3 Health Care Stocks That Could Gain 50% or More

If you want to invest in health care, then wait 'til next year. That's what investors are saying after seeing their stakes in seemingly robust health care stocks fall from grace this year. But as the calendar turns over, I see three stocks in particular that have caught my eye as potential major rebounders. Each of these stocks has at least 50% upside if a few headwinds turn into tailwinds, regardless of how the broader economy fares. Here they are...

1. Intermune (Nasdaq: ITMN)
When pursuing up-and-coming biotech stocks, it pays to focus on companies that have significant market opportunities. InterMune, which is targeting the idiopathic pulmonary fibrosis (IPF) market with its Esbriet drug, could well be looking at billion-dollar sales levels one day. To be sure, such a milestone is still several years away.

Esbriet has received European regulatory approval (which helped propel its stock to $35 late last year), but initial sales have been slow to build. Quarterly revenue remains below $10 million and is unlikely to top this mark before next spring. The slow ramp and concerns about Esbriet's efficacy have pushed shares down into the mid-$20s. Yet analysts say InterMune could build a real head of steam, ending 2012 with a $400 million annualized revenue run rate.

First, those efficacy concerns are starting to abate. At a medical conference in September, InterMune released fresh test data that show a measurable improvement in patient outcomes. After attending the conference, Brean Murray's Brian Skorney concluded a rising number of physicians intend to use Esbriet with their patients. "Shares remain substantially undervalued for a commercial organization with the first approved therapy for IPF and believe launch metrics will justify an upside move in the next 12 months," he said. Skorney sees shares rising to $50, nearly double the current price.

U.S. regulators haven't yet approved Esbriet, though recently-released safety data has sharply boosted chances of eventual approval. Any such announcement could quickly propel shares up toward Skorney 's target price.

2. Alere (NYSE: ALR)
This company, which changed its name from Inverness Medical Innovations in 2010, has long been an impressive growth story. Sales shot up from $487 million in 2006 to more than $2 billion in 2010, thanks to rising demand for its health-related diagnostic kits. The kits help consumers and doctors quickly learn of exposure to a range of infectious diseases, various cancers, drug abuse and women's health issues.

But the slowing economy has cooled demand for many of these tests, as consumers dial back discretionary spending on health care. Sales are expected to grow about 10% this year, but would have actually shrunk were it not for a few tuck-in acquisitions. This has pushed the stock down from about $40 this past spring to a recent $26. The forward earnings multiple, as a result, has now slipped below 10.

But a turn may be at hand. Alere delivered a better-than expected third quarter, highlighted by earnings per share (EPS) of $0.67 -- $0.08 ahead of consensus forecasts. A deeper look at the quarterly results reveals a clear trend: Diagnostic tests ordered up by doctors is showing rising demand, while consumer demand for at-home tests appears to be flattening. This trend is likely to continue if the company prevails in its bid to acquire Anglo-Norwegian Axis-Shield, which offers a range of professional diagnostic-testing services.

After the steady drop throughout 2011, shares now trade for just four times projected 2011 free cash flow (according to Goldman Sachs forecasts). The key to a rebound back to the $40 level is proof of sustained growth in 2012 and beyond. The just-released quarter is a start. A few more quarters like this, and investors are likely to warm up this stock once again.

3. Eresearch Technologies (NYSE: ERT)
I profiled this company 18 months ago after it had just made a major acquisition. During that time the provider of outsourced drug-testing services looked poised for robust growth. Back then, I suggested EPS could exceed $0.50 in 2011 and perhaps $0.60 in 2012. Well, I was being too ambitious. Company-wide gross margins have slumped, and the company has been slow to generate expected synergies from that 2010 acquisition (it bought the research division CareFusion (NYSE: CFN), in an $81 million deal). As a result, shares have fallen from $8 back then to a recent $5.

It now looks as if my analysis was actually accurate, albeit premature. Recent quarterly results, highlighted by a swelling backlog of a record $343 million, set the stage for an improvement in results in 2012. "FY12 is shaping up to potentially be a double-digit revenue growth year," predict analysts at Auriga Securities. They see EPS (finally) exceeding $0.50 next year and figure if the company can hit this mark, then shares could rise up to $9, more than 75% above current levels. Analysts at Dougherty & Co., however, have a more modest $7.50 price target, noting that the stock "is trading at a no-growth multiple though we expect the company to grow revenue at least in the mid single-digit percentage next year." Still, this would be nearly a 50% gain from current levels.

Risks to Consider: The health care sector is currently in flux. Any major reimbursement changes, either from the government or health maintenance organizations, could hamper these companies' ability to meet 2012 sales and profit targets.

Action to Take --> These three companies share one common trait: the past year has not played out as many had expected when the year began. But each of these companies, all of which have seen their stock fall steadily from a 52-week high, look to have at least 50% upside, and are poised for solid annual results in 2012 and beyond.

China Runs Out of Money

Companies' cash is drying up, with dire consequences for their workers ... Unpaid wages in China ... Efforts to curb inflation in China are having some painful side-effects. A squeeze on bank lending has prompted some businesses short of cash to stop paying wages to blue-collar workers. Even the much-vaunted state sector is feeling the pinch. Work has all but ground to a halt on thousands of kilometres of railway track, and many of the network's 6m construction workers have been complaining about not being paid for weeks or sometimes months. – Economist

Dominant Social Theme: One thing is for sure, the Chinese communists know how to run a capitalist economy and have done a helluva lot better job than Europe or America! Something about socialism really gives people the "smarts."

Free-Market Analysis: The editors of the Economist "newspaper" – who never met a tin-pot dictatorship or dictator that they couldn't find some way to praise – have apparently "hit a wall" when it comes to China. That great hope of capitalism (Communist China) is broke and heading for a hard landing.

After singing the praises of China and its vibrant "free market" for years, the Economist editors have now run smack into reality, giving rise to this squib of a story that indicates the ChiComs are hitting the proverbial brick wall when it comes to their hyperactive and impossibly stimulated economy.

We're not supposed to understand this, of course. It's an elite dominant social theme, after all, that the ChiComs' murderous command-and-control economy has much to recommend it that the West's anarchic and "free" economies (sarcasm off) do not. Here's some more from the article:

Migrant workers from China's vast countryside are usually the first to suffer when employers find themselves strapped for cash. In February a revision to the criminal law made it illegal for a company to withhold salary if it had the means to pay. This has done little to protect the more than 150m rural migrants who perform most of the country's manual labour ... The $600 billion stimulus launched in 2008 is all but spent. Indeed, the central government has urged state banks to cut back on lending in order to curb inflation, which in the year to July reached a three-year high of 6.5%, before dropping to 6.1% in September.

In recent weeks a credit crisis in the eastern city of Wenzhou has led to the flight of dozens of businessmen, leaving thousands of workers at private companies unpaid. State firms are little better off. After two record years of track-laying, the problems now facing the railway-building industry are severe. The government has had a change of heart about rapidly expanding the high-speed rail network following a fatal crash of two high-speed trains in July.

But bank credit drying up has also played a big part. China Daily, an English-language newspaper, says many of the industry's migrant workers have not been paid for months. Complaints have been growing. A senior railway official quoted in the state media said workers at China Railway Engineering Corporation, one of the country biggest civil-engineering firms, had submitted more than 2,000 petitions to the authorities since July. Another newspaper, Economic Information Daily, said wage arrears and protests by rail workers had "alarmed" top leaders in Beijing. Only a third of railway construction projects were continuing normally, it said.

The power elite had evidently and obviously hoped to contrast China's "vibrant" quasi-controlled economy (their description) to the West's chaotic and uncontrolled one (their description). But China appears to be unraveling faster than expected. The Chinese central bank (state owned) doesn't seem to managing that ole "soft landing" very well.

In fact, as we've been pointing out for several years now, there's not going to be a Chinese soft landing. The rotting, empty Chinese cities and shoddy, tipsy skyscrapers, profligate and corrupt Chinese central bank, entrepreneurial flight (see yesterday's article) and rising civil violence across the country (so bad it's not being reported formally anymore) should be red flags (no pun intended) that explain what one needs to know.

The Chinese miracle is dead. It never existed anyway, anymore than the West's late-20th century consumer mania was a product of Anglo-American "genius." No, the story of modern directed history is the story of elite-controlled money stimulation and central banking largess. Control tens of trillions and you can control the world. And they have. Not just in the US but in China, too.

What is "real" in China? The current state of development? Or is it Money Power? The central bank, like Western central banks, has tens of trillions to float the pretense of the Chinese Miracle. Sure, the Chinese people constitute an ancient, wise and powerful culture. But you don't develop an entire country in 30 years. Do you?

Not in our opinion. Not without central banking super money you don't. But we are supposed to believe it anyway. Just as we are supposed to believe the big-brain central banking technocrats of the Chinese central banking authority can bring that large and populous country in for a "soft landing." Whatever that means. Would the elites lie to us? Would they?

When the bust comes – and it is coming – all three legs of the stool will have been knocked away. America, Europe AND China will be no longer capable of firing the cylinders of the modern central banking economy. The world will sink into the deepest depression it has ever known. Chaos and worse will sweep across the world. And what then?

Conclusion: Are the elites waiting in the wings with their next fancy project? And what will it be called? World government?

Pic of the Day: Perpetual Payment Machine

Barton Biggs Boosts Bullish Stock Bets: AAPL, CSCO, MSFT, CAT, DE, EMR, GE

Barton Biggs, the hedge fund manager who bought stocks when the market bottomed in 2009, boosted bullish bets on equities in his Traxis Global Equity Macro Fund after European leaders took action to contain the debt crisis.

The fund's net long position has risen to 80 percent, Biggs, the founder of Traxis Partners LP, said in an interview with Betty Liu on Bloomberg Television's "In the Loop" program. That compares with 65 percent on Oct. 17 and 40 percent about a month before that, and near 85 percent six months prior.

The Standard & Poor's 500 Index is surging the most in a month since 1987, advancing 12 percent amid speculation European leaders will solve the crisis, after slumping from May through September. Investors remain too pessimistic, meaning the rally will continue as they change their mind, he said.

"There's a tremendous amount of money that's trapped out of stocks," Biggs said today. The rally is "going to continue for a while."

Stocks gained last week after the European rescue fund was boosted to 1 trillion euros ($1.4 trillion) and investors agreed to a voluntary writedown of 50 percent on Greek debt. Today, Italian and Spanish bonds fell, while global stocks retreated from a three-month high on concern European leaders will struggle to raise funds to contain the crisis.

"This morning, all of the wise men of Europe and the economists are very negative about this European deal that was worked out last week," Biggs said. "The general feeling is that the right thing to do is to cut back on risk and that it is going to be a flop, and that all they did was kick the can not very far down the road again."

"I am inclined to feel differently," Biggs said.

The investor said he likes technology stocks such as Apple Inc. (AAPL), Cisco Systems Inc. (CSCO), Intel Corp. and Microsoft Corp., which he called "incredibly cheap and undervalued." He also favors industrial companies such as Caterpillar Inc. (CAT), Deere & Co. (DE), Emerson Electric Co. (EMR) and General Electric Co. (GE)

Biggs said that while he's not buying European stocks, he is drawn to their valuations.

"I must admit I don't own hardly any European stocks, but I'm intrigued by them because they are so cheap, and because it would certainly be a contrarian trade," he said.

Peter Schiff On Yahoo Breakout

Louise Yamada: Gold & Silver Report

from King World News:

With gold still near the $1,750 level and silver roughly $34, today King World News was given the ability to share an extraordinary piece of legendary technical analyst Louise Yamada’s “Technical Perspectives” report. This information is not available to the public and we are grateful to Louise for sharing her incredible work with KWN readers globally.

Gold – Hugged the Uptrend Line
by Louise Yamada Technical Research Advisors, LLC (“LYA”)

Read the Article @ KingWorldNews.com

Top German news outlet: Just a "matter of time" before Greece leaves the euro

Spiegel continues to pile it on. Following yesterday's heartfelt thanks to G-Pip (as he is now known due to his impact on the EURUSD with every single public appearance), today they follow it up with: Greek Exit From Euro Zone Just A "Matter Of Time." To wit: "Despite its location on France's glamorous Cote d'Azur, Wednesday evening's meeting likely won't be a pleasant one for Giorgios Papandreou. The Greek prime minister is set to meet with German Chancellor Angela Merkel and French President Nicolas Sarkozy. None of them, one presumes, will be in the mood to enjoy their enchanting surroundings...Should Greek voters, frustrated by round after round of deep austerity measures, reject the bailout deal, it could result in an uncontrolled national bankruptcy. Markets will likely remain nervous until the results of the ballot are in -- meanwhile the euro will move even closer to the abyss. As if to highlight the dangers, German banks on Wednesday announced they were postponing their acceptance of the Greek debt haircut until after the referendum. Without voluntary bank approval, Greece faces a disorderly bankruptcy which could accelerate contagion throughout the euro zone. Papandreou's decision, said European Commissioner for Energy Günther Oettinger, "puts the euro in even greater danger."

More:

Greek Exit From Euro Zone Just A "Matter Of Time"

Last week, it looked as though the euro had been saved. Now, in the wake of Greek Prime Minister Papandreou's announcement of a national referendum on the bailout package for his country, the common currency is even closer to the abyss. Still, say German commentators, it may have been the right move.

Despite its location on France's glamorous Cote d'Azur, Wednesday evening's meeting likely won't be a pleasant one for Giorgios Papandreou. The Greek prime minister is set to meet with German Chancellor Angela Merkel and French President Nicolas Sarkozy. None of them, one presumes, will be in the mood to enjoy their enchanting surroundings.

Leaders of the world's most powerful economies begin arriving on France's south coast on Wednesday night for the Thursday kick-off of this year's G-20 summit. Host Sarkozy had been hoping the gathering would focus on raising funds to boost the effectiveness of the euro backstop fund, the European Financial Stability Facility (EFSF), but the success of the meeting is now in doubt. Papandreou's announcement on Monday evening that he was planning to hold a referendum on the EU bailout package for his country has shocked and infuriated his would-be benefactors -- and sent global markets into yet another tailspin.
The news came less than a week after an all-night bargaining session in Brussels that resulted in an agreement to slash Greek debt by 50 percent, make a further €130 billion in loans available to the country and leverage the EFSF to €1 trillion. Markets immediately calmed and the euro began climbing against the dollar. (more)