DNDN: Provenge Just Approved By The FDA

According to CNBC's Fast Money 4/29/2010,

A first-of-a-kind prostate cancer treatment from Dendreon [DNDN  50.18    10.56  (+26.65%)   ] that uses the body's immune system to fight the disease received federal approval Thursday.

Doctors have been trying to develop such a therapy for decades, but it’s Dendreon’s drug – called Provenge – that was first to win approval. "I suspect within five to ten years immunotherapies will be a big part of cancer therapy in general," said Dr. Phil Kantoff, a professor of Harvard Medical School who helped run the studies of Provenge.

Currently doctors treat cancer by surgically removing tumors, attacking them with chemotherapy drugs or blasting them with radiation. Provenge offers an important fourth approach by directing the body's natural defense mechanisms against the disease.

The drug is intended to treat prostate cancer that has spread elsewhere in the body and is not responding to hormone therapy.

Medical specialists hailed the approval as an important milestone, but stressed it will serve as an addition to current practice, not a replacement. "This is just one step in a new pathway for treating patients," said Dr. Simon Hall, chairman of urology at Mt. Sinai Hospital "We have to make them realize this isn't a cure, it's very variable."

The news is out and the stock is up to $51.79, up well over 35% from my recommendation on April 13. The question now for whoever followed the suggestion is, what do we do now? It would definitely be prudent to take some profits on an unbelievable short-term gain. However, digging deeper into the growth prospects, that stock looks quite attractive for the long term to keep a smaller long position. The revenue estimates are setting up Provenge to be a blockbuster with sales up to $1-2 billion/year within 2-3 years. There is also a high probability of a buyout which should send shares even higher. There are many big pharma names out there sitting on a pile of cash, such as Pfizer. These big pharma names need to fill their product portfolio with blockbuster novel treatments like Provenge, because they will be hitting a wall of patent expirations soon.

An obvious potential threat would be future competition. According to Reuters:

Other companies are exploring the field. GlaxoSmithKline (GSK.L) is studying a lung cancer vaccine while Bristol-Myers Squibb (BMY.N) is testing a melanoma vaccine.
Danish biotech Bavarian Nordic A/S (BAVA.CO) is about to start late-stage testing of a rival prostate cancer vaccine called Prostvac that does not need to be tailored to the individual patient.

Another setback could be lack of supply or production delays.

Christopher Raymond, an analyst with Robert Baird & Co, said the company told investors in a conference call there will be only enough Provenge within the next 12 months to treat 2,000 patients, all from a factory in New Jersey that is operating at 25 percent capacity.
Dendreon said three plants will be running by mid-2011, which Raymond said should be able to supply 4,400 patients in 2011, and about 8,000 patients in 2012.

I'm considering a major threat could be managed care organizations and Medicare not including Provenge on their drug formulary lists because of the high $93,000 cost per treatment. However, most treatments for Cancer and HIV disease states typically don't have too much of a problem getting on formulary. That is just purely my speculative opinion from experience in the industry.

I have no idea how to calculate a target price because there is no multiple history due to the company operating at a loss. But I'll try to do a very high level and probably inaccurate calculation. What we do know is:

2010 Revenue Estimates= $79.42 million
Current EPS= $-2.04 on Shares outstanding=  134.14 million

If DNDN can get to $1 Billion in revenues by 2011, that would be a 1259% increase. Most Biotech companies operate on 30-45% operating margins. So if total revenues were $1 billion, Net income could essentially come out to $300,000,000 on a conservative 30% operating margin. Making an approximate EPS of $2.23. That's a $4.27/share shift. What does that mean? I have no idea since we don't know what multiple investors will pay. But the prospects for top line revenue growth are tremendous. So please evaluate all aspects carefully and don't be too greedy.


Do not rely solely on the opinions of this blog or any other site when making an investment decision. Any investment could result in the risk of loss of capital. Please consider seeking professional advice before initiating your investment ideas.

Disclosures:
Long BAC, Long C, Long F, Long DNDN, Long GLW, Long SPF, Long HD, Long AAPL

Hedge Funds Are Adding To Their Long Positions In Crude

According to B of A/ Merrill Lynch's, "Hedge Fund Monitor Report" dated April 26, 2010:

Overall, Hedge Funds remain cautions on US equities, further selling the S&P 500 and pairing back on the NDX. At the same time, despite some selling last week, they remain very net long metals and energy. They also continue to be very short the Euro and are keeping to their curve steepening trade.

These data points were considered significant Hedge Fund moves across all asset classes. Hedge funds as of last week were cautious of the overall market and were looking for protection on the downside. It's like they saw yesterday's 200+ point decline before it even happened. The focus has been with smaller cap stocks, or higher beta plays, but now they are fleeing to safety and rotating into oil.

According to Investopedia: Beta is a measure of a stock's volatility in relation to the market. By definition, the market has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the market. A stock that swings more than the market over time has a beta above 1.0. If a stock moves less than the market, the stock's beta is less than 1.0. High-beta stocks are supposed to be riskier but provide a potential for higher returns; low-beta stocks pose less risk but also lower returns.

The oil data point actually caught my interest, stating that hedge funds were adding to their crowded longs in oil. This is because I had a great conversation last week with a fellow investor from Stanford (A. Ho) who focuses on sectors that he thinks will do well in a 3-6 month time frame. He recommended taking a look at stocks that move with higher oil prices. His higher oil thesis is right in line with the hedge funds. I'll be sure to discuss the other sectors he is fond of in the near future, since he has had a hot hand as of late.

The stocks we discussed are Exxon Mobil (XOM), Chevron (CVX) & ConocoPhillips (COP) which should benefit with higher oil prices. Their valuation look extremely attractive at these levels as well. CVX is the cheapest on a current multiple valuation basis and XOM has the best PEG of an impressive .75 (We always try to look for a PEG of under 2).

Investopedia explains Price/Earnings To Growth - PEG Ratio
PEG is a widely used indicator of a stock's potential value. It is favored by many over the price/earnings ratio because it also accounts for growth. Similar to the P/E ratio, a lower PEG means that the stock is more undervalued.

Other companies he suggested taking a look at are MRO, CLR, TLM & DIG. I have yet to conduct thorough analysis on these, but it's definitely worth taking a look.

Jim Cramer has been recommending oil drillers as of late because he just recently stated that oil should be going to $100/barrel. More specifically Weatherford Int. (WFT). He also recommended Occidental Petroleum as an oil play as well.


Do not rely solely on the opinions of this blog or any other site when making an investment decision. Any investment could result in the risk of loss of capital. Please consider seeking professional advice before initiating your investment ideas.

Google: Removed From GS Conviction Buy List & Crossing It's 200 Day Moving Average

According to the streetinsider.com:

Goldman Sachs removed Google (Nasdaq: GOOG) from their Conviction Buy List, but maintained their Buy rating and $680 6-month price target. The firm cited recent underperformance following in-line 1Q results.

The firm still thinks Google can sustain a mid-teens revenue growth rate for the next 3-5 years. They said shares are attractive at 16x their 2011 EPS/FCF.

It's interesting that Goldman Sachs removed GOOG from the Conviction Buy List but maintained a $680 price target which is a 28% increase from the current $531 price ($528 after hours) within 6-months. If that expected price action doesn't warrant buying with conviction, then Goldman Sachs has some very high expectations for their market moving Conviction Buy recommendations. This alone makes the current share price an interesting entry point. It aligns with great valuations of 16x forward earnings and an impressive PEG of 1.00.

But wait, what has caused the massive 2 week decline of over 65 points? They beat earnings expectations which seemed like the stock could march up toward the $680 price target. However, market pros believe the decline was caused by the decision to add staff, acquire additional companies and develop products outside the realm of Internet search advertising. Now, it has dropped to a key resistance level. At $530, the stock has just crossed the 200 day moving average. Investors that rely on technical analysis understand this is a key inflection point which may cause the stock to climb or continue to decline.

Which ever trajectory the stock continues in the near future, it could be worth looking at. Holding at this level could be powerful, however, the lower it drops the more attractive on valuation it becomes.

Do not rely solely on the opinions of this blog or any other site when making an investment decision. Any investment could result in the risk of loss of capital. Please consider seeking professional advice before initiating your investment ideas.

Will Ford Surprise To The Upside For Q1?

As previously disclosed, Ford (F) has been a stock I keep a close eye on. For full disclosure I own F and I recently began driving a new Ford Fusion (My experience with the new ride may have possibly swayed my bias). Upon a surprisingly pleasant experience with the vehicle I looked into the company’s news and events. In doing so, I discovered a number of awards and accolades for various Ford vehicles, ranging from: U.S. News & World Report ranks Taurus #1, Fusion hybrids beats Toyota, Nissan and Chevy hybrids in Car and Driver’s test, Fusion and Excape named cars.com’s best hybrids for the money. I came to the realization that this company has completely turned itself around. I’m sure most people were already aware of this, but my perception of the company’s vehicles was so negative that it took me this long to realize it. Now Ford releases earnings for Q1 this Tuesday (analyst are expecting EPS of $.31/share), so the big question is if the impressive awards and accolades will materialize into appropriate revenue growth?

According to David Bailey and Soyoung Kim of Reuters, The automaker no doubt has benefited from the 2009 U.S. government bailouts of rivals General Motors (GM.UL) and Chrysler, and Toyota Motor Corp's (Tokyo:7203.T - News) massive recalls that led to congressional hearings this year, analysts say. However, that edge may begin to fade with Toyota offering company record incentives to rebuild U.S. sales, Chrysler reporting a first-quarter operating profit and GM repaying government loans and calling a 2010 profit a possibility. Consistency will be critical as Ford looks to generate positive cash flow, reduce a massive debt load and eventually return to an investment grade credit rating, analysts say.

This helps me understand why the stock is only trading at 16.4x earnings at an annual EPS of $.86. Investors are most likely anxiously awaiting for F to reinforce their 2010 and 2011 outlook because they feel that their recent success may just be a short lived run of luck. They basically are waiting to see if F can provide 6-8 quarters of consistent, great results.

Also mentioned in the article,

Through March, Ford's U.S. sales were up 37 percent while the industry was up 15.5 percent. Ford gained more than 1 percentage point of U.S. market share last year, not including the Volvo car unit it is selling, to 15.5 percent. Ford's quality and sales improvements and avoidance of bankruptcy give it an edge over rivals, said Logan Robinson, a professor at the University of Detroit Mercy School of Law and former industry executive. "With Chrysler and GM still owned by the government and the unions and with Toyota's present difficulties, I see a pretty good year ahead for Ford," Robinson said, adding that Chrysler's sales remain quite weak.

Ford’s Q4 2009 revenue was $35.4 billion and the average analyst estimate for Q1 2010 is $30.49 billion. Now with U.S. sales up 37% per the article, this leads me to believe that the Q1 estimates may have been set quite low, unless there was a dramatic drop in their global operations. We’ll see if that assumption is correct on Tuesday and see if they can surprise to the upside in top line revenue growth and EPS for Q1 like they have the past 4 quarters. For those who have been in the stock, let’s hope we can extend our gains and see a new 52-week high. BTW, Jim Cramer thinks it could go to $17.

Do not rely solely on the opinions of this blog or any other site when making an investment decision. Any investment could result in the risk of loss of capital. Please consider seeking professional advice before initiating your investment ideas. 

Apple Can Do No Wrong

Apple's earnings for Q2 2010 came out to $3.33/share vs an average analysts estimate of $2.45/share. Their profit margin came out higher than expected and top line revenue was $13.5 Billion vs $12.04 Billion est.

2.94 million Mac units sold
10.8 million iPod units sold
8.75 million iPhone units sold

Guidance is Q3 revenue of $13 Billion to $13.4 Billion

This is just a blow out performance. I'm surely regretting not creating a large position in this unbelievable company. After hours action is showing a 7% pop. Some experts warn of a near term pull back for profit taking.

Do not rely solely on the opinions of this blog or any other site when making an investment decision. Any investment could result in the risk of loss of capital. Please consider seeking professional advice before initiating your investment ideas.

Corning (GLW): Could They Benefit from 3D Televisions?

GLW is becoming more interesting with the emergence of 3D televisions. Samsung and Sony have stated that they are preparing for bigger sales. The Best Buy earnings report also alluded to it. They also said that, "...unit sales of flat-panel televisions, notebook computers and cell phones each experienced such large increases that they contributed to comparable sales gains in those categories even though their average selling price has been declining."

There's a possibility that 3D could be the next big thing, like LCD's were a few years ago. GLW was the company that benefited because they make the displays for the TV's. According to GLW’s most recent 10k, displays for TV's, smartphones & computers compose up to half their revenue. They also have a partnership with Samsung for displays, and if Samsung is going to push big, they should definitely benefit. Even if 3D does flop, there are 2 billion TV's in the world and only 13% are LCD's, so there is definitely room for growth. Other segments they are involved in are telecommunications and fiber optics with an agreement with Verizon, environmental technologies and life sciences.

They are trading at 15.6x earnings at the current $19.98 price, which is cheap in comparison to its industry. Its industry P/E is 22x. The 5-year PEG is .86, which is appealing. EPS revisions have been revised up recently and RBC Capital Mkts just upgraded GLW from Sector Perform to Outperform with a price target of $26. According to Mark Sue of RBC Capital, “... strong retail demand for LCD TVs and a potential upgrade cycle by the recovering consumer may drive improving earnings growth.” It's possible to expect the average analyst estimate to be lifted from its current $1.78/share for Dec 2010. However, if it doesn't and investors are willing to pay only 16x earnings, the target price for Dec 2010 average EPS could reach $28.16.

According to CNBC's Fast Money on April 21, 2010

Pete Najarian has spotted an unusual options action in Corning which is trading at $20.40, up 1.49% today. A large volume of June 23 calls traded this week combined with a large number of May 21 and 22 calls traded last weeks suggests to him this stock could have more room on the upside.

Do not rely solely on the opinions of this blog or any other site when making an investment decision. Any investment could result in the risk of loss of capital. Please consider seeking professional advice before initiating your investment ideas.

Goldman Sachs Hedge Fund Monitor Report: Top Hedge Fund Holdings

It’s a little late, but I felt it was necessary to share some important aspects from the Goldman Sachs “Hedge Fund Trend Monitor” released on February 22, 2010. It is a compilation of analysis for 627 hedge funds with a fundamental strategy. Below is a listing of the Ten Stocks That Most Frequently Appear In Hedge Funds’ Top Holdings & the Top Ten Stocks Added Most By Hedge Funds. Why is this important? Hedge fund returns are largely dependant on the performance of just a few holdings. These holdings are usually their top holdings.

Ten Stocks That Most Frequently Appear In Hedge Funds’ Top Holdings

Apple – AAPL
Pfizer- PFE
Bank of America- BAC
Google- GOOG
JPMorgan Chase- JPM
Microsoft- MSFT
Mastercard- MA
DirectTV- DTV
Wells Fargo- WFC
CVS Caremark- CVS

Top Ten Stocks Added Most By Hedge Funds

Mead Johnson- MJN
Wells Fargo- WFC
Citigroup- C
Amazon- AMZN
3Com- COMS
Hewlett Packard- HPQ
Wellpoint- WLP
Black & Decker- BDK
CVS Caremark- CVS
Jeffries- JEF

Do not rely solely on the opinions of this blog or any other site when making an investment decision. Any investment could result in the risk of loss of capital. Please consider seeking professional advice before initiating your investment ideas.

My Ideal Fundamental Portfolio

I was asked last week by a new, eager investor what stocks would be good to start watching and analyzing. So I provided him with the stocks I either have positions in, have recommended and or will create positions in. It's decently diversified, but not an exact 20% sector allocation that many experts suggest. I tried to find the companies with both great fundamentals and impressive growth prospects in respects to the given economic climate. (Disclaimer: some have horrible fundamentals and are purely speculative). Catalysts that I put more emphasis in are healthcare reform, mobile internet boom, emergence of 3D TV, regional housing recovery and future economic global recovery. I feel that this is a strong portfolio for a 1-3 year timeframe. Please comment, whether it be positive or negative. I love to hear different perspectives. I'll also track it over time as of last week to evaluate my growth analysis and provide updates over structured time intervals. It won't be my exact performance, since I will sell and buy into these positions over time, but it will be a good barometer that novice investors can follow.

C
BAC
V
GOOG
AAPL
CSCO
GLW
F
NKE
HD
SPF
TEVA
DNDN *** Very speculative play. This stock could drop to the basement if they do not receive FDA approval for their promising compound, Provenge.
FCX

Good luck investing!!

Do not rely solely on the opinions of this blog or any other site when making an investment decision. Any investment could result in the risk of loss of capital. Please consider seeking professional advice before initiating your investment ideas.