June 08 Summary
In May I started a commentary on the moves in my CAPS port over the past month. This post is to capture my thoughts on June moves.
Just one pick got ended in June - KForce (KFRC). This company provides temporary labor services to the life science industries. I really like this company, but it just seems to be the wrong time to be bullish on it. Pharma is still laying off workers and restructuring. Not exactly a 'hiring' environment for temp workers. Now it is my opinion that a lot of these workers will find themselves employed at CROs, as pharma continues its expanded use of contracted services. So Kforce could well be fine right now. Still, I'm in a hold mode on it. When pharma shows signs of strength again (post election?), I'll be green thumbing this one again. But for now it is to the watchlist.
New Picks - There were 3.
First was GreenHunter Energy, a stock I own in reality. This is a company in the alternative energy space. So, what is it doing in a biotech / healthcare specific portfolio...well.... uhmmm....how about a focus on biodiesel (yeah, its a stretch rational wise - I give myself leeway). The company just opened the largest biodeisel refinery in the US, and one that can take multiple feedstocks (whose prices are problematic when you talk soy or corn). They are also buying Jathropha assets for future feedstock control. Very speculative play. Today they announced a share buyback, despite clear indications that they will tap equity markets in the future for growth funds (huh?). Still management is experienced and inspires confidence (listen to a presentation), I'm content to go along for this bumpy ride.
Second was an underperfrom on FUJI. As I said in my pitch (and replies), this company is entering the drug development market and seems overly naive about it. Here are some links related to this opinion 1, 2. Translation issue? Perhaps. But many companies stall when they venture into what they think are related industries that aren't really that close. FUJI needs to do something, and this reeks of desperation.
Third was a bullish call on Biogen-Idec (BIIB). I had cause to do some background research on this firm and like the direction they are pointed. They are buying in 'traditional' i.e. small molecule pharmaceuticals in development to complement the therapeutic biotech products and pipeline. The Elan joint effort on Tysabri seems to be gaining momentum in the market as well. I was too quick on the trigger, and should have waited for the proxy grumbling with Carl Ichann to settle out before going bullish - but thats OK. This is a pick for the long term. In general, I won't hold too many biotechs with pharma focus - too risky IMO. But when you do, it has to be for the long haul.
Not much going on. I'm dying to be bullish on Sigma-Aldrich again, but still want to wait. This chemical supplier should be hit by commodity prices harshly, so I'm expecting a lowered guidance in the future - but like the company too much to red thumb it. Waiting for a time to green thumb (looking for post quarterly and a price under 50). Myriad Genomics has been added to the watchlist. I like the company as a diagnostic, but didn't want to buy and face the failure (not unexpected) of the Alzheimer's drug. Well, the drug failed, and Myriad wasn't punished as much as I hoped. Hope I can get greedier. Speaking of diagnostics. Meridian Biosciences (VIVO) has been on the watchlist a long time and should probably make the port. Have to think more about that one.
For me, the big news in my CAPS port was Invitrogen making a bid for ABI. As a former ABI guy, this was close to home. Now I think this merger makes sense from a product portfolio point of view - heck, I think AFFX should be part of this as well (give them a year). But...Invitorgen got themselves in trouble by being a serial acquirer in the past. A big part of my green thumb on them was the supposed 'focus on operations' which had been playing out over the past couple of quarters. So I was somewhat miffed by the buyout of ABI (being contrary to my pseudo investing thesis and all). So what to do now? Hmmm.... Well, I'm going to see if they learned from past mistakes and give them a year to make this merger work, but I'm awfully skeptical. A limp green thumb from here, and should I get a +5, I may take it off the table (We'll see - maybe not). As for ABI - despite being close to this I've never been good at predicting the stock. The core sequencing business has been under pressure for years, and MS isn't fairing so well either (mostly with MDS Sciex now anyway). But efforts for future growth have been made, I'm just not sure they will play out. With ABI and CRA splitting, I really thought that it would be CRA that got sold first - d'oh.