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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 GLW Long SPF Long Cash....

Citi: It Seems Like Everyone Is Flooding Into C

If you haven't created a position in C yet, this could be a good entry point. At least that is what prominent money managers are saying. Citi has had a wild ride in the past month. Seeing highs north of $5/share, down to lows close to $3.50 this past week. With over a 20% drop what are the main catalysts for getting in?

The US Treasury has stated that they had sold 1.5 billion shares for an average price of $4.13. They have also authorized another 1.5 billion share release of the total 7.7 billion shares they have acquired through the preferred exchange.

Fast Money pointed out that there are many whales stepping back in at this point buying up C, these Hedge Funds include:

Whales Bullish on Citi
Current Holdings:
Pershing Square: 150Mln
Paulson & Co.: 506Mln
Fairholme Funds: 227Mln
David Tepper: "Significant Position"
Source: CNBC.com

According to a Barrons article, Goldman Sachs has upgraded C to buy from neutral due to improved consumer credit and capital markets.

WHETHER YOU CALL IT URBAN RENEWAL or something else, what's clear is that investors are moving back into Citigroup (ticker: C).

Before Monday's opening bell, Goldman Sachs (GS) upgraded the financial giant to Buy from Neutral while downgrading Citi rivals Wells Fargo (WFC) and Comerica (CMA) to Neutral from Buy.

Analyst Richard Ramsden wrote that "the turn in consumer credit, and prospects for a good capital markets quarter," inspire confidence in Citi's ability to outperform. He also has a Buy rating on JPMorgan (JPM) and Bank of America (BAC).

Since we have not reached a level of normalized earnings after the '08 credit crisis, it is very difficult to value banks on P/E multiples. One way to do bank comparisons and fundamental valuation now, is through analyzing Book Value Per Share as The Street Insider has done for us.

A key metric to value Citigroup and other bank stocks is Tangible Book Value Per Share. At the end of Q1 Citigroup's Tangible Book Value per shares was $4.09. Banks stocks usually trade for at least 1x tangible book and some much higher. The average amongst Citigroup's stronger peers is about 1.7x.

There is one theory that Bill Ackman may be a buyer of Citigroup stock below Tangible Book Value, while the Treasury is a seller above Tangible Book Value.

Shares of Citigroup are siting at $4.02 currently, up 3.9% today. Based on the theory above, shares could easily glide to $4.09, but once there there could be major resistance as the Treasury unloads and hits any bid.

The good news is that once the government gets out of the way, shares could trade at a market multiple of 1.7x tangible book value. That would get the shares about $7.

For additional opinion, here is Jim Cramer's take on C.




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 GLW Long SPF

Goldman Sachs' VIP List: Following Smart Money...

Goldman Sachs just released the VIP List which displays long hedge funds most widely held positions in the first quarter of 2010. They derive this list by compiling the 13f filings that hedge funds submit every quarter. It's extremely valuable if investors want to look to the best and brightest for some investing ideas.

According to Market Folly:

Hedge fund returns are often dependent on only a few key stocks and a fund's top 10 holdings typically represent 60% of their assets. As such, it makes complete sense that the VIP list tracks stocks that most frequently appear in the top ten holdings of various fundamentally driven hedge funds. Goldman's VIP basket of 50 stocks has outperformed the S&P 500 by 67 basis points on a quarterly basis since 2001 with a Sharpe ratio of 0.24. Those of you with Bloomberg Terminal access can look it up via GSTHHVIP.

Here are the top 10 ranked by the number of hedge funds that have these positions as a top holdings:

1. Apple (AAPL): 72 hedge funds owned it as a top 10 holding
2. Bank of America (BAC): 46
3. Google (GOOG): 43
4. Microsoft (MSFT): 40
5. JPMorgan Chase (JPM): 39
6. Pfizer (PFE): 34
7. CIT Group (CIT): 31
8. Intel (INTC): 25
9. Qualcomm (QCOM): 25
10. Cisco Systems (CSCO): 22

Read more: http://www.marketfolly.com/2010/05/goldman-sachs-vip-list-stocks-that.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MarketFolly+%28Market+Folly%29#ixzz0ov70RRXP



Goldman-Sachs-VIP-List-Hedge-Funds -


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 BAC.H (preferred) Long C Long F Long DNDN Long GLW Long SPF Long BP

It's that time again where the best and brightest money managers disclose the investments they made in the first quarter with the 13F filings out. This provides us with some insight into what positions could be worth taking a look at, or worth getting rid of. Today, CNBC's Fast Money summarized some of the notable investments made by the whales of the industry.

Noteworthy Buys
Warren Buffett bought into Becton Dickinson [BDX  73.78    0.52  (+0.71%)   ] and Iron Mountain [IRM  25.36    0.88  (+3.59%)   ].

John Paulson increased his stake in Bank of America [BAC  16.35    0.01  (+0.06%)   ].
David Einhorn raised his stake in CIT [CIT  37.01    -1.34  (-3.49%)   ].

Bill Ackman added to his position in Kraft [KFT  30.55    0.52  (+1.73%)   ] , General Growth Properties [GGP  14.25    -0.25  (-1.72%)   ] and Yum![YUM  41.13    0.56  (+1.38%)   ]

Carl Icahn upped his take in Motorola [MOT  6.85    0.06  (+0.88%)   ], Genzyme [GENZ  50.87    0.44  (+0.87%)   ] and Lions Gate [LGF  6.54    -0.16  (-2.39%)   ].
Noteworthy Sells
Warren Buffett is scaling back in Gannett [GCI  16.19    0.43  (+2.73%)   ], Carmax [KMX  23.59    0.37  (+1.59%)   ].

George Soros cut his stake in Citi [C  3.86    -0.12  (-3.02%)   ] from 95 million to 10,000 and he cut his stake in gold.

John Paulson sold his take outright in Philip Morris  [PM  46.25    -0.31  (-0.67%)   ] .

Cal Icahn reduced his shares in Yahoo! [YHOO  16.27    -0.12  (-0.73%)   ] and dissolved his stake in BlockBuster [BBI  0.40    -0.005  (-1.23%)   ] and CIT Group [CIT  37.01    -1.34  (-3.49%)   ] .

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

Investing Ideas From Goldman Sachs

Regardless of the current public perception of Goldman Sachs, one can not deny the fact that they are a money making machine. It was just reported that they made money trading in every single day of the first quarter, among a few other firms. They have more often than not, been on the right side of many trades. Investors have great admiration for the research and analysis that has come out of this firm, due to their renown accuracy. One of those areas that is highly respected is the Goldman Sachs Conviction Buy List.

Goldman's Sachs' Conviction Buy List is a listing of stocks the investment banks research team expects to outperform. Goldman's Sachs' regional Conviction Buy and Sell lists represent investment recommendations focused on either the size of the potential return or the likelihood of the realization of the return. (from goldmansachs.com)

It would be fitting to base investing ideas to align with this list. According to the Street Insider:

Goldman Sachs added U.S. Steel Group (NYSE: X) to their Conviction Buy List with a $73 price target, representing 33% upside. The firm notes global steel production is approaching the peak seen in mid-2008 and inventories in the US remain at historically low levels. They see recent weakness as a good entry point.

Goldman Sachs added PepsiCo, Inc. (NYSE: PEP) to its Conviction Buy list with a $76 price target, representing 17% upside. The firm is recommending buying shares ahead of EPS reaccelerating to high-teens in 2H10, versus 5-6% in 1H10. The firm also sees 13%-14% EPS CAGR over the next few years, which the said is "best in class" among large-cap Staples.

Goldman Sachs upgraded McKesson Corporation (NYSE: MCK) from Neutral to Buy and added the stock to its Conviction Buy list and raised their price target from $70 to $80. The firm said McKesson offers the best risk/reward among Big 3 Distributors. The firm noted the overhang from FY11 guidance is behind us, recent underperformance and valuation at a 6% discount to the group.

Goldman Sachs upgrades Boeing from Neutral to Buy and adds the stock to its Conviction Buy List with a $90 price target. The firm said Boeing spans nearly every positive global theme: "BRICs exposure, credit normalization, a product story, the consumer recovery, favorable industry structure, and favorable company-specific dynamics." The Boeing Company designs, develops, manufactures, sells, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services worldwide.

An addition to the recent updates to their coveted list, they have made some extremely bold calls in face of much uncertainty.

“Our top-down EPS forecasts of $76 and $90 for 2010 and 2011 reflect +33% and +20% growth, respectively. Our pre-provision and write-down EPS forecasts are $81 for 2010 and $91 for 2011. Bottom-up consensus forecasts a 44% increase in 2010 to $82, and an 18% increase in 2011 to $97.
Valuation Top-down, the S&P 500 trades at an NTM P/E of 14.0X (13.4X on pre-provision EPS). Bottom-up, it trades at an NTM P/E of 13.3 X and LTM P/B of 2.3X.”

They are still maintaining their S&P price target of $1300 for mid year/$1250 for year end and shrugging off the possibility of European woes preventing US growth. They believe the problems that we are facing are offset by the market's low valuations, improving  earnings, strengthening in the labor market and impressive ISM numbers.

Source: TPC, Street Insider, Goldman Sachs


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 BP

Where Can I Hide? How About GLD...

If you even attempted to stomach the destruction experienced in today's market, you are probably left with a hangover of anxiety. I literally froze for a minute when I saw that the Dow was close to 1,000 down. Fortunately the tremendous move was attributable to a trading glitch, with the Dow moving quickly back up to 347 down for the close. This doesn't mean that the market is down 347 because of the glitch. There is much fear and uncertainty surrounding sovereign debt, China purposely slowing growth, financial regulation, etc. There was an astounding 11 Billion shares traded today, much higher than the average. This basically solidifies the downward pressure on the market. Usually when a big move happens with large volume, it is usually a sign that the move is meaningful.

As stated in my previous post, Hedge Funds have trimmed their stock equities and moved to the safer haven, Gold. Sharon Eperson, CNBC contributor, reported today that most investors that are holding Euro's are moving to gold to preserve their purchasing power due to the destruction of that currency. We've noticed that this is definitely the case with gold moving up a bit. So if this is the current momentum trade that is working, along with shorting the Euro, how can we best trade it?

We can certainly buy physical gold, with government issued bullions or gold coins. Or we can buy the GLD, which is a gold ETF. This ETF mimics the price action of gold and makes it a very liquid solution, since you can trade in and out of ETF's like you can with stocks. So if you believe in the continued problems that we are faced with, this could be a good place to park your investment flow if you don't want to wait out in cash. Please be cautious with this move. It is a momentum trade and a play on inflation. However, many factors can influence the price action of gold.

According to Yahoo Finance:
GLD- The investment seeks to replicate the performance, net of expenses, of the price of gold bullion. The trust holds gold, and is expected to issue baskets in exchange for deposits of gold, and to distribute gold in connection with redemption of baskets. The gold held by the trust will only be sold on an as-needed basis to pay trust expenses, in the event the trust terminates and liquidates its assets, or as otherwise required by law or regulation.

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
I did add a little to financial positions today.

Flight To Safety, Or Buy The Dips

Bank of America/Merrill Lynch released their Hedge Fund Monitor report titled, "HFs positive in April", May 3, 2010.

Overall, HFs still remain cautious on US equitites, further selling the NDX. At the same time they added to their very net long position in metals. They also continue to be very short the Euro/long the USD and pulled back somewhat on their curve steepening trade.

Long/short HFs kept their market exposure last week at ~25% net long~ well below the historical average of 35-40%. Additionally, they switched to high quality stocks from low quality while moving into growth relative to value. At the same time Equity Market Neutral stayed very net long equities, but also began to favor high quality stocks. We also estimate Macro HFs moved into a net short with respect to US equities last week while continuing to buy the Emerging markets.

Some other notable HF moves from the report include, 

HFs modestly added to their net long position in gold last week.

Large specs reduced some of their crowded long in crude oil last week.

This activity was telegraphed last week with market experts recommending value stocks that are typically defensive in nature, like health care and consumer staples. Big pharma names like Merck and Pfizer gave investors approximately a 2% pop today while the overall market dropped over 2%. Oil also dropped 4%, in a reversal of recent activity in this space. A majority of the news released was bearish, leading investors to wonder if this is a start of a correction. The market has been completely bewildering, with the Dow increasing and decreasing in triple digit increments. The VIX, which acts as a barometer for volatility for the S&P 500 has increased over 18% today, to a closing of 23.84. Some feel higher levels of volatility could signal a negative outlook for stocks. So if you cannot stomach too much risk and cannot sleep at night with high levels of volatility, you might want to consult with your broker/advisor.

Although the negativity appeared to dominate the headlines, there are those who are a little more optimistic like Jim Cramer of Mad Money.

The shorts and panicked sellers have a “buffett of horribles” to choose from, Cramer said Tuesday, to try to knock down this market. But that’s no reason to sell and run.

Whether it’s Europe’s debt problems, a government-induced slowdown in China or falling oil prices, the bears have harped on any negativity they could find to hurt stocks. They’ve been jumping all over financial regulation, the failed car bombing in New York’s Times Square and the Australian mining tax, too.

But while Cramer admitted that Europe would continue to weigh on investors, and they’ll have to let it play out, he still thinks there are plenty of opportunities in this market.

We have reached a level of so much uncertainty in so many different areas, that it makes it difficult to confidently decide what to do with equities in this environment. Do we follow hedge funds and reduce our equity exposure after the big drop we just experienced? Or do we consider this an opportunity to buy the stocks we regret not getting into during the preceding bull run?


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 BP, Long NKE, Long HD

BP: Oversold or Just the Beginning?

 On Saturday, May 1, 2010, Andrew Bary of Barrons, wrote an article titled, "BP, Transocean Priced For Disaster."

According to Bary, Bernstein analyst Neil McMahon wrote in a note to clients that the recent loss of $25 billion in BP's market cap was "extreme" relative to the potential worst case cost scenario of $12.5 billion for the oil spill.

 According to Reuters, posted on CNBC,

The final bill for cleaning up the spill could be $7 billion, Neil McMahon, analyst at investment firm Bernstein said.

Analysts at Morgan Stanley put the figure at $3.5 billion, while analysts at Citigroup, Evolution Securities and Panmure Gordon put cleanup costs at under $1.1 billion.

Compensation that must be paid to those impacted by the slick could also amount to billions of dollars. The cost to the fishing industry in Louisiana could be $2.5 billion, while the Florida tourism industry could lose $3 billion, Bernstein predicted.

BP will also have to spend $100 million to drill a relief well to try and stem the flow of the well...

There seems to be no consensus, as to what the projected price tag will be for BP. All we know is it is worst than originally believed to be, and according to the media, it is becoming progressively more challenging. The situation is definitely dreadful and BP has an uphill PR battle for most of the foreseeable future. However, the stock has plummeted over 13% since the incidence has occurred.

Barron's makes a good point towards the stock being oversold, in comparison to the worst case scenario that could stem from this disaster. Especially since we know hedge funds are expecting a rise in oil, per my post "Hedge Funds Are Adding To Their Long Positions In Crude." The drop in price makes BP an attractive value play. It trades at 8.2x trailing earnings, compared to CVX at 15.5x, XOM at 17x and COP at 18.25x. It also has a PEG of 1.6. The dividend at these levels is a whopping 6.44% (The Ex-Dividend date is 5/5/2010, so in order to get the $.84/share payout on 6/21, you need to be holding shares by this date). Throw all that in with the above mentioned possibility that the stock could be oversold. It makes sense why experts are jumping in. Even Jim Cramer and Karen Finerman are holding to the oversold thesis.



There are many reasons why one should consider a position in BP, but there are also some uncertainties. The analysts could be wrong in their estimations, the spill could spread even further, BP's brand could become tarnished, the government could enforce detrimental regulation or a global initiative of drilling reduction could all prohibit future profit. Not to mention a whole slew of legal liabilities that the company will be faced with.

This situation is a tough one to digress. However, if the scale were to tip in BP's direction, investors should be handsomely rewarded with an increase in share price and a nice 6.44% dividend payout.


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 APPL, Long XOM, Long BP

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.