Sunday, May 06, 2007

Barron's Summary

Barron’s cover discusses stem cell stocks. Article suggests that hope and hype in the sector will intensify this year as money pours in from states and private donors, as the political climate becomes more supportive and as small biotech co’s, many of them long on promise yet short on profit, seek to capitalize on this wave of optimism. Investors would be well advised to pay close attention, particularly to co’s whose products support the research effort, but to proceed carefully - and with patience - as the science develops. Already, some co’s are lining up clinical trials this year to test how stem cells will affect patients suffering from cancer, heart disease and spinal-cord injury. But the scope extends beyond life-threatening ailments; Cytori Therapeutics (CYTX), for example, is testing 19 patients in Japan to see how stem cells extracted from fat can reconstruct breast tissue after mastectomies. "We don't even know what the potential scope or limits are," says Arnold Kriegstein, of Institute for Regenerative Medicine. "But we're at a transformative moment, and stem cells could change what we know of medicine. Other stem cell co’s mentioned include OSIR, GERN, STEM, KOOL, VIAC and ASTM.

Fund manager picks include RGC, CNK, CKEC, JRC and MNI. Another fund manager top holdings include BRKA, CNQ, DISH, MHK, SHLD, LUK, IDT and BRKB.

McDermott (MDR) could rally at least into the mid-60s in the next 18 months, from 59. The stock trades for 15.5 times '08 estimated earnings, below the sector's average P/E of 20.

The shares of WellPoint (WLP) look cheap, selling at just 12.7 times estimated 2008 earnings. With business prospects strong, the shares could top $100, up 23% from now.

The shares of Delta Air Lines (DAL), which started trading Thursday at about $21, are apt to face turbulence in early weeks as creditors cash out. But they're headed for a cruising altitude closer to $27.

Barron’s has learned that over the past few weeks CEO of iMergent (IIG), Donald L. Danks, has told select individual and institutional investors that the co's F3Q earnings will be over 50% higher than the est of 39-41c a share set by the one analyst who follows the co. Some ppl apparently have gotten the good word already. On a tape recording of a conversation heard by Barron's, a voice that sounds like Danks' is heard telling an investor about the earnings, adding that "net dollar contracts written," which is the way the co reports its rev, will be around $50m. The recording was made by a person who says he took part in the conversation, who identifies the other speaker as Danks and who contends that others have told him they have had similar discussions with the iMergent CEO. Such conversations would appear to violate Regulation FD of the SEC, which mandates that a co can't disclose material information about its operations selectively, but instead must make "fair disclosure" to all potentially interested parties simultaneously. Asked about this Fri afternoon, Danks adamantly denied having spoken with any outsiders about the qrtrly earnings. "I would never give that information to anyone who would use it to trade the stock."

Barron’s discusses Intl. Fight League (IFLI.OB), saying that the co’s stock has plunged after an IPO last year. Given the co's lack of profits and big challenges, the stock is unlikely to rise anytime soon from its recent level of about $3.

“The Trader” section discusses favorably Interactive Brokers (IBKR), whose founder and CEO Thomas Peterffy tested public appetite for his co and was greeted with clamor. The deal valued the firm at $12bn, 3x that of the Nasdaq (NDAQ). About $1bn of the proceeds will go to Peterffy. And he swelled his bank balance without relinquishing his stranglehold on the firm he founded 25y ago, which he controls with 91.3% of voting rights post-IPO. Net rev grew 65% in ‘05 and 35% last year, and the co keeps costs low with savvy use of automation. No surprise, then, to see shares accorded a plump valuation. At 31, IBG shares trade at 4.4x tangible BV, or 26x ‘06 earnings of $1.21 per-share. That presupposes derivatives volume will keep growing at a galloping pace of more than 20% a year, and that Peterffy will continue to stay two nimble steps ahead of the crowd.

“International Trader” discusses BSkyB (BSY), whose stock is up 25% since the beginning of the year. The co is facing multiple legal and regulatory challenges to its latest strategic moves. BSkyB might yet have to sell its stake in cable's ITV at a loss and see the terrestrial broadcaster fall into the hands of rival Virgin Media. And the success of ITV and Setanta Sports in outbidding the BBC and BSkyB for rights to show the FA Cup is an ominous sign of growing competition. BSkyB says its gross direct-to-home customer additions were the highest in a F3Q in 6 years. At 340K, the total exceeded even bullish forecasts. Churn did worsen, but BSkyB points to the phasing-out of discounts that cost it some business, short-term, and left net new customer additions at a more modest 51K. But those new customers seem to be buying higher-priced products, with ARPU coming in above 400 pounds for the first time. All this promises extra earnings growth, perhaps not fully reflected in the admittedly robust 21x forward earnings multiple that BSkyB's stock has been trading at. That said, BSkyB now faces much higher expectations of its operating performance, suggesting that any slippage will be judged harshly by investors.

“Plugged In” column discusses upcoming Motorola (MOT) AGM, saying that Carl Icahn will be in the house. He's pushing for at least one seat on the board in return for his 3% stake in the co. The column also reports that there’s a rumor that Ericsson (ERIC) has made an unsolicited offer to acquire Motorola at 23 a share. Snyder says that at least two major shareholders say Icahn has been spreading that word.

1 comment:

daniel said...

Great post! I recently found an article that has changed my viewpoint about Stem Cell Stocks. Now I'm a believer of these fortune making stocks.

Investing in Stem Cell Stocks