Today's 3 Stock Picks: AN, SVNT, APWR

Shares of national car dealer AutoNation (AN) accelerated Tuesday after GMAC, the troubled financing company partly owned by General Motors (GM), received government bailout funds.

GMAC said the $6 billion federal aid package allows it to immediately resume auto financing to would-be car buyers who've thus far been unable to get credit. That could help AutoNation start moving cars off its lots at a time when other dealerships are shutting down.

"If you’re a believer that the closing of many independent auto dealers will eventually expand the market share for AutoNation and are thinking more long term, clearly this could be an opportunity," says Cid Wilson, an analyst at Kevin Dann & Partners, a boutique broker-dealer in New York.

But investors in the Ft. Lauderdale, Fla., car dealer should be prepared to be patient, as that opportunity won't rumble over the horizon for some time. November auto sales dropped 37% year-over-year to a level not seen since 1982. Sales were off 41% at GM and 31% at Ford (F). Chrysler posted a 47% decline. Even industry mainstay Toyota Motors (TM) was not immune, as U.S. sales dropped 34%. The Japanese car maker went on to post its first-ever loss.

Wilson expects lower earnings for AutoNation in the final quarter of 2008 and for all of 2009, he wrote in a Dec. 3 report, as the company “is a victim of uncontrollable economic headwinds.” More positively, sales of cars from the Big Three auto makers account for less than 20% of AutoNation’s profit, and Wilson praised the company's cost-cutting measures.

Bottom Line: Buy
This is a long-term play for aggressive investors, but be forewarned that there will be many, many bumps in the road.

Shares of Savient Pharmaceuticals (SVNT) rose sharply Tuesday after the Food and Drug Administration granted rapid review to pegloticase, a drug used to treat gout.

The drug is intended for people who have not responded to other treatments of gout, a painful inflammation of joints, cartilage and tendons caused by a buildup of uric acid.

The FDA will review pegloticase within six months, a designation assigned to drugs deemed by the agency to have the potential to provide an important advancement in treatment or provide a treatment for which there is no adequate therapy available. Several other medications exist to treat gout, but the disease sometimes proves resistant to those therapies.

“Priority review doesn't remove all the safety concerns surrounding pegloticase, but it clearly establishes that the FDA believes that the drug will serve a valuable purpose,” Andrew Vaino, an analyst at Roth Capital Partners, wrote Tuesday. “Our take on the risk/reward balance for pegloticase is that the benefit outweighs the risk.”

Collins Stewart analyst Salveen Kochnover wrote Tuesday that he believes the odds for initial approval, with many attached conditions, are high. The review should be completed by April 30, 2009, according to FDA criteria.

Bottom Line: Buy
This is only the beginning of a lengthy path to market, even with priority review status. Although betting on any drug is an uncertain proposition, there’s something here for investors already comfortable with the inherent risks of the biotech sector.

Depositary shares of A-Power Energy Generation Systems (APWR), a Chinese wind-power equipment maker, plunged after the company cut its outlook for 2009.

Plunging oil prices have made renewable energy a tougher sell in a global recession, and corporate spending on equipment such as wind turbines has dropped, said Chairman and Chief Executive Jinxiang Lu.

“Due to the unusual current macroeconomic conditions, a few of our key potential contracts, which we expected to close in the fourth quarter, were postponed,” Lu said.

Roth Capital Partners analyst Mark Tobin added that poor weather in the northeastern city of Shenyang where the company is based has chilled production.

“[A] site visit and recent discussions with management indicate that APWR's wind turbine assembly operation is progressing more slowly than expected,” Tobin wrote in a Dec. 29 note. “During our visit, we did not observe any evidence that production has commenced. Therefore, we expect no wind turbine shipments and no resulting wind revenue during the fourth quarter of 2008.”

Brian Yerger, an analyst with Jesup & Lamont, wrote Dec. 1 that A-Power is in better shape than many of its rivals because it has raised sufficient capital to power through the credit crisis.

Still, Tobin’s assessment that the company hasn’t got much to show for its efforts makes many of A-Power's projections — which called for 30 turbines to be finished by the end of the year — hard to support.

“We do not expect that APWR will complete assembly of any turbines prior to year-end and therefore will not recognize any revenue from the wind,” Tobin wrote.

Bottom Line: Sell
There are alternatives to this alternative energy company, and they’re found closer to home than in China, which is in the midst of its own radical slowdown.