Friday, July 31, 2009

Can You And I Trust Analysts, See SWIR!

After Sierra Wireless' (SWIR) quarterly report, about 6 analyst issued recommendations or reiterations. About half for and half against. It's a joke. Their main competitor released results on the same day and received almost no attention. One analyst actually had the nerve to lower his rating on SWIR and price target from C$7.40 to C$7.20. Why waist the ink.

When is the SEC going to do something about analyst who clearly have dubious motives. By the way, SWIR had a good quarter. Top line and bottom line of the business excluding Wavecom and items was superior to Novatel (NVTL) and I believe management is superior.

Here's my rating, strong buy, price target $100.

disclosure: long SWIR

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Wednesday, July 29, 2009

The '1' In The Options Market

Have any of you option traders noticed the '1'? You put in an order to buy say 10 or 20 contracts in between the current bid/ask and your 10 contracts become the bid. All of a sudden they tack on a 1, so the bid size becomes 11 and it sits there forever.

It's like some sort of signal to the pros not to fill your order. I remove my order and the extra 1 contract goes away as well. This has happened so much it can't be coincidence. The bid/ask spread in the options market can be huge and I wouldn't be surprised if the professionals don't want you and I cutting in.

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Monday, July 27, 2009

Earnings Revisions

Analyst revised earnings up on S&P companies 889 times and down 886 times in June. This is the first time since 2007 that more companies have been revised up than down. This brings down the market valuation. This is what the 'talking heads' haven't told you. Most of them have been telling you that the market was too rich, but what happens when earnings are revised up. Over night the markets becomes cheap.

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Big Week

So this is a big week for PaperGains followers. Many companies we follow are reporting earnings. I expect to get what I didn't get last quarter from the insurers. Genworth (GNW), Aflac (AFL), and Hartford (HIG) all report this week. I'm holding all three through the reports.

We're also waiting on Dow Chemical (DOW) and I also expect good things there. By the way, we've had a nice run in Dow and I expect Dow to get up over 30 before the end of the year.

Oh yes, then there's Sierra Wireless (SWIR). Still one of the most undervalued companies on any exchange.

Disclosure: long all

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Friday, July 24, 2009

Previous Market Manipulation Poll 20Jul-24Jul

When asked "Are some large, well known firms freely manipulating our financial markets?", 100% responed "YES".

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Thursday, July 23, 2009

Biotech Buyout/Valuation

Bristol Myers' (BMY)acquisition of Medarex (MEDX) provides more clarity for the sector. BMY paid about 45 times trailing sales and 25 times forward sales. That's a lot and confirms what we've been thinking, biotech is one of areas where you have to have exposure. With a friendlier FDA and many large drug companies thirsty for new product, I expect a lot of action over the next few years.

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Wednesday, July 22, 2009

Biotech Investing

Those of us who were in Dendreon (DNDN) and Human Genome (HGSI) before their announcements have profited nicely. While I still hold positions in both companies, I have lightened up a bit. I'm now looking at Arena (ARNA) and Vivus (VVUS). Both have weight loss drugs in Phase III trials and expect to announce results over the next few months.

My criteria for investing in biotechs is as follows; 1)must address an issue afflicting many people which would result in potential blockbuster drugs/treatments (e.g. diabetes, prostate/breast cancer, obesity, etc.), 2)must have access to enough cash to carry through key clinical trials (decent balance sheets), 3)I prefer companies with fewer than 100 million shares outstanding, 4)I prefer a decent pipeline (i.e. no single drug companies).

With that typed, I still hold both Dendreon and Human Genome because I feel confident both companies could end up being giant companies over the next 15 years, provided they are not acquired. I also hold Vanda (VNDA) even though they don't have a deep pipeline, the valuation argument is too strong. The market puts a $300 million dollar valuation on a company with a potential $1+ billion drug. I feel like they'll be acquired, soon.

I currently own ARNA and looking to buy some VVUS. Both fit all my criteria.

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Monday, July 20, 2009

DOW and Goldman

So Goldman finally added Dow Chemical to their 'conviction buy' list. Well we've known about DOW for some time now, at least PaperGains readers have. I know this probably means they're getting ready to sell the stock, but I'm still a holder, as I believe the stock moves past $30 next year, regardless. Where were they when the stock was at $6, probably buying like me? If you bought at $6, then you're enjoying a 6+% yield and a triple play, so far!

I expect a similar move in GE soon. $169 bil backlog and bids on $200 bil in stimulus work. It's a steal under $12.

Disclosure: long DOW, GE

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Sunday, July 19, 2009

Human Genome Updated

So Monday morning is the big day, or at least, the first of several big days for Human Genome (HGSI). For those that don't know, the company is to release the results of their Phase III trial for Benlysta. Of course if the news is good, the stock probably moves up in to the teens. Bad news cuts the stock in half. Any bad news I see as a buying opportunity, as the company has a rich pipeline.

THEY DID IT. LONGS WIN, SHORTS LOSE ON THIS ONE.

In my view, given HGSI's rich pipeline, this is a huge company in the making, bigger than Dendreon. I see this going to at least $15 real quick. Best thing is many of the drugs are in late stage trials and treat major illnesses.

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Friday, July 17, 2009

Does Anyone Care That Our Markets Appear 'Rigged', See Mosaic

Earlier this week the rumors started that Vale was looking to buy Mosaic (MOS), so of course the stock traded from 40 to 54 this week and closed under 50. Now this isn't the first time these rumors have surfaced, but something seemed more sinister this time. Recall today was options expiration and many of the options that were way out of the money, ended up being in the money in no time at all.

Now I don't think there's a conspiracy behind ever corner, but with 3 minutes left in the trading day Reuters reports that Vale releases a statement saying that they're not looking to buy anyone. MOS started to tank with about 30 minutes left in the trading day, and the 50 strike calls expiring today were on fire! The story was obviously out at about 30 minutes left, although much of the market didn't get it until near market close. This all seems very orchestrated.

The 50 calls traded as high as $440 then close worthless like they were at the begining of the week. I'd like to see who held the majority of those calls going in to this week. I wonder if the holder of those calls and who ever started the rumor were the same. By the way, I had that feeling earlier in the week that this might be yet another scam. If more financial reporters actually had financial backgrounds they wouldn't be so easily used and manipulated.

Beware the rumor mill. It can be hazardous to your portfolio. If it doesn't make sense, then usually it isn't a rumor, but a lie and that didn't make sense. The rumored price was too low and then there is Cargill to deal with, as a major MOS shareholder and they've expressed no interest in selling (at least not publicly).

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Thursday, July 16, 2009

Human Genome Action Looking Like Dendreon

I've been watching the trading and analyst write ups on Human Genome (HGSI) and it's starting to smell like Dendreon (DNDN) and Provenge all over again. Nearly all of the analyst say 'no way', nearly of retail says 'yes', message boards are on fire, and trading in the stock has become erratic. What I like about HGSI is their rich pipeline. They have quite a few drugs at various stages, so whether or not this lupus drug, Benlysta, works out, I'm still a holder of the stock long term.

I believe this is one where you buy a little for the IRA and put it away. With stocks like these, a little goes a long way. As far as what I expect with Monday's result, I don't know, but I do tend to be a contrarian, as I believe you do better to bet against the talking heads. Whatever the masses think, usually doesn't happen.

If the results are positive on Monday, this thing will rocket. With all of the negative sentiment, relatively high short position, and potential of a drug with no competition sets the stage for a home run (hopefully).

I believe mature drug companies are worth between 2 and 3 times sales. Young drug companies are worth 2 to 3 times mature companies, so 4 to 9 times sales, so let's say 6 times. You see this when companies are acquired. Small drug companies typically get taken out somewhere north of 5 times sales

Disclosure: long HGSI

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Tuesday, July 14, 2009

Intel

Is anyone actually surprised that Intel (INTC) had a blow out quarter and raised guidance? If you were then you weren't paying attention because the company telegraphed the quarter a couple of months back telling the street that orders were picking up and customers weren't as pessimistic as analyst. I believe they actually used the term 'bottoming out'. Also, the company is saying what other companies are saying, 'customers are optimistic about business'. I'm paraphrasing, but you get the idea.

If that wasn't enough, look at Alcoa (AA) and CSX (CSX). They said similar things about their customers. These company's products and services are core inputs to many, many things. You might even look at some of the statements made by DELL, 'input costs (components) were high'. You mean components like those Intel makes.

I like where we're headed in the market and believe you want to be in companies that are at the lowest level first, like the Alcoas, Dow Chemicals (DOW), Arch Coals (ACI), etc. Don't wait until it's obvious to everyone that the recovery is under way, because at that point the recovery is more than likely behind us and the easy money has already been made.

Think about this, I mentioned Dow Chemical and GE when they were around $6. At that time the talking heads were saying GE was going to $2 1/2 and Dow was going out of business. Had you kept your head, like some of us, and bought these bellwether companies, you'd be collecting a 6 plus percent dividend today and already seen your combined investment more than double - that was about 4 months ago.

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Sunday, July 12, 2009

AIG and Other Insurers

What are investors/traders to think about AIG? I guess management didn't get the memo about reverse splits. They almost never work. All they did was caused the short sellers to reload - more powder for the cannons. Another way to look at the situation is that this is further proof that short sellers are in control and continue to manipulate markets.

Last week it looked as if someone's 'market manipulating code' was set loose on AIG. Then some analyst comes out and says equity holders will be left with no value. The stock goes from about $22 to 8 in no time. It all seemed orchestrated. I thought it was October/November 2008again.

Retail investors beware, these are dangerous waters.

Looking at the broader market, ever wonder why the market moves 1, 2 percent or more for no apparent reason in about 5 minutes. It's them. Then their flunky reporters jump up and justify the market move with bogus stories.

On a brighter note, I believe the big life insurers will due well this quarter. The market had a great second quarter, so their expected return on assets has to look better. Accounting rules are in their favor and many of the big firms took their bad tasting medicine in the first quarter. Short sellers and short timers have to be bored with the sector by now. Anyway, I'm still holding Hartford (HIG), Genworth (GNW) and Aflac (AFL).

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Wednesday, July 8, 2009

Alcoa

Earnings season kicked off with Alcoa (AA) today and after listening to the call I'm convinced the recovery is underway. It wasn't only the China talk, but the talk about customers being optimistic and even talk of the automobile sector picking up. What more do you need to hear - autos picking up!

Yes, the last couple of weeks have been bad in the market, but we knew this. Recall an earlier post where we talked about the markets looking safe through mid June. I see this as a buying opportunity and I'm not the least bit concerned when I hear the talking heads going at it, preaching gloom and doom.

One more thing to point out, the talking heads keep insisting that the S&P is rich trading at about 15 times (I believe forward earnings). They fail to take into account that those earnings estimates will be revised 'up' when the economy gets back to normal. This suggest a forward PE of no more than 10, assuming earnings would be 50% higher than current depression levels.

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Sunday, July 5, 2009

Retirement Strategy

When thinking about investing for the long run, we should think about more than just which stocks to buy. I was explaining to someone the other day that I treat my IRA different from my regular brokerage account in at least a couple of ways. While I've talked about my Model Portfolio which I plan to hold until sometime in 2011, I admit there are a few other things I hold which I refer to as 'core holdings'.

A core holding is something I'll hold in my retirement account for 10 years or more. I also elect to have the dividends payed in more stock instead of cash. Core holdings include Verizon (VZ), Bristol Myers (BMY), Mathews China (MCHFX), and now GE and Dow Chemical (DOW). The last two were added this year.

Core holdings excluding mutual funds have a few things in common; hefty dividend, large cash flow, a great brand, and will be around for decades to come. Other stocks come and go depending on which way the wind is blowing, but core holdings stay. I see them as a base or foundation for my portfolio and they tend to lower the volatility.

By the way, collecting the dividend in stock is a critical component of my retirement strategy, as it cost you nothing and you're able to average in to new shares over time.

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The Vix

About This Blog

Where we rant and rave about the market and of course give our opinions on stocks we love or hate. We're not advisors and urge you to conduct your own due diligence.

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