The market had a fantastic rally after the Fed policy statement that was released 2:15 PM EST. The Fed continues to state that inflation is its primary concern but the tone had much more neutral bias. Fed further acknowledges the slowdown in the housing market.
Financial stocks performed terrific this afternoon. Both filthyrich financial ideas (JP Morgan and Goldman) saw significant buying interest. Both JPM and GS sold off in recent times amid general market correction, brought on by collapse of the China stock market and concern of sub-prime mortgage crisis. In my opinion, investors have unjustifiably thrown the baby out along with the bath water. Although sub-prime market is in trouble, its impact is relatively well-contained within the sub-prime segment. In fact, earning calls from GS, Morgan Stanley, Bear Stern as well as UBS reveals that given the right price, many well-run banks want to increase its exposure to sub-prime as they see additional opportunities within this segment.
GS had a fantastic earning this month. It continues to blow away the consensus earning estimate. It generates the piles of cash, which the company is using to buy back shares. While share counts decreases, the revenue continues to climb higher as the trading and other investment banking revenue remain strong. China exposure has been a concern for some investors but after the deep correction, China stock market has roared back to its old highs. The fact of the matter is that there are too much liquidity out there to depress the financial market worldwide. Real estate market is in doldrums and bond yield is shrinking. Where else the money would flow but into the stock market worldwide? I believe that GS earning story is not over and the firm is poised to generate EPS well above $24 a share in 07 and possibly higher in 08. The stock is grossly undervalued. I maintain my target price of $250 and would suggest that you take position in GS before April.
JPM also saw a lot of selling pressure due to sub-prime mortgage concern. JPM is the best positioned to show one of the best earning growth performance among integrated banking names. I expect in 07, the stock market will be driven by those select names with solid earning performance. The company also continues to buy back shares. Profit margin still has a room to improve and ROE metrics have improved significantly. The bank has the lowest sub-prime loan market exposure. Also look what has happened to the yield curve today. It is no longer inverted. As investors anticipate Fed rate cut sometime in the second half of this year, finally yield curve has become consistent with the market rate outlook. I expect the yield spread to become more favorable for banks over next several months. With this, JPM earning will likely to accelerate in 08. EPS in 08 could eclipse $5 and I believe the stock is headed higher above $60 by the end of 07. During this market correction, I have substantially increased my leap (call $50 08) position and if I am right about JPM earning story, JPM should make me mucho dinero.
I would start buying back china names aggressively. CTRP has weathered this correction exceptionally well. It is crushing its competitions such as elong and is likely to rule the Chinese online travel market. I am revising my target of CTRP to $85 from $70. I would be an aggressive buyer of CTRP once again. I will write a separate article on CTRP to justify my TP.
I would also start buying FMCN. I am upping my target of FMCN to $100 from $80. FMCN recent announced another acquisition of Allyes to get into internet ad area. This dominant company is becoming more dominant in China. It commands considerable market shares in all display and display related ads in first Tier and second Tier cities. Its valuation is attractive, trading at 18X 08 earning estimate. I believe that the market correction in the US and China is largely over. Although it may continue to consolidate for a while, I believe the market is likely to establish uptrend once again. I will also work on writing a separate article for FMCN to justify the TP adjustment to $100.
I would also consider looking into biotech names. I especially like CELG here. Celgene is waiting for European approval of Revlimid by the end of April. I see CELG’s Revlimid getting the approval in Europe for both MM and MDS applications. Many analysts see MM approval but have not reflected MDS approval in the earning estimate yet. This approval could serve as upside catalyst for the stock.
Finally, AMR and LUV have seen a lot of selling pressure. I also like them here. Temporary slowdown of the traffic has been weather related. As the economy cools, oil price is likely to moderate. Many expect the oil to head considerably higher towards summer driving season; I continue to believe that oil remains in the trading range between $45 to $55. The economy will grow but the growth rate will slowdown. This is truly bullish case for bulls. Inflation will remain under control. Fed will sit on the sideline and the earning will continue to head higher, although at slower rate.
In conclusion, I love where the market stands now. With correction largely behind us, I would be an aggressive buyer of our favorite names. Good luck to you all.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Wednesday, March 21, 2007
Wednesday, March 14, 2007
AMGN: continued sell-off: analysts adjusting TP lower.
AMGN is seeing another sell-off today. On Friday, FDA announced its decision to put black box label on AMGN and JNJ erythropoiesis-stmulating agents which include AMGN's Epogen and Aranesp. Although adverse safety profile of Aranesp was already highlighted on certain areas of cancer applications for several weeks already, FDA decision is thought to cut doctors' usage of Aranesp and Epogen with patients with higher hemoglobin (Hb) levels. Goldman analyst cuts AMGN's 08 EPS estimate to $4.50. This is roughly 50 to 60 cents reduction in EPS estimate from some consensus numbers that I am aware of for 08. However, other firms see much less impact on the bottomline number. Even in the case of GS revised EPS estimate, AMGN is trading with PE of roughly 13 on a forward basis and I believe that the stock already reflects most of this negative outcome. I continue to believe that the selling is overdone. But do remember that the market sentiment can sway to the extreme level of either pessimism and optimism so I am not going to claim AMGN shares have seen the absolute bottom. However, I am not backing away from my long term bullish stance on AMGN.
Now on a separate note, UBS analyst today downgraded AMGN to reduce from neutral and cuts the TP to $56 to $71. UBS analysts cites that Medicare carriers are starting to drop coverage of affected drugs for anemia of cancer applications and the company is poised to lose revenue associated with these applications. Do note that despite this downgrade to sell rating, the downside TP is not much away from where AMGN is currently trading at. This is an indication that there is solid valuation support for this stock.
I am attaching Notablecalls take on AMGN released this morning so you may get better idea of what other firms are saying about the company today.
For the direct link of notablecall blogging site: http://notablecalls.blogspot.com...
Several firms comment on Amgen (NASDAQ:AMGN) after the FDA modified the label for erythropoiesis stimulating agents (ESA), incl. Aranesp and Epogen/Procrit, to include a black box warning, recommendation to start with the lowest dose and strong emphasis against exceeding hemoglobin (Hb) of 12g/dL. Medicare also allowed carriers to drop coverage of ESA for treatment of anemia of cancer (AOC) immediately:
- JP Morgan notes that although the revised safety warnings for erythropoietin stimulating agents (ESAs) reinforced the labeled usage as expected, the language regarding risks of use was more severe than they thought. The new language is harsher than the firm thought, where they are surprised that DAHANCA data, which has not been published in a peer-reviewed journal, would be specifically referred to in a black box.
Separately, CMS sent a letter to the national Part B carriers instructing them to discontinue coverage of ESA's for AoC. Thus reimbursement changes have come quicker than expected, though the impact to EPS appears manageable, in the range of $0.05-$0.08 on 2008 EPS for AoC alone.
Maintains Overweight rating. Despite the significant negative headlines regarding ESA safety in recent weeks, they still see weakness as a buying opportunity ahead of catalysts with upside potential: 145 trial data, the ODAC panel (May 10), and potential setbacks to the CERA PDUFA (May 20).
- Goldman Sachs expects use of ESA for AOC ($0.6bn or 15% of Aranesp sales) to decline significantly. Physicians will likely be more cautious and target lower Hb for the approved indications as well.The firm has modified their model to reflect a pessimistic scenario, assuming 12%, 24% and 30% reduction in Epogen + Aranesp sales in 2007-09, leading to a cut in our EPS (including ESO) by $0.11, $0.35 and $0.55 to $4.17, $4.50 and $4.89, respectively. GS model assumes launch of Roche's CERA in the US and Europe in 2007 and generic EPO in Europe in 2008 and in the US in 2013 (when patent of Epogen expires). Not included in the model are sales from new products, such as denosumab ($2+bn potential) and AMG-531 ($0.2bn) for which Phase 3 data should be available in 2007.
Maintains Buy but lowers tgt to $72 from $82.
- Baird says that while they understand some investors may have expected this move, we do think our estimates may need to be lowered.
Indeed, firm's recent EMR analysis indicating minimal Aranesp use above 13 g/dL. This same analysis, however, showed 13-14% of doses are delivered to patients with Hb >12g/ dL. They think these dynamics, coupled with recent AoC (anemia of cancer) reimbursement restrictions and the new label are bound to impact Aranesp revenue deleteriously.
Firm now models Aranesp revenue of $4.2B, $3.7B, $4.1B and $4.4B down from $4.7B, $5.2B, $5.6B and $6.2B for 2007-2010, respectively. They stress, however, that they view these new estimates as extreme. Maintains Outperform and remains buyers of the stock. Tgt goes to $80 from $90.
- Deutsche Bank maintains their Buy rating and $90 tgt on AMGN saying their rating is based on underappreciated fundamentals, discounted valuation and potential catalysts in 2H07. They continue to expect volatility related to EPO/Aranesp and CERA-related competitive landscape. Firm estimates Medicare-covered AOC sales to account for ~5-6% of WW Aranesp sales (50% of AOC sales is covered by Medicare), with any potential impact significantly reflected in their recently reduced estimates.
Notablecalls: Presently it sure looks like AMGN has nothing going for it. EPO problems on one hand with follow-on biologics on other. Yet, looking at things from a longer-term perspective, none of these problems is fatal. I have no view on AMGN stock in the s-t but I do believe the problems currently known have been discounted.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Now on a separate note, UBS analyst today downgraded AMGN to reduce from neutral and cuts the TP to $56 to $71. UBS analysts cites that Medicare carriers are starting to drop coverage of affected drugs for anemia of cancer applications and the company is poised to lose revenue associated with these applications. Do note that despite this downgrade to sell rating, the downside TP is not much away from where AMGN is currently trading at. This is an indication that there is solid valuation support for this stock.
I am attaching Notablecalls take on AMGN released this morning so you may get better idea of what other firms are saying about the company today.
For the direct link of notablecall blogging site: http://notablecalls.blogspot.com...
Several firms comment on Amgen (NASDAQ:AMGN) after the FDA modified the label for erythropoiesis stimulating agents (ESA), incl. Aranesp and Epogen/Procrit, to include a black box warning, recommendation to start with the lowest dose and strong emphasis against exceeding hemoglobin (Hb) of 12g/dL. Medicare also allowed carriers to drop coverage of ESA for treatment of anemia of cancer (AOC) immediately:
- JP Morgan notes that although the revised safety warnings for erythropoietin stimulating agents (ESAs) reinforced the labeled usage as expected, the language regarding risks of use was more severe than they thought. The new language is harsher than the firm thought, where they are surprised that DAHANCA data, which has not been published in a peer-reviewed journal, would be specifically referred to in a black box.
Separately, CMS sent a letter to the national Part B carriers instructing them to discontinue coverage of ESA's for AoC. Thus reimbursement changes have come quicker than expected, though the impact to EPS appears manageable, in the range of $0.05-$0.08 on 2008 EPS for AoC alone.
Maintains Overweight rating. Despite the significant negative headlines regarding ESA safety in recent weeks, they still see weakness as a buying opportunity ahead of catalysts with upside potential: 145 trial data, the ODAC panel (May 10), and potential setbacks to the CERA PDUFA (May 20).
- Goldman Sachs expects use of ESA for AOC ($0.6bn or 15% of Aranesp sales) to decline significantly. Physicians will likely be more cautious and target lower Hb for the approved indications as well.The firm has modified their model to reflect a pessimistic scenario, assuming 12%, 24% and 30% reduction in Epogen + Aranesp sales in 2007-09, leading to a cut in our EPS (including ESO) by $0.11, $0.35 and $0.55 to $4.17, $4.50 and $4.89, respectively. GS model assumes launch of Roche's CERA in the US and Europe in 2007 and generic EPO in Europe in 2008 and in the US in 2013 (when patent of Epogen expires). Not included in the model are sales from new products, such as denosumab ($2+bn potential) and AMG-531 ($0.2bn) for which Phase 3 data should be available in 2007.
Maintains Buy but lowers tgt to $72 from $82.
- Baird says that while they understand some investors may have expected this move, we do think our estimates may need to be lowered.
Indeed, firm's recent EMR analysis indicating minimal Aranesp use above 13 g/dL. This same analysis, however, showed 13-14% of doses are delivered to patients with Hb >12g/ dL. They think these dynamics, coupled with recent AoC (anemia of cancer) reimbursement restrictions and the new label are bound to impact Aranesp revenue deleteriously.
Firm now models Aranesp revenue of $4.2B, $3.7B, $4.1B and $4.4B down from $4.7B, $5.2B, $5.6B and $6.2B for 2007-2010, respectively. They stress, however, that they view these new estimates as extreme. Maintains Outperform and remains buyers of the stock. Tgt goes to $80 from $90.
- Deutsche Bank maintains their Buy rating and $90 tgt on AMGN saying their rating is based on underappreciated fundamentals, discounted valuation and potential catalysts in 2H07. They continue to expect volatility related to EPO/Aranesp and CERA-related competitive landscape. Firm estimates Medicare-covered AOC sales to account for ~5-6% of WW Aranesp sales (50% of AOC sales is covered by Medicare), with any potential impact significantly reflected in their recently reduced estimates.
Notablecalls: Presently it sure looks like AMGN has nothing going for it. EPO problems on one hand with follow-on biologics on other. Yet, looking at things from a longer-term perspective, none of these problems is fatal. I have no view on AMGN stock in the s-t but I do believe the problems currently known have been discounted.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Tuesday, March 13, 2007
FilthyRich hive bi-weekly communication - 3/11/07
Dear members,
The market showed some signs of strength this week. Is the market on its way to resume its upward trend? I think we may continue to see choppiness and volatility. When the market advances too much for too long, people always expect bigger correction. Psychologically this may continue to bring out sellers who will use the minor strength in the market to liquidate their long positions. They will harp on sub-prime mortgage concerns, slowing economy, high energy prices, and other geo-political reasons to sell. Consequently, the market may retest its lows that we saw during the week of China market crash
Having said that, I believe we are mostly done with seeing big downside move. I believe that the market will spend its time consolidating and building its base to set itself up for another nice year in 07. I expect the market will start showing some signs of strength in late March to early April where earning expectation will drive the share price of many bluechip companies. I believe the first to rebound from recent sell-off will be low PE, large cap stocks so these names will be the first to recover. Depending on how enthusiastic the investors get upon the strength of the recovery, more speculative, small cap names could see buying interest sometime later.
Another upside catalyst for the market could be Fed rate cut in the middle of the year. No doubt that the certain sectors in the economy are slowing. After 17 consecutive rate cuts, housing, auto, as well as manufacturing continue to weaken. Job market and consumer retail business have been fairly strong. However, prolonged negative sentiment in slowing sectors of the economy will eventually weigh on the remaining sectors of the economy. I believe that Fed will be aware of this trend and will cut the rate. Big question is the direction of the oil. If oil price stays high, inflation pressure is less likely to abate and Fed could stand patted with the interest rate. However, if oil stays fairly ranged bounded between $50 and $60, Fed has a room to cut rate down the road. I believe it will be the latter case. The economy is slowing down and the demand for oil will be more controlled. I believe that the oil price will stay ranged-bounded as a result.
Let us walk through the individual names. First with the biotech sector, AMGN continues to get pounded. AMGN saw more selling pressure this week as FDA now seeks to put black box label on some of AMGN EPO products. The concern is that the doctors will discourage its use and impact AMGN's earning. I continue to believe that AMGN is highly attractive on price to earning multiple and investors are too negative on company's present product lines as well as the future pipeline. The stock has been beaten to death and I continue to advocate AMGN share purchase. CELG is a great buy at current level. Upcoming European approval of Revlimid will be the next catalyst for the stock to break above $60. GENZ sold off during this correction. Again, this is one of my favorite names in the large cap biotech space. It is a good buy at current level. PDLI reported earning last month. I continue to see PDLI staying strong with its royalty business and like the stock at current price. As for ISIS and ALNY, which are more speculative names, I would wait on purchasing any shares until the market sentiment improves for more risky names.
Moving onto financial names, I really like this sector. The sector that will benefit the most from Fed rate cut outlook is financials. It will respond faster than any others. While earning may decline for other sectors in case of economic slowdown (true in my opinion), financials already discount for many of these scenarios and earning outlook is instantaneously benefited upon rate cut. JPM in my opinion is the single best idea in large integrated bank names. I would be an aggressive purchase of the share at current price. Amid sub-prime loan concerns, GS also saw great volatility. GS will report its earning next Tuesday. I think the earning will be just fine but investors are nervous and may sell the shares ahead of the earning. At $200 level, I would wait a little more for additional weakness to be an aggressive buyer. Long term, GS will be a clear winner and I will stick with $250 TP for 07.
Moving onto transportation names, I continue to believe in moderating economy and leveling off of the torrid oil demand. As long as this turns out to be the case, both AMR and LUV will be fine. I love AMR at current price. It is a great buy here. LUV is also a good buy here.
China names have been the great areas of concern for filthyrich members. In fact, I got several calls and emails from my friends, asking about the fundamentals of these companies and decision to hold into these names. I would like to point out that on a relative basis, CTRP and FMCN have performed better than more speculative Chinese names. They are both consumer and media names that is expected to grow nicely with growing Chinese consumer economy. I believe that when Chinese stock recovers, these names will comeback in full force. I like CTRP in low 60's. I like FMCN in the mid-$70's. These two names are great buys at current level. I would start nibbling at these names. Realize that they could stay volatile so make sure you set aside some cash to buy them at a cheaper basis.
Moving onto tech names, OPWV and AVID are at hold at best. Do not purchase any additional shares. They still lacked the earning visibility and robust business model to deliver solid revenue growth. I am inclined to take the loss and moving onto better ideas in my June review time. IBM is the bluechip name that should do fine. I would be a buyer at the current price. TIVO reported earning last week. Earning loss was much better than the forecast. The company is finally thinking in terms of the profitability. I like the stock at current level. RIMM has gone up with vengeance in recent times. It continues to remain volatile. We have started this stock as a short idea around $133 and it is trading right around this level. But it has gone up by more than 10% and fell by the similar magnitude. Many analysts are revising its TP to even higher level around $160 level. RIMM could head higher but I continue to see competition emerging that could trouble the company. AAPL, LG, and Samsung are set to release next generation product in smart phones this summer and RIMM sales could taper off. I continue to stand by my short conviction on RIMM.
Finally with specialty consumer names, PEET is a great accumulate. Love the coffee and the company is showing nice growth in West Coast and is starting to expand its brand on the East Coast. I see Starbucks losing its brand value as high end coffee retailer and PEET could benefit from this trend as well. PEET is not going to be high flyers so don't expect immediate return on your investment and I would suggest more long term approach with this stock.
That is it folks.
Have a great day !!
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
The market showed some signs of strength this week. Is the market on its way to resume its upward trend? I think we may continue to see choppiness and volatility. When the market advances too much for too long, people always expect bigger correction. Psychologically this may continue to bring out sellers who will use the minor strength in the market to liquidate their long positions. They will harp on sub-prime mortgage concerns, slowing economy, high energy prices, and other geo-political reasons to sell. Consequently, the market may retest its lows that we saw during the week of China market crash
Having said that, I believe we are mostly done with seeing big downside move. I believe that the market will spend its time consolidating and building its base to set itself up for another nice year in 07. I expect the market will start showing some signs of strength in late March to early April where earning expectation will drive the share price of many bluechip companies. I believe the first to rebound from recent sell-off will be low PE, large cap stocks so these names will be the first to recover. Depending on how enthusiastic the investors get upon the strength of the recovery, more speculative, small cap names could see buying interest sometime later.
Another upside catalyst for the market could be Fed rate cut in the middle of the year. No doubt that the certain sectors in the economy are slowing. After 17 consecutive rate cuts, housing, auto, as well as manufacturing continue to weaken. Job market and consumer retail business have been fairly strong. However, prolonged negative sentiment in slowing sectors of the economy will eventually weigh on the remaining sectors of the economy. I believe that Fed will be aware of this trend and will cut the rate. Big question is the direction of the oil. If oil price stays high, inflation pressure is less likely to abate and Fed could stand patted with the interest rate. However, if oil stays fairly ranged bounded between $50 and $60, Fed has a room to cut rate down the road. I believe it will be the latter case. The economy is slowing down and the demand for oil will be more controlled. I believe that the oil price will stay ranged-bounded as a result.
Let us walk through the individual names. First with the biotech sector, AMGN continues to get pounded. AMGN saw more selling pressure this week as FDA now seeks to put black box label on some of AMGN EPO products. The concern is that the doctors will discourage its use and impact AMGN's earning. I continue to believe that AMGN is highly attractive on price to earning multiple and investors are too negative on company's present product lines as well as the future pipeline. The stock has been beaten to death and I continue to advocate AMGN share purchase. CELG is a great buy at current level. Upcoming European approval of Revlimid will be the next catalyst for the stock to break above $60. GENZ sold off during this correction. Again, this is one of my favorite names in the large cap biotech space. It is a good buy at current level. PDLI reported earning last month. I continue to see PDLI staying strong with its royalty business and like the stock at current price. As for ISIS and ALNY, which are more speculative names, I would wait on purchasing any shares until the market sentiment improves for more risky names.
Moving onto financial names, I really like this sector. The sector that will benefit the most from Fed rate cut outlook is financials. It will respond faster than any others. While earning may decline for other sectors in case of economic slowdown (true in my opinion), financials already discount for many of these scenarios and earning outlook is instantaneously benefited upon rate cut. JPM in my opinion is the single best idea in large integrated bank names. I would be an aggressive purchase of the share at current price. Amid sub-prime loan concerns, GS also saw great volatility. GS will report its earning next Tuesday. I think the earning will be just fine but investors are nervous and may sell the shares ahead of the earning. At $200 level, I would wait a little more for additional weakness to be an aggressive buyer. Long term, GS will be a clear winner and I will stick with $250 TP for 07.
Moving onto transportation names, I continue to believe in moderating economy and leveling off of the torrid oil demand. As long as this turns out to be the case, both AMR and LUV will be fine. I love AMR at current price. It is a great buy here. LUV is also a good buy here.
China names have been the great areas of concern for filthyrich members. In fact, I got several calls and emails from my friends, asking about the fundamentals of these companies and decision to hold into these names. I would like to point out that on a relative basis, CTRP and FMCN have performed better than more speculative Chinese names. They are both consumer and media names that is expected to grow nicely with growing Chinese consumer economy. I believe that when Chinese stock recovers, these names will comeback in full force. I like CTRP in low 60's. I like FMCN in the mid-$70's. These two names are great buys at current level. I would start nibbling at these names. Realize that they could stay volatile so make sure you set aside some cash to buy them at a cheaper basis.
Moving onto tech names, OPWV and AVID are at hold at best. Do not purchase any additional shares. They still lacked the earning visibility and robust business model to deliver solid revenue growth. I am inclined to take the loss and moving onto better ideas in my June review time. IBM is the bluechip name that should do fine. I would be a buyer at the current price. TIVO reported earning last week. Earning loss was much better than the forecast. The company is finally thinking in terms of the profitability. I like the stock at current level. RIMM has gone up with vengeance in recent times. It continues to remain volatile. We have started this stock as a short idea around $133 and it is trading right around this level. But it has gone up by more than 10% and fell by the similar magnitude. Many analysts are revising its TP to even higher level around $160 level. RIMM could head higher but I continue to see competition emerging that could trouble the company. AAPL, LG, and Samsung are set to release next generation product in smart phones this summer and RIMM sales could taper off. I continue to stand by my short conviction on RIMM.
Finally with specialty consumer names, PEET is a great accumulate. Love the coffee and the company is showing nice growth in West Coast and is starting to expand its brand on the East Coast. I see Starbucks losing its brand value as high end coffee retailer and PEET could benefit from this trend as well. PEET is not going to be high flyers so don't expect immediate return on your investment and I would suggest more long term approach with this stock.
That is it folks.
Have a great day !!
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Sunday, March 11, 2007
JPM: nothing but soothing comments out of Analyst Meeting.
JP Morgan Chase (JPM) held its annual analyst meeting in NY this morning. JPM has been my favorite large integrated bank name and we had JPM in the filthyrich core holding since 11/05. My investment thesis with JPM has been accelerating earning leverage as the bank executes on its turnaround efforts from dismal performance of the past under the new CEO Jamie Dimon.
See my previous articles:
http://investorhives.com...
http://investorhives.com...
http://investorhives.com...
http://investorhives.com...
JPM along with other financial institutions in the US has been hit hard during this market corrective period. The overhanging concerns that are currently plaguing the financial sector is the sub-prime mortgage crisis which may cause serious negative impact on the financial institutions with home mortgage exposure. Inverted yield curve which also reduces bank's revenue from shrinking NIM (net interest margin) has been another area of concern. Finally, investors have swiftly changed their view on the US economy that is vulnerable to enter into recession after recent market crash in China. Recession slows down all economic activities which may result in substantially challenging business condition.
JPM's management team has provided calming words to investors an Analyst Day. JPM management sees tremendous opportunities for organic growth. While Citibank is scaling down its business operation to cut cost and to boost EPS, JPM stands by its plan to increase investment to accelerate its growth and to further fuel top and bottomline growth. Investment banking continues to forecast strong pipeline. The strategy with IB segment changes from conservative “defensive” to more “offensive”. The bank sees more opportunities in the foreign energy market, fixed income market as well as possible new deals in the sub-prime mortgage market if some of the assets become more attractive. While everyone is trying to get out of the sub-prime market, JPM thinks sub-prime market could be opportunity when all the doom and gloom pushes down the asset price.
Some investors were concerned about JPM making a large acquisition in the consumer banking area. JPM management sees no need for immediate deal and wants to stay the business focus on achieving organic growth. I believe Jamie Dimon wants to get the share price as high as possible and this put JPM's share in much more powerful currency when the bank wants to expand its presence in the West Coast.
JPM also puts the worry about the sub-prime market into the rest by saying that the company sub-mortgage exposre is less than 5% of the total asset. In addition, the management team sees the stabilizing trend in the sub-prime loan delinquency trend.
I have uploaded the seven PDF files on investor day presentation by different JPM market segments. Please take a look at them for additional info for what was talked about at the meeting.
http://www.investorhives.com/uploaded_files2/jongyoo223.pdf
http://www.investorhives.com/uploaded_files2/jongyoo224.pdf
http://www.investorhives.com/uploaded_files2/jongyoo226.pdf
http://www.investorhives.com/uploaded_files2/jongyoo228.pdf
http://www.investorhives.com/uploaded_files2/jongyoo227.pdf
http://www.investorhives.com/uploaded_files2/jongyoo229.pdf
http://www.investorhives.com/uploaded_files2/jongyoo230.pdf
I have also included the Yahoo technical chart of JPM to give you some idea on the price range to purchase JPM shares during this corrective period (see figure below). JPM chart shows nice uptrend with extremely tough support at 200 DMA. 50DMA is a short term support that was broken down during this sell-off. This happened again last year during May-June correction. 200DMA was again the support then. The stock showed double bottom formation before resuming uptrend last year. I expect this to be the roughly same case. Right now, 20DMA is above 50DMA so the stock has a decent chance of bouncing back quickly. However, fundamentally the market may continue to consolidate for a while and although major dip may be largely over, volatility and choppiness still may exists till the end of this month.
http://www.investorhives.com/big_pic.php?fname=uploaded_files2%2Fjongyoo222.png&caption=1%20year%20JPM%20technical%20chart&msgid=414
I expect JPM to resume uptrend given the sound outlook and improving operational and profit metrics. Buy in increments towards 200 DMA of around $46 if there is a deep pullback. There also a fair chance that the stock could head higher towards 50DMA to form the double bottom so buying anywhere between $46 to $48 range would be a good place to start. Long term, I continue to expect the stock to outperform the banking peers and financials to shine in the second half of the year if the economy is slowing and Fed would be willing to cut the interest rate.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
See my previous articles:
http://investorhives.com...
http://investorhives.com...
http://investorhives.com...
http://investorhives.com...
JPM along with other financial institutions in the US has been hit hard during this market corrective period. The overhanging concerns that are currently plaguing the financial sector is the sub-prime mortgage crisis which may cause serious negative impact on the financial institutions with home mortgage exposure. Inverted yield curve which also reduces bank's revenue from shrinking NIM (net interest margin) has been another area of concern. Finally, investors have swiftly changed their view on the US economy that is vulnerable to enter into recession after recent market crash in China. Recession slows down all economic activities which may result in substantially challenging business condition.
JPM's management team has provided calming words to investors an Analyst Day. JPM management sees tremendous opportunities for organic growth. While Citibank is scaling down its business operation to cut cost and to boost EPS, JPM stands by its plan to increase investment to accelerate its growth and to further fuel top and bottomline growth. Investment banking continues to forecast strong pipeline. The strategy with IB segment changes from conservative “defensive” to more “offensive”. The bank sees more opportunities in the foreign energy market, fixed income market as well as possible new deals in the sub-prime mortgage market if some of the assets become more attractive. While everyone is trying to get out of the sub-prime market, JPM thinks sub-prime market could be opportunity when all the doom and gloom pushes down the asset price.
Some investors were concerned about JPM making a large acquisition in the consumer banking area. JPM management sees no need for immediate deal and wants to stay the business focus on achieving organic growth. I believe Jamie Dimon wants to get the share price as high as possible and this put JPM's share in much more powerful currency when the bank wants to expand its presence in the West Coast.
JPM also puts the worry about the sub-prime market into the rest by saying that the company sub-mortgage exposre is less than 5% of the total asset. In addition, the management team sees the stabilizing trend in the sub-prime loan delinquency trend.
I have uploaded the seven PDF files on investor day presentation by different JPM market segments. Please take a look at them for additional info for what was talked about at the meeting.
http://www.investorhives.com/uploaded_files2/jongyoo223.pdf
http://www.investorhives.com/uploaded_files2/jongyoo224.pdf
http://www.investorhives.com/uploaded_files2/jongyoo226.pdf
http://www.investorhives.com/uploaded_files2/jongyoo228.pdf
http://www.investorhives.com/uploaded_files2/jongyoo227.pdf
http://www.investorhives.com/uploaded_files2/jongyoo229.pdf
http://www.investorhives.com/uploaded_files2/jongyoo230.pdf
I have also included the Yahoo technical chart of JPM to give you some idea on the price range to purchase JPM shares during this corrective period (see figure below). JPM chart shows nice uptrend with extremely tough support at 200 DMA. 50DMA is a short term support that was broken down during this sell-off. This happened again last year during May-June correction. 200DMA was again the support then. The stock showed double bottom formation before resuming uptrend last year. I expect this to be the roughly same case. Right now, 20DMA is above 50DMA so the stock has a decent chance of bouncing back quickly. However, fundamentally the market may continue to consolidate for a while and although major dip may be largely over, volatility and choppiness still may exists till the end of this month.
http://www.investorhives.com/big_pic.php?fname=uploaded_files2%2Fjongyoo222.png&caption=1%20year%20JPM%20technical%20chart&msgid=414
I expect JPM to resume uptrend given the sound outlook and improving operational and profit metrics. Buy in increments towards 200 DMA of around $46 if there is a deep pullback. There also a fair chance that the stock could head higher towards 50DMA to form the double bottom so buying anywhere between $46 to $48 range would be a good place to start. Long term, I continue to expect the stock to outperform the banking peers and financials to shine in the second half of the year if the economy is slowing and Fed would be willing to cut the interest rate.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Tuesday, March 06, 2007
AMGN: More firms are out in defense.
According to Notablecalls, JP Morgan and Deutsche Bank are in defense of AMGN, citing attractive valuation. More firms are defending the stock but the stock continues to slide amid investor pessimism on firm's ability to grow the revenue and on general market correction. Credit Suisse on a separate note upgrades the stock from underperforms to neutral as the stock hit its downside TP. But Credit Suisse analyst still remains skeptical of AMGN as the analyst think Arnesp and EPO products which accounts for 40% of the overall revenue is under attack by the competitions and negative trial data.
I continue to stick my neck out and pound the table for AMGN share purchase. Current stocks accounts for more negative outcome of deteriorating earning due to decline in the revenue associated with EPO products (including CERA entering and Physicians reducing the usage given the negative data). I tend to believe that the one needs to buy the stock when pessimism overwhelms investor outlook. AMGN has the better pipeline story and better growth potential than traditional pharmaceutical companies. Yet the company is trading with valuation lower than MRK and PFE based on PE and PEG multiple. Also do remember that the company has 5.5B active share buyback program which can be put to work.
Following is the comment from notablecalls.
(directlink: notablecalls.blogspot.com)
Two defensive notes out on Amgen (NASDAQ:AMGN).
- JP Morgan says that with AMGN shares now trading at 12.5X 08 consensus (vs. Big Pharma at 15), they would argue the selloff from anemia-related headlines is overdone. They find AMGN's risk/reward highly attractive ahead of the ODAC panel and CERA PDUFA, both in May. They are comfortable with the risk of trial 145 (Aranesp in small cell lung cancer or SCLC) as, like many recent negative anemia trials, target Hb levels are outside of commercial clinical practice.
The 145 study guides Hb levels to 13-14g/dl, higher than 97% of commercial oncology patients on Aranesp. Hence, even if Aranesp demonstrates harm in Trial 145, its relevance to contemporary practice is questionable, in firm's view. With 80% power to detect a 42% survival difference between the study cohorts, a smaller difference (e.g., 10%) is unlikely to reach statistical significance. So the most likely scenario, in their view is that Aranesp shows no difference (i.e. benefit or harm) between treatment arms.
Firm believes that a negative trial 145 is manageable for Aranesp where worst-case scenario, 10% of CIA sales may be at risk (~$285M). When also factoring in a potential hit to Aranesp in AoC, they estimate a total EPS impact of $0.13 or 3% of our 2008 ests of $4.83. Reiterates Overweight.
- Deutsche Bank thinks that Amgen's recent severe decline from $75.85 (1/22/07) to $61.75 (3/2/07) per share or $16B or 23% is unwarranted, and more than reflects impact from negative events sidelining investors. On valuation, AMGN shares are trading at 12x their 08 EPS est of $5.31 or 43% discount to its comp grp avg of 21x, making AMGN an increasingly attractive investment opportunity.
Sum of the parts analysis shows -ve events more than fully reflected in valuation. Firm set forth an abbreviated sum of the parts framework for forecasting financial impact from anticipated new KDOQI guidelines impact, and negative dialysis, pre-dialysis, AOC data and upcoming studies (including the 145 lung cancer CIA trial results in May). Net/net, firm est the sum impact to be $125M/$0.11 in 07, $265M/$0.23 in 08, and $283M/$0.20 in 09.
Notablecalls: The defenses keep coming, but this time Deutsche got to a new level - they are holding a conference call with investors to discuss the issues. Might want to grab a few commons ahead of the call at 10AM EST today. Tight leash though as the defenses have failed to work so far. Would love to see it gap down first along with the general market.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
I continue to stick my neck out and pound the table for AMGN share purchase. Current stocks accounts for more negative outcome of deteriorating earning due to decline in the revenue associated with EPO products (including CERA entering and Physicians reducing the usage given the negative data). I tend to believe that the one needs to buy the stock when pessimism overwhelms investor outlook. AMGN has the better pipeline story and better growth potential than traditional pharmaceutical companies. Yet the company is trading with valuation lower than MRK and PFE based on PE and PEG multiple. Also do remember that the company has 5.5B active share buyback program which can be put to work.
Following is the comment from notablecalls.
(directlink: notablecalls.blogspot.com)
Two defensive notes out on Amgen (NASDAQ:AMGN).
- JP Morgan says that with AMGN shares now trading at 12.5X 08 consensus (vs. Big Pharma at 15), they would argue the selloff from anemia-related headlines is overdone. They find AMGN's risk/reward highly attractive ahead of the ODAC panel and CERA PDUFA, both in May. They are comfortable with the risk of trial 145 (Aranesp in small cell lung cancer or SCLC) as, like many recent negative anemia trials, target Hb levels are outside of commercial clinical practice.
The 145 study guides Hb levels to 13-14g/dl, higher than 97% of commercial oncology patients on Aranesp. Hence, even if Aranesp demonstrates harm in Trial 145, its relevance to contemporary practice is questionable, in firm's view. With 80% power to detect a 42% survival difference between the study cohorts, a smaller difference (e.g., 10%) is unlikely to reach statistical significance. So the most likely scenario, in their view is that Aranesp shows no difference (i.e. benefit or harm) between treatment arms.
Firm believes that a negative trial 145 is manageable for Aranesp where worst-case scenario, 10% of CIA sales may be at risk (~$285M). When also factoring in a potential hit to Aranesp in AoC, they estimate a total EPS impact of $0.13 or 3% of our 2008 ests of $4.83. Reiterates Overweight.
- Deutsche Bank thinks that Amgen's recent severe decline from $75.85 (1/22/07) to $61.75 (3/2/07) per share or $16B or 23% is unwarranted, and more than reflects impact from negative events sidelining investors. On valuation, AMGN shares are trading at 12x their 08 EPS est of $5.31 or 43% discount to its comp grp avg of 21x, making AMGN an increasingly attractive investment opportunity.
Sum of the parts analysis shows -ve events more than fully reflected in valuation. Firm set forth an abbreviated sum of the parts framework for forecasting financial impact from anticipated new KDOQI guidelines impact, and negative dialysis, pre-dialysis, AOC data and upcoming studies (including the 145 lung cancer CIA trial results in May). Net/net, firm est the sum impact to be $125M/$0.11 in 07, $265M/$0.23 in 08, and $283M/$0.20 in 09.
Notablecalls: The defenses keep coming, but this time Deutsche got to a new level - they are holding a conference call with investors to discuss the issues. Might want to grab a few commons ahead of the call at 10AM EST today. Tight leash though as the defenses have failed to work so far. Would love to see it gap down first along with the general market.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Thursday, March 01, 2007
FilthyRich essential shopping list.
We are in the midst of the market correction that was anticipated sometime ago. China market crash (9% steep decline: biggest in 10 years) sent the shockwaves to the financial markets throughout the world including the US market. The investor perception about the world economy was the continued, robust growth, especially in BRIC countries (Brazil, Russia, China, and India) prior to the market correction. US economy was also seen to re-accelerate with housing picking up, consumer confidence at all time high levels, and industrials once again thought to outshine. In fact, people were worried about the economy re-accelerating and possible rate hike by Fed going forward as robust economy may bring fears of inflation into investor focus. Energy stocks recovered. Commodity stocks continued to set highs. Cyclical industrial stocks and emerging country stock soared and soared.
In my opinion, the market correction along with recent economic data point to the picture that is quite the contrary to the investor perception that I have outlined above. Chinese market correction shows that emerging market economies have vulnerabilities. As thousands of people lost money on China market crash day, it could weigh on the consumer confidence. In addition, it became also evident that the Chinese government is very concerned about the speculative nature of Chinese financial market. The government does appear to be determined to be control the growth rate to avoid steeper, prolonged recession down the road. This means slowing demand for the oil and commodities. In addition, the housing data out of the US market appears to be showing no signs of recovery. New home sales data remains anemic and the inventories are still at all time high level. Home prices are finally cracking down and this may finally take a toll on the consumer confidence. Manufacturing data looks troublesome: it is in deep slowing down mode. It does appear that the economy is indeed on track to contract although recession would be unlikely scenario in my opinion.
We have a great buying opportunity here after the market correction. The market correction will force investors to rethink their asset allocation in the energy, commodity, industrial and other cyclical names. Techs are cyclical. My recent research as well as contacts with semiconductor industry reveals stagnant market conditions at best. I am really worried about the possible deterioration of the business climate in the semiconductor area. It is definitely hard to be excited about techs at this juncture, especially if the economies in the World are slowing a bit. Upcoming April earning could show difficult earning growth environment for US conglomerates. As such, we should be looking for economically insensitive issues or already beaten down names with negative catalysts already reflected in the stock price as the primary names to focus.
I would consider the following 5 names among FilthyRich ideas.
1) JP Morgan (JPM)
2) Goldman Sachs (GS)
3) Celgene (CELG)
4) Amgen (AMGN)
5) American Airline (AMR)
JP Morgan (JPM) is a premiere large integrated bank in the US. Financials have been beaten down lately amid concerns over inverted yield curve and sub-prime mortgage crisis. However, JPM continues to show robust earning growth driven by the turnaround efforts of the new management team. JPM's exposure to the sub prime mortgage is lowest among peer banks. If the economy is indeed slowing down, Fed is likely to cut rates by the mid-year (with the stock market instability to the downside, it has more ammo to do this). JPM is likely to be a huge beneficiary of the Fed easing. It has Investor Day on March 6th, and the company may possibly address hiking the dividend.
see my recent opinions on JPM
http://investorhives.com...
http://investorhives.com...
http://investorhives.com...
Goldman Sachs (GS) took a steep fall as investors became concerned about its exposure to Chinese market. Although China may slow its economic growth, its growth is likely to be robust at least till 2008 Olympics. Fed’s easing will also be tailwind for GS. I think it should be the focus stock to buy during this correction.
See my recent opinions on GS
http://investorhives.com...
http://investorhives.com...
http://investorhives.com...
I like biotechs, especially large cap because their earnings are less impacted by the economic cyclicality. Celgene (CELG) has a lot going for it. Its earning growth is expected to be robust over next two years. Its blockbuster drug Revlimid is penetrating multiple markets outside core segments of MM and MDS. By the end of 1st Q, Revlimid has a chance of being approved for MM and MDS in Europe. I believe this will be a huge psychological boost for the stock. I like the stock at the current level.
See my recent posts on CELG
http://investorhives.com...
http://investorhives.com...
http://investorhives.com...
Amgen (AMGN) has been beaten down to death. Concerns over competitions in EPO market, negative data with Arnesp with several cancer applications as well as dissapointing Vectibix data in the 1st/2nd line treatment of colorectal cancer has greatly depressed the share price. To make the matters worse, Medicare reform works in Congress, which may potentially limit the use of several AMGN drugs, acted as negative catalysts. How much more the negative news drive this stock downward? Most of the bad news are in the stock price, I believe. As possible economic slowdown and earning deceleration takes the multiple of economic sensitive names lower, AMGN could spark investor once again; the investors are likely to seek valuation support and earning growth stability. AMGN’s earning is expected to grow another 15% YOY and EPS could near $5 in 08, which puts the stock trading with PE around 13. The stock is cheap.
See my recent posts on AMGN
http://investorhives.com...
http://investorhives.com...
http://investorhives.com...
American Airline (AMR) is a transportation name which is known to be sensitive to the economic conditions. Why then am I recommending this stock? Although economic growth may slow, I don’t think it will head into recessionary state where business and personal travels will be impacted. However, slowing economic conditions could portend reduced oil demand and hence AMR could benefit from reduced fuel cost that will significantly boost its earning in 07. As I stated before, I expect the oil price to be caught in trading range between $45 to $55. If this holds true, AMR could deliver EPS that surpasses $7 a share and the stock is then trading on PE of 5. I like AMR at this level as the stock has pull back from intraday high of $41 to below $35 level.
See my recent posts on AMR
http://investorhives.com...
http://investorhives.com...
I will talk about china names and other stocks if the market condition further improves. However, for now, five names mentioned above seem to be good place to start.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
In my opinion, the market correction along with recent economic data point to the picture that is quite the contrary to the investor perception that I have outlined above. Chinese market correction shows that emerging market economies have vulnerabilities. As thousands of people lost money on China market crash day, it could weigh on the consumer confidence. In addition, it became also evident that the Chinese government is very concerned about the speculative nature of Chinese financial market. The government does appear to be determined to be control the growth rate to avoid steeper, prolonged recession down the road. This means slowing demand for the oil and commodities. In addition, the housing data out of the US market appears to be showing no signs of recovery. New home sales data remains anemic and the inventories are still at all time high level. Home prices are finally cracking down and this may finally take a toll on the consumer confidence. Manufacturing data looks troublesome: it is in deep slowing down mode. It does appear that the economy is indeed on track to contract although recession would be unlikely scenario in my opinion.
We have a great buying opportunity here after the market correction. The market correction will force investors to rethink their asset allocation in the energy, commodity, industrial and other cyclical names. Techs are cyclical. My recent research as well as contacts with semiconductor industry reveals stagnant market conditions at best. I am really worried about the possible deterioration of the business climate in the semiconductor area. It is definitely hard to be excited about techs at this juncture, especially if the economies in the World are slowing a bit. Upcoming April earning could show difficult earning growth environment for US conglomerates. As such, we should be looking for economically insensitive issues or already beaten down names with negative catalysts already reflected in the stock price as the primary names to focus.
I would consider the following 5 names among FilthyRich ideas.
1) JP Morgan (JPM)
2) Goldman Sachs (GS)
3) Celgene (CELG)
4) Amgen (AMGN)
5) American Airline (AMR)
JP Morgan (JPM) is a premiere large integrated bank in the US. Financials have been beaten down lately amid concerns over inverted yield curve and sub-prime mortgage crisis. However, JPM continues to show robust earning growth driven by the turnaround efforts of the new management team. JPM's exposure to the sub prime mortgage is lowest among peer banks. If the economy is indeed slowing down, Fed is likely to cut rates by the mid-year (with the stock market instability to the downside, it has more ammo to do this). JPM is likely to be a huge beneficiary of the Fed easing. It has Investor Day on March 6th, and the company may possibly address hiking the dividend.
see my recent opinions on JPM
http://investorhives.com...
http://investorhives.com...
http://investorhives.com...
Goldman Sachs (GS) took a steep fall as investors became concerned about its exposure to Chinese market. Although China may slow its economic growth, its growth is likely to be robust at least till 2008 Olympics. Fed’s easing will also be tailwind for GS. I think it should be the focus stock to buy during this correction.
See my recent opinions on GS
http://investorhives.com...
http://investorhives.com...
http://investorhives.com...
I like biotechs, especially large cap because their earnings are less impacted by the economic cyclicality. Celgene (CELG) has a lot going for it. Its earning growth is expected to be robust over next two years. Its blockbuster drug Revlimid is penetrating multiple markets outside core segments of MM and MDS. By the end of 1st Q, Revlimid has a chance of being approved for MM and MDS in Europe. I believe this will be a huge psychological boost for the stock. I like the stock at the current level.
See my recent posts on CELG
http://investorhives.com...
http://investorhives.com...
http://investorhives.com...
Amgen (AMGN) has been beaten down to death. Concerns over competitions in EPO market, negative data with Arnesp with several cancer applications as well as dissapointing Vectibix data in the 1st/2nd line treatment of colorectal cancer has greatly depressed the share price. To make the matters worse, Medicare reform works in Congress, which may potentially limit the use of several AMGN drugs, acted as negative catalysts. How much more the negative news drive this stock downward? Most of the bad news are in the stock price, I believe. As possible economic slowdown and earning deceleration takes the multiple of economic sensitive names lower, AMGN could spark investor once again; the investors are likely to seek valuation support and earning growth stability. AMGN’s earning is expected to grow another 15% YOY and EPS could near $5 in 08, which puts the stock trading with PE around 13. The stock is cheap.
See my recent posts on AMGN
http://investorhives.com...
http://investorhives.com...
http://investorhives.com...
American Airline (AMR) is a transportation name which is known to be sensitive to the economic conditions. Why then am I recommending this stock? Although economic growth may slow, I don’t think it will head into recessionary state where business and personal travels will be impacted. However, slowing economic conditions could portend reduced oil demand and hence AMR could benefit from reduced fuel cost that will significantly boost its earning in 07. As I stated before, I expect the oil price to be caught in trading range between $45 to $55. If this holds true, AMR could deliver EPS that surpasses $7 a share and the stock is then trading on PE of 5. I like AMR at this level as the stock has pull back from intraday high of $41 to below $35 level.
See my recent posts on AMR
http://investorhives.com...
http://investorhives.com...
I will talk about china names and other stocks if the market condition further improves. However, for now, five names mentioned above seem to be good place to start.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Selling accelerates and the market in the crashing mode.
Folks,
Selling in the market is accelerating. Compounded by the China market crash, weak durable order goods data, and the concerns over the sub-mortgage crisis, investors are finally selling stocks in a panic mode. This is the correction I have been waiting for.I am glad that my call for prediction (which made me stupid) is finally materializing. I am not glad that my portfolio is taking a beating like never today.
My put position which were costing me much grief lately is coming alive today. My long positions in the filthyrich ideas is getting pummeled. My plan is to take advantage of the put option price rise and take the profit over this semi-crash/deep corrective period and building more long position in the core ideas we cover. I am torn because I love when the stocks get cheaper but I hate when my account balance plunges. Having said that, I look forward to utilizing my cash ( that I have been raising (undeployed portion)) and scoop up many core ideas over the next two to three weeks.
I will outline what names to focus in the near future.
Do not panic (programming selling is making the indexes worse that it should be). Let us look for the next opportunities after this correction.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Selling in the market is accelerating. Compounded by the China market crash, weak durable order goods data, and the concerns over the sub-mortgage crisis, investors are finally selling stocks in a panic mode. This is the correction I have been waiting for.I am glad that my call for prediction (which made me stupid) is finally materializing. I am not glad that my portfolio is taking a beating like never today.
My put position which were costing me much grief lately is coming alive today. My long positions in the filthyrich ideas is getting pummeled. My plan is to take advantage of the put option price rise and take the profit over this semi-crash/deep corrective period and building more long position in the core ideas we cover. I am torn because I love when the stocks get cheaper but I hate when my account balance plunges. Having said that, I look forward to utilizing my cash ( that I have been raising (undeployed portion)) and scoop up many core ideas over the next two to three weeks.
I will outline what names to focus in the near future.
Do not panic (programming selling is making the indexes worse that it should be). Let us look for the next opportunities after this correction.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
China Market crashes overnight.
Chinese market crahed overnight with Shanghai index falling by near 9% overnight.
(see http://finance.yahoo.com...)
This sharp sell-off triggered the worldwide sell-off including loss that you are seeing currently in the US market. Just about every stocks that I am following is showing signs of red. It may be possible that this sharp market correction in China stocks is finally triggering the correction that we were waiting for in the US.
I expect first sharp fall in the Chinese bluechip names and we may see additional speculation fizzle out with smaller speculative names. So the corrective period may not be over in China. We are currently covering CTRP and FMCN with china names. They are both medium risk consumer&media related stocks. I see them recovering quickly after the correction. I am continuing to recommend CTRP below $60 level and FMCN below $80. Watch these two stocks carefully because we will get a great chance to buy these names cheaper. FMCN just delivered nice results and guided the 07 estimates higher. I will provide more detailed analysis tonight.
Implication of Chinese stock market correction could lead to slowdown in Chinese economy (depending on severity of market correction). Ironically, this could help with easing the energy and commodity prices as a result of reduced demand. Also in the long run, this can help Chinese financial market to avoid serious prolonged downturn as it had attained the state of speculation and bubble in recent times.
I expect commodity and energy names to be weak in the US. Also brokerage names such as GS could see selling pressure due to its exposure in Chinese financial market. I anticipate that Chinese market correction is indeed a correction and we will get a great chance to add quality names at a cheaper price.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
(see http://finance.yahoo.com...)
This sharp sell-off triggered the worldwide sell-off including loss that you are seeing currently in the US market. Just about every stocks that I am following is showing signs of red. It may be possible that this sharp market correction in China stocks is finally triggering the correction that we were waiting for in the US.
I expect first sharp fall in the Chinese bluechip names and we may see additional speculation fizzle out with smaller speculative names. So the corrective period may not be over in China. We are currently covering CTRP and FMCN with china names. They are both medium risk consumer&media related stocks. I see them recovering quickly after the correction. I am continuing to recommend CTRP below $60 level and FMCN below $80. Watch these two stocks carefully because we will get a great chance to buy these names cheaper. FMCN just delivered nice results and guided the 07 estimates higher. I will provide more detailed analysis tonight.
Implication of Chinese stock market correction could lead to slowdown in Chinese economy (depending on severity of market correction). Ironically, this could help with easing the energy and commodity prices as a result of reduced demand. Also in the long run, this can help Chinese financial market to avoid serious prolonged downturn as it had attained the state of speculation and bubble in recent times.
I expect commodity and energy names to be weak in the US. Also brokerage names such as GS could see selling pressure due to its exposure in Chinese financial market. I anticipate that Chinese market correction is indeed a correction and we will get a great chance to add quality names at a cheaper price.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Subscribe to:
Posts (Atom)