3 All-or-Nothing Stocks We're Closely Watching

By George Budwell, Rich Smith, and Neha Chamaria Markets Fool.com

The value proposition of some stocks can be boiled down to a single catalyst or overarching macroeconomic theme. Theseso-called "all-or-nothing" stocks can generate jaw-dropping returns on capital in exceedingly short periods of time, but also come with the very real risk of a total loss.

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Our contributors think that Geron Corp. (NASDAQ: GERN), Cameco Corp. (NYSE: CCJ), and Kratos Defense & Security Solutions (NASDAQ: KTOS)all qualify as all-or-nothing stocks that could make investors tremendous gains or wreck havoc on their portfolios this year. Read on to find out why.

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This biotech is the quintessential all-or-nothing stock

George Budwell(Geron Corp): Geron Corp. is a developmental biotech that's trading at a tiny fraction of the commercial opportunity of its one and only cancer drug candidate, imetelstat, right now. The short story is that imetelstat is currently being assessed as a disease-modifying therapy for two hematological malignancies known asmyelofibrosis (MF) andmyelodysplastic syndromes (MDS).

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The exciting part is that imetelstat's commercial opportunity for MF alone is probably around $1 billion based on the sales of Incyte's Jakafi. Jakafi is an FDA-approved medicine for MF that mainly alleviates symptoms associated with the disease such as an enlarged spleen, implying that a true disease-modifying therapy could probably steal a significant chunk of its market share.

As an added measure, this experimental cancer drug is licensed out to Johnson & Johnson's (NYSE: JNJ) biotech subsidiaryJanssen. Janssen and its parent company J&J have a strong track record of shepherding novel cancer drugs through the clinical trials process and onto the market. J&J also brings a wealth of resources to the table from a marketing standpoint -- far more than Geron could muster on its own.

So why is Geron's market cap under $400 million if imetelstat is a potential megablockbuster? First off, Geron has no other major value drivers to fall back on if imetelstat turns out to be a dud -- making it a true all-or-nothing stock. Secondly, J&J's first limiteddata dump for imetelstat's ongoing studies in MF and MDS didn't exactly inspire confidence.

Bottom line: The next round of imetelstat data that are expected to hit the Street sometime in the second quarter could send this stock soaring -- or cause it to utterly collapse. Either way, Geron promises to put on a show in 2017.

Japan could decide this uranium stock's fate

Neha Chamaria (Cameco Corp): Once a darling among investors in nuclear power, Cameco Corp cuts a sorry figure today. Japan's Fukushima Daiichi nuclear disaster of 2011 not only cut short the uranium producer's dreams of making it big in the world of nuclear power, but even brought its survival into question. While Cameco has survived the huge blow, the road ahead looks tough.

The only investing thesis for Cameco is the string new reactors that are expected to come online in the next decade or so, especially in key markets like China. Sure, China has more than doubled its nuclear reactors since 2013, but Cameco shares have only fallen since -- 38%, to be precise. Likewise, Cameco's profits have contracted year after year, with the company losing $62 million last year in what was one of its worst years ever.

The fact is that Cameco's fortunes still hang on the fate of reactors in Japan, many of which may never restart as the industry grapples with cost overruns to meet regulations -- so much so that Toshiba Corp. is anticipated to write down a whopping $6.1 billion on its nuclear reactor business that failed to take off.

The challenges don't end there. A couple of earthquakes and a tsunami warning in Fukushima last November revealed how vulnerable the area remains years after the nuclear disaster. Worse yet, one of Cameco's key Japanese customers, TEPCO, abruptly canceled a supply contract worth $1.3 billion earlier this month, citing a "force majeure", or its inability to operate nuclear plants because of government regulations. For perspective, Cameco generated revenue worth about $2.4 billion last year.

Uranium prices may have bounced off multi-year lows and Cameco may be cutting costs to keep its head above water; but in the end, reactors in Japan need to spring back to life to revive Cameco's fortunes. If that happens, Cameco could be a dream stock to own. If not, you could lose what little is left.

Remaking the face of warfare

Rich Smith (Kratos Defense & Security Solutions): Five months ago, I made the argument that Kratos Defense & Security Solutions' drone program has the potential to transform Kratos into either "a money-gusher, or a cash sinkhole." If that's not an all-or-nothing proposition, I don't know what is.

Historically a bit player in the defense space (Kratos did less than $700 million in business over the last 12 months), Kratos has experienced three straight years of revenue declines -- and lost money in four of the past five years. That said, Kratos has a plan under way that could literally transform it from a defense industry also-ran into a leading manufacturer of pilotless, jet-powered combat drones, displacing industry giants like Lockheed Martin, Boeing, and Northrop Grumman, which specialize in building big, expensive -- and piloted -- aircraft.

In rapid succession, Kratos has landed multiple Pentagon drone contracts, including one to build "Gremlin" air-launched and air-retrievable drones for DARPA, and another to develop a "high-speed, long-range, low-cost, limited life" combat drone for ground attack (the Low-Cost Attritable Strike unmanned aerial system Demonstration). At the same time, Kratos is looking to win funding this year for its internally developed UTAP-22 Tornado jet-powered combat drone. Management hopes to sell "hundreds or thousands of these aircraft" to the Pentagon, at prices of more than $3 million each. Simple math tells you that such an opportunity would be valued in the billions of dollars -- several times what it currently books per year.

Enticed by this prospect, investors bid up Kratos stock 61% over the past three months, turning Kratos stock into one of the best performers on the Nasdaq. And here's the thing: if Kratos delivers on its promise of replacing piloted fighter jets with thousands of cheap, disposable, lethal killer combat drones, the stock could still be cheap, selling for a mere fraction of potential annual sales. On the other hand, if Kratos fails to deliver -- look out below.

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George Budwell has no position in any stocks mentioned. Neha Chamaria has no position in any stocks mentioned. Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Johnson and Johnson. The Motley Fool has a disclosure policy.