 3D printer, for $137 million in cash. Z Corporation did the adjustable wrench manufacturing that I showed in the original DDD recommendation.

DDD also gets Vidar Systems in the deal. Vidar is a leader in medical imaging, and will offer 3D medical models, surgical guides, hearing aids, dental applications, and implantable devices. The acquisitions should close just after the end of the year.

DDD is a top buy under $17 for a $27 target price in 2012.

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