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Alpha Natural Resources

Achillion Pharmaceuticals

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Alpha Is Shoveling More Coal to China

Alpha Natural Resources (ANR) was trading at 27 a share in August, 2005, when first highlighted in this column. It's at 90 today. Has it reached its peak? Don't bet on it. One of the largest U.S. producers of metallurgical coal—used in steelmaking—Alpha will fly much higher, says William Harnisch, CEO of hedge fund Peconic Partners, which has been accumulating shares since 2005. "Alpha will be a 200 stock in two years," he says.

Skyrocketing oil prices and escalating demand for coal from China's steel industry is fueling Alpha's earnings, says Harnisch. He sees Alpha earning $10 a share in 2009 and even more in 2010. The Street's consensus forecasts, however, are just $7.20 for 2009 and $7.06 for 2010. Alpha earned a measly 43 cents a share in 2007. The reason for the big leap this year: Demand from China started soaring.

Alpha, which also produces the steam coal used by many U.S. utilities, owns 64 coal mines in Appalachia. The price of metallurgical coal (at the mine, before transportation) has surged from $75 a ton in 2007 to $250, and from $50 a ton to $100 for steam coal. Mark Liinamaa of Morgan Stanley (MS) (it owns shares) rates Alpha outperform, with a 12-month target of 100. He says bullish fundamentals support higher coal prices. "We expect global coking-coal supply to trail underlying demand in 2009 ," says Liinamaa.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

—By Gene Marcial

Achillion: Balm from Gilead

Achillion Pharmaceuticals (ACHN) is the type of biotech that Big Pharma looks for to find new drugs. Achillion develops small-molecule drugs to fight infectious diseases like Hepatitis C and HIV. Gilead Sciences (GILD) has partnered with Achillion and signed a worldwide exclusive license for a compound aimed at stopping the Hepatitis C virus from replicating. The drug has an estimated $1 billion market, says Alfred Mansour, CEO of Biotech Watch, which tracks biotech companies' financials and clinical trials.

He says Achillion is seeking a partner for its drug Elvicitubine, which has shown potent antiviral activity against HIV. Adam Cutler of Canaccord Capital, who rates Achillion a buy, says Elvucitabine's Phase 2 clinical data showed "good efficacy" in treating newly diagnosed HIV patients. His 12-month target for the stock, now at 2.82, is 10.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

—By Gene Marcial

A Hot Summer at Las Vegas Sands?

Gambling stocks have been among the big losers in this economic slowdown, hit by a spike in fuel and food prices and the lingering credit crisis. Las Vegas Sands (LVS) tumbled to 53.77 a share on June 11, down from 148 last October. But the summer months, when travel picks up, should bring relief.

Goldman Sachs' Steven Kent rates Sands a buy. The company should benefit from junkets it began in May to Macao targeting the mass market, not just high rollers, he says. It runs the Sands Macao and Venetian Macao, as well as the Venetian and Palazzo in Las Vegas. "We continue to believe in the long-term prospects of Macao turning into a conference and leisure destination," says Kent.

Robert LaFleur of Susquehanna Financial Group says the stock doesn't yet reflect its sum-of-the parts value of 85. He sees profits of 88 cents a share in 2008 and $1.79 in 2009.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

Marcial writes the Inside Wall Street column for BusinessWeek. In 2008, FT Press published the book Gene Marcial's 7 Commandments of Stock Investing.

—By Gene Marcial