Monday, October 02, 2006


Sector Spotlight: Biotech

One of my core biotech positions, GILD, acquired MYOG today-- for a 48% premium to Friday's close. Although I like MYOG, what the fuck are the execs at Gilead thinking? Now, because of the scale of the deal, short sellers/arbitrage players are going to nail GILD-- until the deal closes.

As for my other biotech position, DNA: Well, there is a lot to be happy about, if you owned this stock over the years. Moreover, with today's FDA approval of Rituxan and good data out of Avastin, I feel strongly about DNA's prospects going forward.

Biotech stocks are very risky investments. With my money, I don't have the medical background to really dig in my heals on a story, attempting to find the next MRK or DNA. It's simply too risky.

Instead, I buy leadership companies, with good pipelines and excellent track records-- typically big cap.

As for today's markets, I feel the ISM numbers coming in below consensus hurts. However, it wasn't weak enough to ring alarms or anything. Therefore, I do not believe the market will nose dive today, just trade moderately lower.

Finally, ahead of earnings season, keep a close eye on analyst downgrades. I seriously doubt those fuckers will head into 3rd quarter earnings with "Strong Buys" attached to every high multiple tech stock. Look for cowardice within the convictionless analyst community.

NOTE: Today, AAPL caught a downgrade and RACK got kicked in the groin by First albany-- reiterating underperform.

NOTE II: Please take the new "Fly Survey," on the left hand side of the page. Are you net long or short stocks?

The following biotech stock have mojo:

MYOG +47%
BMRN +10.3%

HEPH +10.2%
NEOL +9.4%
INCY +4%

DNA+ 2.4%

Man I am seeing a shitload of companies start to warn. Do you think that this could catch the massive long side off guard and send the "Record High" cheerleaders running for the exits? I am decently long but I want to only add to very undervalued longs right now and start putting on the short side. What do you think? I know it is hard to get the read up here but I guess that is how reversals whether temporary or long term happen. Lots of indecision. By the way I like the energy valuation now and I know you had been mentioning VLO.
I believe there is a good chance that 3rd qt. numbers will disappoint a lot of investors.

Generally, I try to avoid trades on earnings-- too risky.

However, considering the big moves in tech, it may be a good trade to sell short, prior to earnings.

Look for LRCX to set the tome, early.

As for oil: VLO should do well as the price of crude stabilizes. If crude starts to ramp, then so will VLO's profit margins.
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DISCLAIMER: This is a personal web site, reflecting the opinions of its author. It is not a production of my employer, and it is unaffiliated with any FINRA broker/dealer. Statements on this site do not represent the views or policies of anyone other than myself. The information on this site is provided for discussion purposes only, and are not investing recommendations. Under no circumstances does this information represent a recommendation to buy or sell securities.