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)

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