By Barbara Kollmeyer
Investors will be wading through knee-deep earnings for Thursday, as jitters over possible election interference rattle markets.
Our call of the day comes from a New Orleans-based fourth-generation money manager. Sandy Villere, portfolio manager with Villere & Co., says his great-great-grandfather St. Denis, who started the firm in 1911 and kept it going through the Great Depression, had a timely saying: “Don’t love a stock because it won’t love you back.”
Taking that to heart, the younger Villere avoids the technology superstars that investors appear enamored with, in favor of overlooked smaller and midcap companies, which he maintains “have a higher margin of safety.”
Also, “history doesn’t repeat but it rhymes. Look back to 1998, 1999, 2000, then 2001 to 2003 did well for names that were not the darlings.”
Among his stock picks are Ligand Pharmaceuticals /zigman2/quotes/202030140/composite LGND +4.55% — a “cheap and safe way to play biotech,” he says. Its technologies help pharmaceutical companies discover and develop treatments. Ligand’s big “tailwind” is Captisol, a drug delivery tech being sold to Gilead /zigman2/quotes/210293917/composite GILD -0.55% for its remdesivir COVID-19 treatment, he says.
With over 120 partners and 200 programs and all of that royalty revenue, Ligand has operating margins “north of 60%,” says Villere. He forecasts earnings per shares of $7.64 in 2021, which will see it trade at 12.7 times earnings, a “huge disconnect in valuation.”
EHealth /zigman2/quotes/202600750/composite EHTH -1.37% is another pick. The owner of eHealth.com has seen shares drop 40% from highs this year due to some retention issues, but the company is about helping seniors buy Medicare insurance. Some “10,500 [people] every day turn 65 and are eligible,” he notes. Villere thinks the stock will climb from a current $82 to $150.
The last pick, Caesars Entertainment /zigman2/quotes/205281174/composite CZR +4.49% , is “not for the faint at heart,” Villere admits. But in a recent Zoom chat with Chief Executive Tom Reeg, he learned the company has saved $150 million just by axing 52 different casino buffets. “It doesn’t even bring in the clientele they want, it’s just one of those things casinos always had,” says Villere.
Even if Nevada falls under more pandemic restrictions, Caesars should do OK and the city seems busier, said the manager. “These guys are going to be more profitable than before because their margins will keep growing due to incredible cost controls.”
Stocks /zigman2/quotes/210598065/realtime DJIA +1.06% /zigman2/quotes/210599714/realtime SPX +1.49% /zigman2/quotes/210598365/realtime COMP +2.32% are modestly higher , and European stocks /zigman2/quotes/210599654/delayed XX:SXXP +1.19% are also struggling. Bitcoin prices /zigman2/quotes/31322028/realtime BTCUSD -1.53% are up, hovering under $13,000. Here’s why they have been soaring lately.
Weekly jobless claims finally dipped below 800,000. Existing home sales rose in September and leading economic indicators also rose. Meanwhile, your mobile phone is providing the post-pandemic economy’s most closely watched indicator.
Tesla /zigman2/quotes/203558040/composite TSLA +3.16% shares are up 5% after the electric-car maker reported its “best quarter” ever. But, as some note, Tesla didn’t manage that by selling its cars for a profit. One analyst has already upgraded those shares.
Shares of chemical group Dow /zigman2/quotes/203121064/composite DOW +2.57% , telecommunications group AT&T and drinks giant Coca-Cola /zigman2/quotes/209159848/composite KO +0.40% and appliance maker Whirlpool /zigman2/quotes/200296850/composite WHR +0.21% are still to come. After the close, chip maker Intel /zigman2/quotes/203649727/composite INTC +2.48% and toy maker Mattel /zigman2/quotes/209819189/composite MAT +1.82% will report.