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TMFHelical (99.03)

Disappointment with the financial press

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January 25, 2007 – Comments (1)

Let me explain.

I wrote up a short take today on Varian Medical Systems. The company reported a good quarter but was down in after hours trading. A few 'news' reports attributed this to weakened 2nd quarter guidance.

Well, I listened to the call, yes guidance was lowered for the second quarter. But more importantly, the guidance didn't incorporate the ACCEL acquisition which should close in the quarter and dilute future earnings. So the guidance is admittedly still too high, because it doesn't include the acknoledged hit from ACCEL. Also key was that the growth in Europe and Asia which had been historically strong, dried up this quarter. Important IMO and not mentioned in the press releases.

I guess I should not be surprised that barely any effort was put into these news reports to actually understand why the company was trading down. Just get a comment out quick reading little more than the press release. Then the other reports can parrot each other.

I've occasionally felt uncomfortable writing the occasional takes for TMF. Sure I know the science behind many biotechnology companies quite well, but felt perhaps under qualified to comment on the investibility aspects i.e. financial analysis. I guess I'm getting a lot more comfortable with my own opinion.

I am still bullish long term on VAR, but short term (with the next 6 months) I would not be at all surprised to see some buying opportunities present themselve. I would like to rate Reuters and all as 'underperform'

Ralph (Zz)

1 Comments – Post Your Own

#1) On January 28, 2007 at 1:19 PM, AssetMangler (99.00) wrote:

"Disappointed with the financial press"

Only NOW? ... Have you never heard the adage "Sell on news?" .... :)

So you're a Bio-tech type? Ve-e-e-e-ry interesting ... I'm going to have to keep an eye on YOU.

I did a quick check on VAR against my criteria. It's a solid company that I would be comfortable with in my portfolio. Solid financially, but more expensive than I like to pay for. I focus on cash, cash equivalents and low debt as a sign of financial strength, and high ROE as an indicator at (a) management knows how to make money, and (b) the business premise is fundamentally sound (there's demand for the product). I would support your assessement that this stock can be had in the near future at lower prices. At least I wouldn't buy here (but I also wouldn't be as aggressive as to short it in real trading - because of its quality, and because health care is considered to be defensive in downturns.)

Cheers,

AM

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