The year 2022 was lousy year for investors across the board. I wish I could be sanguine as 2023 opens, but how can I be when a recession appears on the horizon, inflation still is still high, a Fed "pivot" appears distant and the war in Ukraine drags on.
But I take comfort in two things as we approach the new year: First, the consensus is overwhelmingly bearish as we begin 2023, and the consensus rarely turns out to be right. Second, China seems set to finally abandon its Covid lockdown, after nearly three years. This should help global growth, which desperately needs the boost.
And, I've got my 2023 stock pick, Exelixis (EXEL) , to look forward to. My stock pick of the year for 2022 was was BioDelivery Sciences (BDSI) . This small biopharma was promptly purchased in February for over a 50% buyout premium. That kind of clairvoyance -- or plain luck -- will be tough to duplicate next year, but we will give it the old college try anyway.
I have profiled the mid-cap oncology name Exelixis a few times in 2022. The stock has been a very profitable "rinse, wash and repeat" covered call trade over the years as the shares have been range bound for some time now. There are numerous reasons Exelixis makes the grade as my investment selection of the year.
First, the shares are trading at the bottom of the range they have been since late 2018. Therefore, they should have little downside from here, an important factor given my pessimistic view of the overall market. Second, the company's franchise drug Cabometyx has developed into a billion-dollar-plus blockbuster and continues to take market share for its approved uses.
The stock sells at 30-times fiscal 2022's likely earnings, but this is very deceptive. Exelixis is spending a lot of money on trials designed to expand the approved uses for Cabometyx. Without those efforts, the company would be immensely profitable. Finally, the company makes a hugely logical buyout target. The stock sports an approximate market cap of $5 billion and should deliver $1.6 billion in overall revenues this fiscal year. Sales should expand in the low to mid-teens range in fiscal 2023. Exelixis also has a $2.1 billion cash hoard on its balance sheet as well as a few earlier stage drug candidates. Even with a purchase price in the mid-to-high $20s, a buyout would be significantly accretive to a larger player that wanted to expand their footprint in oncology. Given management's inability to boost the stock price despite impressive sales growth over the past few years, an acquisition seems increasingly likely.
I am hardly alone in my enthusiasm for Exelixis as Real Money's Paul Price gave the company a big shout out on earlier this week. Hopefully both of us and the Real Money Pro community will profit from this view in 2023.
