Top 5 Nasdaq 100 Stocks Near a New Low

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 |  Includes: AMGN, CELG, CEPH, QGEN, TEVA
by: New Low Observer

As with our most recent dividend watch lists (found here), the Nasdaq 100 watch list is loaded with biotechnology and pharmaceutical companies. The complete Nasdaq 100 watch list is located here.

From our experience, this concentration of companies within an industry group indicates that the sector, as a whole, is reasonably undervalued. We think that now is the time to selectively acquire as many of these companies as possible. It is times like these that mergers, acquisitions and bidding wars should soon follow.

Below are the Nasdaq 100 companies that are within 20% of the 52-week low. This list is strictly for the purpose of researching whether or not the companies have viable business models. Although theses companies are very risky, they provide significant opportunity to outperform the market in the coming year.

Symbol

Name

Price

P/E

EPS

Yield

P/B

% From Low

CELG

Celgene Corp

$51.29

27.28

1.88

0

4.42

6.81%

CEPH

Cephalon

$59.96

11.2

5.35

0

1.81

9.02%

QGEN

Qiagen N.V.

$18.48

29.06

0.64

0

1.77

9.61%

AMGN

Amgen

$55.20

11.52

4.79

0

2.16

9.83%

TEVA

Teva Pharma.

$54.10

16.65

3.25

1.30%

2.26

15.13%

Click to enlarge

Watch List Summary

The following is the order that we think the watch list companies might perform over the next year (from best to worst on a percentage basis) and our thoughts on the reasons why.

  • Celgene: Celgene has no debt, strong earnings growth, while the book value has increased nearly 50% in the last 5 years.

  • Teva Pharmaceutical: Although saddled with some debt, this Israeli based pharmaceutical company is undervalued on a cash flow basis by 23% according to Value Line.

  • Amgen: Amgen has reduced the shares outstanding by nearly 23% since 2002. Unfortunately, the share reduction has been at the expense of a nearly 250% increase of long-term debt in the same period of time. According to Value Line dated December 17, 2010, AMGN normally trades around 12 times cash flow. Using the most conservative numbers provided by Value Line, AMGN should be selling at $72 a share instead of the current price of $55.20.

  • Cephalon: There is a severe disconnect with Cephalon and the stock market. CEPH shares trade at less than the 2001 high. According to Value Line, the annualized growth rate of the book value over the same period has been 26%. The company’s debt has remained relatively steady while the number of shares outstanding has grown by “only” 7.6% annually. CEPH should be selling for at least $76 if the numbers on this company are accurate.

Watch List Performance Review
In our ongoing review of the Nasdaq 100 Watch List, we have taken the stocks from our list of February 7, 2010 (article here) and have checked their performance one year later. The companies on that list are provided below with the closing price for February 5, 2010 and February 4, 2011.

Symbol

Name

2010

2011

% change

SRCL

Stericycle

$52.00

$83.63

60.83%

QCOM

QUALCOMM

$38.04

$55.23

45.19%

FSLR

First Solar

$114.19

$157.94

38.31%

GENZ

Genzyme

$55.17

$73.40

33.04%

ATVI

Activision Blizzard

$10.21

$11.74

14.99%

ERTS

Electronic Arts

$17.26

$18.23

5.62%

GILD

Gilead Sciences

$46.38

$38.79

-16.36%

APOL

Apollo Group

$59.93

$42.14

-29.68%

Average

18.99%

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click to enlarge

Our watchlist from last year did quite well. Only one in four stocks from our list registered losses. Stericycle (NASDAQ:SRCL), Qualcomm (NASDAQ:QCOM), First Solar (NASDAQ:FSLR) and Genzyme (GENZ) either matched or exceeded the returns of the Nasdaq 100 Index (NYSEARCA:QLD).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.