Top picks 2013: InVivo, PetroBakken
Here's a high-risk medical device maker and a high-yield Canadian oil play.
InVivo (NVIV) was my top speculative pick for 2012 and it remains my favorite idea for appreciation in 2013. Although the story has taken longer to play out than originally expected, I will definitely stick with it for potential outsized gain in 2013.
My income favorite again in 2013 is PetroBakken (PBKEF), which, to cut right to the chase, pays a $0.96 annual dividend. This works out to 8.7%.
InVivo has developed a biodegradable, biopolymer scaffolding device. When implanted into a spinal cord injury (SCI), this device reduces swelling and inflammation that would otherwise cause total paralysis below the point of injury.
The company seemed poised to gain Food and Drug Administration clearance to take its device into clinical trials earlier this year. However, InVivo's plans to move into new manufacturing space late in 2012 prompted the FDA to delay clearance.
The FDA delayed the trial until InVivo moved into this new facility, completed validation of it and produced compliant batches there. Although this delayed the timeline a good six to nine months, these steps are now done,
The company has tested its device in over 40 monkeys with SCI and every one has walked again within two to three weeks. Trial results in monkeys are as good a proxy for what will happen in humans. So this is a very exciting time. Human trials should start in the first part of 2013.
While there are no guarantees, the success on all 40 monkeys tested and the involvement of Nobel Prize candidate Bob Langer of MIT, gives us a measure of confidence.
PetroBakken is an energy exploration and development (90% oil) company. Its roots are in the Canadian portion of the Bakken/Williston Basin.
That portion of the company has turned into a cash cow that helps fund growth in new fields like the Cardium in Alberta (and other newer opportunities) where it can use its skills in horizontal drilling and well stimulation.
Despite annual decline rates in the 35% range and the sale of 4,000 barrels of non-core production to refinance and reposition itself for growth, the company is on track to increase production by 10% in 2012 to an exit rate of 52-56,000 boepd, with more of the same likely in 2013.
Accordingly, barring a collapse in oil prices, the 8.7% dividend appears reasonably secure.
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Pipeline owners are making big profits on oil coming from North Dakota's Bakken fields. But a lot of natural gas continues to be flared due to low prices.
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