Gabelli research analyst Steven Comery discusses his top stock pick of 2017; Florida Community Bank (NYSE: FCB).
We are recommending Florida Community Bank as our best idea for 2017. Florida Community Bank is an $8.5B commercial lender headquartered in Weston, FL. The Florida lending market highly is concentrated, with 67% of deposits held at the ten largest institutions. Surrounded by money-center, regional, and midsize companies, management at FCB was able to take share with its community-bank model over the reported last 12 months, growing the loan portfolio by $1.6B or 40% and LTM revenues by 50%. However, with only 1.2% of the deposit market captured so far, we think the FCB strategy has plenty of runway left. If the company can continue to successfully challenge larger competitors, we think FCB will ultimately be acquired by either: 1) one of the regionals losing share and looking to take out a competitor or 2) by an outside bank looking to enter Florida by buying the only public bank with significant scale in the market. From an interest rate perspective, as of September 30, $2.4B of the company’s $2.6B commercial and industrial and commercial real estate portfolio was floating rate, providing an immediate revenue bump in the new year as loans reprice. We estimate EPS can grow from $2.20 in 2016 to $2.45 in 2017 and $2.75 in 2018, and calculate a 2018 Private Market Value estimate of $56 per share.
Gabelli Research Best Ideas 2017: Florida Community Bank (NYSE: FCB)
Best Ideas 2017: Wynn Resorts (NYSE: WYNN)
Gabelli research analyst Adam Trivison discusses his top stock pick of 2017; Wynn International Inc. (NYSE: WYNN).
We are recommending Wynn Resorts as our best idea for 2017. The Las Vegas-based company owns and operates three casino resorts, two of which are located in Macau. The company has 102 million shares outstanding, closed at 91 dollars per share for an equity market cap of 9.3 billion dollars, 6 billion dollars of that is related to Wynn Macau. Wynn shares are trading approximately 20% below their 52-week high, the decline is due in part to a slower than expected revenue ramp at Wynn Palace following it’s August grand opening. Nevertheless, we expect 2017 to bring improved performance at the new Cotai resort, the result of improving market growth, management led initiatives and the opening of an expanded Cotai ferry terminal.
Wynn’s Las Vegas operations are also poised to rebound after two years of weak international demand.
Wynn is also in the process of building a $2 billion casino resort near Boston, expected to open in mid-2019.
The value of this development, which we estimate at $13/share by 2020, is likely to be highlighted by the recent opening of MGM National Harbor in Washington DC. We estimate EPS can grow from $3.90 in 2016 to $5.75 in 2018. We calculate a 2018 Private Market Value estimate of $139 per share, a 50% premium to WYNN’s current price.
Unique Orphan Drug Asset: BioMarin (NASDAQ:BMRN)
Gabelli research analyst Jing He initiates her coverage of BioMarin (NASDAQ:BMRN).
We are initiating coverage on BioMarin with a Buy recommendation and a PMV of $109 per share. BioMarin has 178 million shares out, closed at $83.52, equity market cap $14.8 billion, net cash $600 million and total enterprise value $14.2 billion. It has the best orphan drug portfolio in the sector, with four key marketed products, two late-stage candidates awaiting FDA approval and multiple pipeline drugs. Despite the uncertainties in pricing regulations under the Trump administration, we believe orphan drug pricing is relatively protected due to the lack of alternative treatments and that global pricing is at parity. We expect a repatriation holiday to give the pharmaceutical industry flexibility to use its $200 billion offshore cash, leading to increasing M&A activities. BioMarin has already been the target of takeout speculation. We believe that Gilead, Amgen, Merck, Sanofi and Roche may be interested.
Trump Transition: On the Markets
GAMCO Vice President Katherine Boccaccio discusses Trumps agenda, infrastructure & defense spending, benificiaries of the post election rally etc.
Markets began the month cautiously ahead of the US presidential election, with most market participants expecting a Clinton victory and continued divided government. Though there was some initial tumult overnight, the market soared following the Trump victory along with Republican control of both houses of congress, as various aspects of President-elect Trump’s agenda – lower taxes,fewer regulations, large government expenditures on infrastructure projects – became discounted by the market. So far, there has been less concern regarding any negative economic impact of immigration or trade policy.
We believed that either new administration would likely increase spending on defense and infrastructure and examine corporate tax reform. True enough, industrials, especially infrastructure-related companies, have been among the largest beneficiaries of the post-election rally. Financial stocks have been other main beneficiaries, due to the prospects of both a lighter regulatory hand as well as higher interest rates. Bonds and dividend oriented stocks such as consumer staples and utilities have fared less well since the election, though the “great rotation” had already begun months before. Finally, we note that the Trump administration will likely take more of a benign view towards corporate dealmaking.
Elections are but one of many macro dynamics that we regularly consider and we look forward to digesting continued cabinet decisions and policy discussions as they unfold.