Archive for 2005

  • Gilead Sciences
    , October 7th, 2005 at 10:34 am

    Gilead Sciences (GILD) has been a superstar stocks for several years now. The company has able to maintain gross margin around 87%, and despite running a loss for several years, operating margins are now running about 50%.
    Barrons reports that Gilead is getting also a boost thanks to governments stockpiling Tamiflu, the company’s influenza drug.

    Founded in 1987, the California-based biotechnology giant develops and sells medications that treat infectious diseases like AIDS and hepatitis.
    But Gilead shuns protein-based therapies and concentrates on small molecules, which are chemical compounds and thus normally the realm of large pharmaceutical companies.
    “This is what happens when you focus and you are able to introduce several products in the same category,” says Yaron Werber, an analyst with Citigroup.
    Gilead invented Tamiflu, the popular antiviral drug, but licensed it to Roche Holding Ltd. in 1996.
    Between 2001 and 2004, Tamiflu’s annual sales were $200 million, which earned Gilead royalties of between 7% and 11%.
    But fear of the Avian flu and a possible pandemic has prompted 30 governments, including that of the U.S., to stockpile the drug.
    Gilead has launched a legal battle to wrest control of Tamiflu from Roche. If it’s successful, that would be a major coup: Citigroup’s Werber projects Tamiflu’s sales will reach $850 million in 2005.
    Meanwhile, Gilead’s AIDS drugs — Viread, Emtriva and Truvada — remain the company’s crown jewels, accounting for 69% of sales, or $908 million, in 2004.
    And the most glittering prize appears to be Truvada, which combines Viread and Emtriva, Gilead’s older AIDS drugs, into one pill.

  • Apple’s Secret Announcement
    , October 7th, 2005 at 8:48 am

    Next Tuesday Apple Computer (AAPL) will report its earnings. On Wednesday, Apple will make a major announcement to unveil “just one more thing.” The early buzz is that this will be the long-anticipated video version of the iPod. Or it could be a change to Apple’s computer lineup. Business Week has more. Piper Jaffray expects Apple to ship 858,000 iPod nano units in the fourth quarter and 5 million units in the first quarter.

  • Unemployment Rate up to 5.1%
    , October 7th, 2005 at 8:33 am

    The is the first look at Katrina’s impact on the economy. Nonfarm payrolls dropped by 35,000 last month. However, payrolls were revised higher by 211,000 for August. This means, the economy was very strong before the hurricanes.

    Economists predicted payrolls would drop by 150,000 last month from the previously reported 169,000 gain for August, based on the median forecast in a Bloomberg News survey. Estimates ranged from declines of 25,000 to 350,000. The jobless rate, which the department determines through a separate sampling of households instead of employers, matched the median forecast.
    Difficulties in surveying the hurricane-stricken areas may have distorted payrolls figures, economists said. “We’ll know more about the hurricanes’ impact when local employment estimates become available later this month,” said Philip Rones, deputy commissioner of the Bureau of Labor Statistics.

  • Election Fraud at Quality Systems?
    , October 6th, 2005 at 8:27 pm

    At Quality Systems (QSII), six of management’s eight candidate were just elected to the board of directors. But a dissident group, led by Dr. Ahmed Hussein, may sue for a recount. The Motley Fool is on the case.

    The problem, according to documents obtained by The Motley Fool, is that various brokerages submitted unsigned proxies that were voted in favor of the company’s slate. These proxies represent shares, held in street name at the brokerages, that individual shareholders failed to submit themselves. According to Dr. Hussein, unsigned proxies cannot be counted in a disputed election, and without those votes—approximately 832,000 out of a total 13.1 million shares outstanding—all three of his nominees would have been elected.

  • More Good News for Frontier
    , October 6th, 2005 at 2:58 pm

    Market Pulse: Frontier Airlines September traffic, load factor rise
    Thursday October 6, 1:40 pm ET
    By Carla Mozee
    SAN FRANCISCO (MarketWatch) — Frontier Airlines on Thursday said traffic in September rose 20.9% to 553.7 billion revenue passenger miles. Its load factor rose 6.6 percentage points to 71%. Capacity at the Denver-based air carrier increased 9.6% to 779.4 billion available seat miles.

  • Gold is Up, Oil is Down
    , October 6th, 2005 at 1:03 pm

    Today’s shaping up to be a lot like yesterday, only more so. Oil is down again, however gold is rallying. On our Buy List, Frontier (FRNT) is having a very good day. Thor Industries (THO) is also doing well. Lower oil prices are clearly helping us. I wouldn’t be surprised to see oil dip below $60 soon.
    The CEO at Wright Medical Group (WMGI) said that he’s going to step down. This comes one day after his company announced a major earnings warning. This hurt our medical stocks. Zimmer (ZMH), Stryker (SYK) and Biomet (BMET) are all lower again today. However, UBS initiated coverage of Medtronic (MDT) and St. Jude (STJ), each with buys.
    Despite the gold rally, financials are having a decent day. Golden West (GDW) was upgraded by Wachovia, however Commerce Bancorp (CBH) was downgraded by Oppenheimer. In the tech sector, Bear Stearns is maintaining a “peer perform” on eBay (EBAY).

  • A To-Do List for Fannie Mae
    , October 6th, 2005 at 9:50 am

    Fannie Mae (FNM) has to be one of the most disappointing stocks in recent years. It wasn’t that long ago that Fannie was regarded as one of the best stocks on Wall Street. The stock has slid from nearly $80 a year ago to $60 three months ago, to $41 today. What does it have to do to get back on track? Business Week has a to-do list.

    No, Fannie Mae is not about to implode. Despite late September news stories alleging extensive new accounting violations and a drop from $77 to $41 in the stock price in the past year, the nation’s largest mortgage-finance company is well-capitalized enough to handle any downturn in the housing market and is probably still profitable, say analysts.
    Only probably still profitable? That’s merely most analysts’ best guess, since Fannie doesn’t have any recent earnings statements for them to review. In December, 2004, regulators required Fannie to admit that it had broken accounting rules and to promise to restate past results. It has yet to reissue clean statements for 2004 — or file any new ones since last December.
    Fannie’s investor relations Web site includes this startling disclaimer: “Investors and others should no longer rely on Fannie Mae’s previously issued annual and quarterly financial statements.”

  • Today’s Market
    , October 6th, 2005 at 9:25 am

    Yuck! That wasn’t pretty. The market dropped over 123 points yesterday. The commodity sector, and oils in particular, were hardest hit. The Dow Energy index dropped 3.6%, and the tech index lost 3.1%.
    It seems as if there was almost a delayed reaction to Tuesday’s big drop in oil prices. Oil is now at a two-month low, and I think it’s headed even lower. As oil falls, lower fuel costs will help the better airline stocks, particularly my favorite Frontier Airlines (FRNT). Remember, the price of crude peaked before the hurricanes hit. Oil is already down another $1 a barrel this morning.
    Some of our health care stocks got dinged yesterday when Wright Medical (WMGI) said that its third-quarter earnings will be significantly below Wall Street’s estimate. The stock got nailed for a 20% loss. This spilled over into some of our medical stocks like Medtronic (MDT), Stryker (SYK) and Biomet (BMET). However, Wright is a very small company and its problems shouldn’t be taken as a reflection of the entire industry.
    This morning, Wal-Mart (WMT) said that Hurricane Katrina will shave one penny a share off earnings. Also, GE (GE) said that it will hit the high end of its third quarter forecast of 44 cents a share. The company said that earnings for the entire year will come in at $1.81 to $1.83 a share.
    The market should rally today, but the big news will be tomorrow’s employment report and next week’s earnings.

  • 72,000-Square-Foot Home
    , October 6th, 2005 at 7:07 am

    David Duffield, of PeopleSoft fame, is smashing an 8,000-square-foot house in order to build a 72,000-square-foot house. His neighbors, however, are not pleased.

    The project already is facing intense opposition from the neighbors who would have to live in the shadow of the proposed three-story home in Alamo, Calif. — a tony suburb about 30 miles east of San Francisco.
    Alamo resident Bruce Smith, whose family previously owned the 8,000-square-foot home that Duffield hopes to demolish to make room for his new house, said the land was never intended for a residence that will dwarf the 60,645-square-foot Hearst Castle and the 55,000-square-foot White House.
    “I really don’t have a problem with a man pursuing his dreams, but this is just too much,” Smith said in an interview Wednesday.

  • Valuing the Market
    , October 5th, 2005 at 1:47 pm

    I’m beginning to fall in love with Morningstar’s database. I wanted to look at the valuations of a number of large-cap stocks. I decided to use a PEG ratio of 1.5 as fair value. I should say that I’m not a fan of the PEG ratio, but I simply wanted to find a rough estimate of what the market is thinking.
    I looked at all the stocks that are followed by 10 or more analysts. That comes to about $8 trillion in market value, so that’s a pretty good slice of the entire market. Going by a PEG 1.5, I found that the market is undervalued by 7.4%, which sounds about right.
    Here’s a list of 100 of the largest-cap stocks on Wall Street and how the market is pricing them (100% is fairly valued, more than that is overpriced, less is underpriced). My Buy List stocks are in bold.
    GE 101.80%
    MSFT 103.50%
    C 72.33%
    JNJ 109.69%
    PFE 93.92%
    WMT 81.79%
    BAC 73.01%
    AIG 60.57%
    INTC 79.86%
    PG 124.01%
    IBM 106.60%
    JPM 73.95%
    CSCO 78.90%
    AMGN 95.49%
    WFC 73.86%
    DNA 142.24%
    VZ 267.93%
    GOOG 102.74%
    TWX 116.53%
    HD 72.18%
    HPQ 113.70%
    DELL 73.26%
    NOK 114.57%
    SBC 174.74%
    UPS 103.41%
    QCOM 137.71%
    WB 81.19%
    UNH 86.13%
    ABT 118.87%
    MDT 109.54%
    ORCL 87.83%
    CMCSA 212.22%
    WYE 145.30%
    AXP 77.79%
    LLY 123.28%
    ERICY 122.93%
    MWD 64.98%
    BA 131.87%
    GS 57.69%
    MOT 107.61%
    EBAY 105.16%
    SAP 139.94%
    TXN 82.60%
    VIA.B 92.56%
    UTX 95.23%
    USB 76.37%
    LOW 74.32%
    DIS 98.23%
    BLS 168.53%
    YHOO 125.11%
    WLP 82.07%
    TGT 86.51%
    WAG 104.64%
    AAPL 113.44%
    CCL 82.64%
    MCD 128.96%
    FNM 40.04%
    ACL 139.69%
    MET 75.60%
    ALL 65.19%
    EXC 146.88%
    S 77.80%
    PRU 70.38%
    WM 66.80%
    EMC 83.55%
    SGP 202.36%
    HON 100.29%
    LEH 57.71%
    KRB 79.47%
    FDC 90.67%
    SO 251.40%
    CL 138.56%
    AMAT 107.92%
    CAH 95.58%
    SYMC 84.92%
    LMT 100.73%
    DUK 201.46%
    FDX 74.63%
    ADP 121.60%
    BAX 134.03%
    AET 77.12%
    STI 91.63%
    ITW 81.24%
    HIG 62.48%
    GDT 139.03%
    AFL 81.50%
    ACN 86.45%
    CMX 85.66%
    BK 84.68%
    TEVA 65.46%
    NKE 77.64%
    GILD 109.84%
    NCC 94.44%
    AT 209.18%
    HCA 81.42%
    BBT 94.64%
    COF 48.30%
    BEN 105.04%
    COST 108.40%
    PGR 94.05%
    BBY 78.34%
    SYY 102.79%
    FITB 75.78%
    BSX 55.37%
    SYK 94.67%
    SBUX 126.09%
    INFY 79.92%
    K 141.32%
    CFC 36.47%
    AMZN 178.62%
    GENZ 108.34%
    GDW 62.27%
    CCU 128.70%
    STJ 120.62%
    ZMH 80.94%
    GCI 96.71%
    ERTS 134.06%
    KSS 69.64%
    STT 99.73%
    PNC 107.74%
    DHR 83.08%
    CA 170.26%
    BRCM 94.70%
    SPLS 83.41%
    AEP 303.93%
    CI 95.56%
    MHS 96.81%
    LU 138.42%
    GPS 69.11%
    OMC 103.10%
    GNW 75.50%
    ADBE 124.96%
    MCK 97.94%
    NT 300.91%
    PAYX 140.94%
    MXIM 80.64%
    RF 103.99%
    YUM 107.50%
    MAR 92.31%
    ADI 120.62%
    ACE 60.78%
    BIIB 115.37%
    MEL 101.64%
    FRX 73.96%
    HDI 70.35%
    MRVL 85.60%
    KEY 109.73%
    HOT 109.78%
    IR 70.77%
    JNPR 98.62%
    MGM 106.95%
    CPB 175.52%
    HET 85.46%
    BBBY 73.77%
    NFB 75.03%
    ED 365.80%
    COH 79.71%
    EDS 170.09%
    APOL 78.75%
    LLTC 85.00%
    PGN 289.75%
    NTRS 107.48%
    FD 79.98%
    DHI 30.84%
    EQR 176.85%
    PHM 37.79%
    TRB 126.89%
    ADSK 143.60%
    MI 94.36%
    XLNX 101.51%
    ASD 91.69%
    CMA 101.68%
    AMD 538.44%
    KLAC 90.01%
    ESRX 95.57%
    TJX 74.22%
    LEN 34.23%
    ETN 66.10%
    WFMI 192.63%
    JWN 92.50%
    CIT 69.12%
    NSM 121.57%
    LNC 72.79%
    ASO 99.63%
    RCL 74.06%
    BMET 82.15%
    CSC 89.03%
    FISV 87.21%
    SNV 85.24%
    HLT 118.60%
    NTAP 82.81%
    TROW 123.43%
    MEDI 331.86%
    MU 399.21%
    CHIR 127.89%
    ABC 128.05%
    LTD 84.18%
    ASN 292.23%
    SOV 81.46%
    HUM 101.41%
    Advanced Micro Devices is the most overvalued, followed by Micron and Consolidated Edison. The best bargain is D.R. Horton, followed by Lennar and Fannie Mae.