Are These Three Soaring Stocks Worth Buying?
Matthew is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I’ve written a lot lately about companies that just got crushed after earnings season to see if their demise was unjustified. On the flip side, there were quite a few companies that saw their shares rocket higher post earnings. Were these moves justified and if so should new buyers move in at these elevated prices?
The first company that caught my eye is SXC Heath Solutions (NASDAQ: CTRX) which I must admit is a company that really makes me happy. As a long term owner of the company, I’ve watched as the shares are up more than an astounding 800% since they first joined my portfolio. Over the past 90 days shares are up over fifty percent. Much of those gains are attributable to their announced acquisition of Catalyst Health Solutions (NASDAQ: CHSI) for $4.4 billion. The deal will add to SXC’s earnings as it will save about $125 million dollars through cost synergies over the next several years. What the deal really does is combines Catalyst’s full-service Pharmacy Benefits Management business, best-it-class service and growing customer base with SXC’s industry-leading tools and technology platform. It’s their technology platform that really sets apart in the PBM industry and should help propel them to market beating returns for years to come.
A technology that has the potential to completely revolutionize a lot of industries is that of 3-D printer maker 3D Systems (NYSE: DDD). Shares are up over thirty five percent in the past three months as are shares of competitor Stratasys (NASDAQ: SSYS). 3-D printing has some amazing applications that have investors salivating. However, much of the recent gains are due to Stratasys’ purchase of smaller rival Objet which caught investor’s attention. Both firms are trading at over forty times earnings making them almost as pricey as the printers they sell. However, in the case of 3D Systems revenue was up 44% last years as they increased units sold by 242%. What should excite long-term investors is seeing their recurring revenue sources such as printing materials and services which has grown to become 71% of total sales. This puts less reliance on selling the expensive printers. Given the recent run-up I think 3-D is due for a bit of a breather as most of their recent gains are due more toward external factors than to their own performance. However, for investors with a long term outlook, this is one company that could be a huge long-term winner.
The final high flyer that I think could keep flying higher is professional social networking site LinkedIn (NYSE: LNKD). Already up over twenty percent the past three months, shares are certainly priced for perfection. Some of the interest lies in it being the first of the major web 2.0 social networking sites to go public but that will change shortly as Facebook races toward the finish line of its highly anticipated IPO. Where the real difference lies is in LinkedIn’s ability to disrupt the online recruiting industry. LinkedIn has the data that employers and recruiters have never had access to before. This is information that hiring managers have only dreamed of gaining access to as they can search for both active and passive candidates to find exceptional fits not only in experience but in their skill sets, they can see honest recommendations and better enable them to see how well they’d be a cultural fit. This treasure trove of data that is continually being added to and refined by users gives them an enormous competitive moat which should enable them to expand their hiring solutions division as well as pursue revenue opportunities we haven’t yet conceived. Shares are pretty pricey and unfortunately will trade more off of Facebook and the like until the market realizes that they have a business model unlike any of their peers.
Of the three, I think that 3D Systems has the most exciting future potential, though all three should continue to be winners for long term investors. Writing puts at this point could enable long term buyers a better entry point after recent gains. It's just hard not to be excited about the where their future lies, what's especially appealing is its potential in the consumer marketplace. While we are years away from being able to print household items from the comfort of our own homes, 3D is the one company best positioned to make that dream into a reality.
latimerburned owns shares of LinkedIn, SXC Health Solutions , and 3D Systems (covered call). The Motley Fool owns shares of 3D Systems and LinkedIn and has the following options: short AUG 2012 $30.00 calls on 3D Systems. Motley Fool newsletter services recommend 3D Systems, LinkedIn, Stratasys, and SXC Health Solutions . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.