• Google Down $116 in One Month
    Posted by on February 9th, 2006 at 4:53 pm

    Google (GOOG) has been getting pummeled lately. The stock closed today at $358.77 a share, its lowest close since October 28. On January 11, the stock reached an intraday high of $475.11.
    I wish I had seen this coming.
    goog.bmp

  • Whole Foods Market Down 6%
    Posted by on February 9th, 2006 at 3:47 pm

    Every so often, I get something right. Two months ago, I wrote that Whole Foods Market (WFMI) was overpriced. After yesterday’s close, the company reported earnings that were one penny a share below expectations. The stock is off about 6% today, and I think it has more room to fall.

  • Human Genome Sciences
    Posted by on February 9th, 2006 at 3:10 pm

    I honestly don’t know how Human Genome Sciences (HGSI) stays in business. The company is officially described as a biotech company, although it has exactly as many commercial biotech products on the market as Crossing Wall Street Global Holdings.
    In other words, zero.
    Last quarter, Human Genome Sciences had total revenues of $9.3 million, and they spent $81.4 million. Dear lord! Who’s there CFO? Willie Nelson.
    Since they don’t have any products on the market, almost all their revenue comes from a licensing agreement with GlaxoSmithKline (GSK). According to news reports, the company missed estimates by four cents a share. What I don’t get is how you can even make an estimate, and why would it matter if they hit it or not.
    How does one put a price tag on this stock? The company doesn’t do anything. The stock is currently valued at about $10 a share, giving it a market cap of $1.4 billion. I have no idea where that comes from. For argument’s sake, let’s say that the stock is trading with a P/E ratio of 20. That would mean that they’d have to have revenues for 2005 of $410 million. Instead, they had revenues of $19 million.
    The price of the stock is based solely on speculation of future products. Over the last four months, the stock is up about 30%. Here’s the CEO on everything the company is about to do:

    H. Thomas Watkins, President and Chief Executive Officer, said, “Progress toward commercialization was our priority focus throughout 2005, and we expect to accelerate our progress in 2006. Our lead products are moving towards Phase 3 clinical development, and we are making progress on our partnering objectives. We reported positive Phase 2 results for Albuferon in hepatitis C in 2005. A larger Phase 2b trial of Albuferon in combination with ribavirin compared to Pegasys is currently underway. We plan to initiate Phase 3 development of Albuferon by year-end 2006, assuming that data emerging from the Phase 2b study in the first half of the year are positive. We are also considering a number of collaboration opportunities for Albuferon this year. We completed Phase 2 clinical trials of LymphoStat-B in both systemic lupus erythematosus (SLE) and rheumatoid arthritis (RA), and we expect to initiate Phase 3 development of LymphoStat-B in SLE in 2006. We are also working to secure an order from the U.S. Government to supply ABthrax for the Strategic National Stockpile under our current contract.
    “GlaxoSmithKline (GSK) has advanced relacatib, the small-molecule cathepsin K inhibitor that GSK discovered using HGS technology, to Phase 2 trials in the treatment of bone metastases. GSK has also filed an Investigational New Drug application seeking to initiate Phase 1 trials of GSK716155 (formerly Albugon) in diabetes. HGS received $12 million in payments during 2005 related to the progress of GSK716155. We expect to complete the CoGenesys transaction in 2006, and we will continue to explore additional ways to monetize less critical assets that we are unlikely to develop internally. We will concentrate our efforts in 2006 on accelerating our progress toward commercialization, while at the same time remaining committed to ensuring the highest standards of quality throughout our Company.”

  • The First Auction of 30-Year Treasury Bonds in Five Years
    Posted by on February 9th, 2006 at 2:43 pm

    Today, the Treasury Department sold off $14 billion worth of 30-year Treasury bonds. The rate was 4.53%. That’s almost the exact same yield as the 5-year and 10-year bonds.
    The bid-to-cover ratio was 2.05, which was less than what I expect, but it still indicates that the public is willing to pay for these bonds. I’m curious if the government will ever try using longer term bonds. Last year, the British and French governments auctioned off 50-year bonds.

  • The Market Today
    Posted by on February 9th, 2006 at 12:40 pm

    I have to apologize for my light posting this week. An evil germ army has invaded and taken over my body, and left destruction in its wake. I’m standing by for a tersely worded resolution from the UN.
    But there is good news. The market has been doing very well yesterday and today. Thanks to a big day yesterday from Dell (DELL), our Buy List is now slightly ahead of the S&P 500 for the year.
    Brown & Brown (BRO) is scheduled to release its earnings after today’s close. The consensus is for 24 cents a share.
    Expeditors International (EXPD) has been doing very well. The stock is up over 12% since the beginning of the year, and it’s at another new high today.

  • The Return of the 30-Year Treasury Bond
    Posted by on February 7th, 2006 at 10:56 pm

    He’s tan, rest and ready! The 30-year is back after a four-and-a-half-year hiatus.
    If you type in the symbol ^TYX into Yahoo Finance, you’ll see what’s called the 30-year Treasury bond. But no…that’s a lie. A filthy, filthy lie.
    It’s really a 25-year bond. The government hasn’t auctioned off a 30-year bond since 2001. If you recall, back then the government was raking in tons of money, at least in the same sense Amazon.com was raking in money. So the Feds decided that we didn’t need to sell 30-year debt anymore.
    The rule-of-thumb is that the more you own, the longer the “term” of your payments should be. That’s why mortgages are longer than car payments. Less debt meant no more long-term bonds. To make a long story very short, we’re in debt again! So the 30-year bond is a-coming back.
    On Thursday, the government will auction off $13 in 30-year bonds. I’m curious if the yield will be less than the five-year note (4.52%). Either way, it will be the lowest yield ever for 30-year debt.
    The number to watch is the ratio of bids to the amount sold. Typically, the government gets a little over twice as many bids as there are bonds to sell. If Thursday’s auction goes well, I think the Feds will step up the 30-year offerings.

  • Dump GM from the Dow
    Posted by on February 7th, 2006 at 9:39 pm

    This chart says it all. Since the beginning of 2004, the Dow (green line) has badly trailed the S&P 500 (gold line). Who’s responsible? The blue line is Ford, which isn’t in the Dow. The red line is GM.
    DowSP.bmp

  • Cisco: Stuck in Neutral
    Posted by on February 7th, 2006 at 2:53 pm

    The WSJ has a good article today on Cisco (CSCO). The company releases its earnings after the close today.
    The article basically sums up my thoughts, I can’t find a reason to get excited about the stock. The business simply isn’t that strong:

    “We have looked at it because it’s come down so much,” says David Dreman, chairman and chief investment officer at Dreman Value Management in Jersey City, N.J. “But there’s not enough growth for a growth investor and not really enough value to tempt a value investor.”
    That kind of blasé attitude could make it tough for Cisco shareholders to make much from their investment in the near term. A company spokeswoman declined to comment on current business trends because the company is in a quiet period before announcing results. But in the past, Cisco executives have contended that the company is growing faster than many of its big tech-company peers.
    Professional investors routinely praise Cisco Chief Executive John Chambers and his management team for slashing costs and staying profitable through tough times for many tech companies. Still, the number of money managers casting their lot with Cisco is far smaller than it once was. Since 2000, the percentage of the nation’s growth funds owning Cisco shares has dropped from nearly 50% to about a quarter, according to Chicago researcher Morningstar Inc. At the same time, less than 10% of value funds own shares.
    That is quite a comedown. As a maker of switches and routers that form the backbone of many tech networks, in the 1990s Cisco routinely increased its revenue at 30% to 40% annually. But after the tech bust, many big customers, such as telecommunications firms, drastically cut spending on Cisco equipment. Many smaller customers folded.
    At the end of last quarter, its bread-and-butter routers business grew 13%, with sales of switches rising just 3%. With overall sales exceeding $25 billion in the 12 months ended Oct. 29, the company is up against the “law of large numbers” — the bigger a company gets, the harder it is to find new products and customers to show a big growth rate.

  • Commodities are Getting Clobbered
    Posted by on February 7th, 2006 at 2:39 pm

    This is an interesting day in the market. Commodities are getting absolutely clobbered. Oil is down nearly $2 a barrel, and gold is off about $20 an ounce. I can’t remember a drop that big. According to Reuters, it’s the biggest fall since 1993. Given today’s action, I would think that bonds would be higher, but they’re not. Yields all across the curve are higher today.
    There’s also an unusually wide spread today between cyclical stocks and consumer stocks. The Cyclical Index (^CYC) is down 0.89%, while the Consumer Index (^CMR) is up 0.20%. It’s rare to see such a wide gap between those indexes. This signals that the market thinks the economy is softer than expected.
    Some of our defensive stocks are doing well like Sysco (SYY) and Biomet (BMET). But that’s being offset by weakness is economically sensitive stocks like Harley-Davidson (HDI) and Home Depot (HD). The Buy List is down about 0.35% today, which is better than the S&P 500 which is off 0.62%.

  • IPOs are Back
    Posted by on February 7th, 2006 at 2:07 pm

    The market may have pulled back some, but IPOs are hot again. We just saw Chipotle’s (CMG) double on its first day. Now we have Crocs!
    Don’t tell me you don’t know what Crocs are! Oh please. You are so not with it. Crocs are (I’m told) the hottest thing in footwear. The company introduced its first models just four years ago, and they’re going to have an IPO this week.
    Demand is heavy. The original price was to be between $13 and $15 a share. The underwriters just raised the range to $19-$20 a share. This will be the largest shoe offering ever. The symbol will be CROX.