Use access key #2 to skip to page content.

TMFHelical (99.13)

July Review

Recs

1

August 03, 2008 – Comments (0) | RELATED TICKERS: SIAL , BIIB , PFE

July was not a happy place in the market, but was good to my healthcare / biotech port.  I broke the top 500 and have a player rating of 99.  When this has happened before, I've tended to go idle and not risk my position (I was once 19th, but there were less than 1000 players then as I recall).  The heck with that, this is a learning experiment anyway.

Lets start with ended positions.  AOB, PBE, BIIB, BRL, HHV.

American Oriental Engineering (AOB) took on debt to buy back shares.  There are few things I hate more.  Sure, it is likely to do an acquisition, but still this generally works out badly for current shareholders.  Bye Bye -- there is enough risk in this company with Chinese management that I don't need more.  So far this has been the wrong call, but it is on the watchlist. Pull it back near $7 and I may give it a go.  Not confident enough that it will happen to red thumb it though.

Powershares Dynamic Biotech ETF (PBE).  A personal favorite since it looks at biotech as more than drug developers and isn't just a DNA, AMGN tracker.  Closed to lock accuracy and restarted again.  I'll do this only 3 times before just keeping the bull call.  For long term bulls, this actually costs score points (but is worth doing with the red thumbs).

I'd love to say I was prescient with my call to close Biogen (BIIB), but it was more dumb luck.  As a top biotech drugmaker that has been on the sale block recently it got a big boost with the rest of the industry on the Roche offer to Genentech.  I expected that to be temporary and that I could lock points and then re-enter on a pullback.  I did not expect another Tysabri problem.  I like Biogen and need to think about what price I will reup the pick.  Probably worth waiting to see if there will be regulatory activity on this one, but patient tracking is already pretty rigorous with Tysabri.  Need to think about Elan as well.

Barr (BRL) will be bought by Teva, which I have a bullish call on.  I won't play arbitrage, so the pick gets closed.

Healthshares Enabling Technologies (HHV).  I love enabling tech in biotech, but despise the setup of the healthshares funds (quarterly rebalancing and narrow sector focus).  Something has to give.  This fund got a big bump on holding (for what reason I don't know) Millenium.  But the other companies are good ones too.  I'd love to sit on the red thumb to warn off these funds, but the makeup is just too good for this one (buy the companies, not this stupid fund).

New Picks in July.  PBE, COWN, DNA, PFE, GSK, LLY

PBE - already covered.  2nd reup.

COWN - I own an investment bank focused on biotech industry but it is too small to rate in CAPS (RODM).  Cowen Group also  has a biotech industry focus, and I like their research which I've read a fair bit of.  They may well struggle for a time but traded at a negative enterprise value when I made the pick.  This isn't an investment bank that owns junk and tries to trade it for profit, just one that offers and makes money based on services.  Silly cheap.

Genentech (DNA - red thumb).  A hasty pick made when this traded up too far above the Roch offer.  Since Roche owns most of the company already, I don't expect an upped offer anytime soon.  But.....honestly Roche is doing this right and getting independent review so I do think the offer may raise a bit.  I'd love to see this pick go green (probably would happen due to S&P performance rather than price pullback though I'm not holding my breath there either), but I won't wait for a +5 to end it.  Bad pick.

Big pharma.  I covered the earnings on the II big pharma recs listed above as a Community Analyst Team member.  I find myself bullish on LLY and PFE at current prices and bearish on GSK.  GSK just has too much coming off patent in the near term.  They called it a generics cliff in the conference call.  I love this company philosophy and pipeline, but won't be a bull until late 2009 I expect.  LLY and PFE face a lot of issues.  I would put Medicare part D legislative action near the top, since both have top selling drugs that focus on the elderly.  But this won't happen pre-election and probably won't be job one after it.  So PFE, I'm out at $22.50 or so, but a buyer here. LLY I probably hold to $55 -- assuming either gets there before the next quarterly report.  I'll more likely hold in the CAPS port at least through the next report and revisit.

 I don't own any of these companies in reality (owned Barr last year, obviously sold way too soon - d'oh).

 

Watchlist 

One of my absolute favorite companies disappointed me by not disappointing the market.  SIAL which I owned in the past and sold at ~$62.  That was a good move as it pulled back to ~$52, but now it is back ~$60.  I had hoped that commodity prices would hurt this company this past quarter, but underestimated both its overseas growth and product mix which owes more earnings to biotech than chemical products. I got greedy with quality, both in CAPS and reality.  Now  I'm on the outside hoping  to get a pullback that may not happen (I'm not confident anyway).  Rats.

I sold KFRC from my CAPS port too soon.  Pharma is still doing layoffs but this temporary placement service with a science specialty is still doing well.  I struggle to reconcile why exactly - perhaps transitional hire back.  Sit and wait for a better time to become bullish here.

I'm surprised by the quick recovery of HCN - Health Care REIT, which I do own in reality.  I expect this to be under $45 and wanted $42 to re-up.  With an expectation that interest rates will not rise soon due to inflation relief due to commodity price pullbacks, I'm not red thumbing this at $50.  Not yet anyway.  In my real port, I'll just collect the cash flows and not worry about price movement.

Not really on my watchlist yet, but I have to make a decision at some point on Health Plan Service companies.  UNH, WLP and the like.  Like most, I hesitate due to expected government action in the coming (but not immediate) future.  But they do seem darn cheap, especially on the basis of historical metrics.  This is going to be a tough sector to play but will be profitable for one who does so correctly.  I want to see some positive momentum then may jump in for a short term CAPS play.  Maybe in reality as well.

 TMFHelical

Community Analyst Team 

 

 

 

0 Comments – Post Your Own

Featured Broker Partners


Advertisement