In Biotech We Trust

Given the recovery of biotech stocks over last few weeks, investors can almost say "In Biotech We Trust". Monday started with big biotech buyout with Roche buying Intermune (ITMN) for $8.5 Billion. This is a deal for company which has less than $150M yearly revenue. But hey, when did those things matter when you have a promising billion $ drug waiting for FDA approval which could come as early as Nov 2014. One could have easily made some dough by buying ITMN stock when rumors started about 2 weeks back that some European drug giants are interested in this company. Luckily I have been studying, tracking and investing in this company since mid-30s.
This deal gave a major boost to other bio-techs which could be next buyout candidates. Here are some of my predictions for either buyout or positive response from FDA. Since these stocks are extremely volatile, I won't recommend them to anyone AT ALL since one could lose all their investments.

The reason I am even writing this blog on bio-techs is only because of my personal interest/study and putting out potential winners publicly. It is like testing my own bio-tech stock picking skills. The price mentioned is possible entry point when markets cool down

• ACHN - below $8
• ARWR - below $10
• FOLD - below $6
• ISIS - below $30
• JAZZ - below $140
• ICPT - below $220
• CLVS - below $37
• INSM - below $13
• SRPT - below $20
• RNA - below $8
• TKMR - below $15
• CLDX - below $12

Personally I feel that there are more than 50% chance that many of these companies would be successful in clinical trials and could be bought over (JAZZ may be due to tax inversion theme). There are some big stocks like GILD, REGN etc which also would do very well (20% gain). After all they are charging more than year's salary (in Bay area) per patient for some of their drugs ($84000 for Sovaldi - $1000 per pill)

Americans like their tech - whether it's high-tech or bio-tech or green-tech. And hence they are willing to fund these companies. That's why America is leader in all of these fields.

Have a great weekend!

/Shyam

Back to School - Time for beaten down Stocks!

I went into summer hibernation from updating my blog. After Modi's spectacular win, I could not find interesting enough topic for me to come out my hibernation and write about it.
Finally now kids are back in school, summer trips are over, it's time for me to get into blog-writing mode. Yesterday I started auditing course at Haas School of Business, UC Berkeley (along with my friend). That is also motivation for me to write my blog which I started during my MBA days.
Markets are all time high. Nasdaq is within teen percentage of all time high and it's just matter of time (most likely in early part of 2015) when Nasdaq would break it's all time record. So in such exuberant markets, what should an investor do? Go with the flow and invest in markets, sell all holdings and sit tight in cash (which may not be a bad decision given historically scary months of Sept/Oct) or pick-n-choose your stock selections.
I am leaning towards 3rd option. While in long-run, efficient market theory work, in short-run, behaviors of individuals (and markets which are made of we all irrational people) play much strong role. This is where stock-picking opportunities would come. I won't claim I am good at it but I could make an attempt. After all one has to make his/her own decisions while investing real money. With that in mind, today's theme is "beaten down" stocks due to various factors. These companies got hammered due to change in strategy (Sprint - S) , investments going bad (Portugal Telecom - PT) or market factors (VIP). But as long as these companies survive, there is strong chance that these investments could return between 25 to 50% by Dec 2015. Here are 10 such stocks and prices at which they could make good entry points:

1. Sprint (S): $5 to $5.50
2. Portugal Telecom (PT): $1.70 to $1.90
3. Vimpelcom (VIP): $8.40 to $8.80
4. Covisiant (COVS): $4.40 to $4.90
5. Rite-aid (RAD): $6 to  $6.50
6. Bank of America (BAC): $15.5 to $16
7. Alcatel (ALU): $3.20 to $3.30
8. National Bank of Greece (NBG): $3.30 to $3.40
9. Jive Software (JIVE): $6.90
10. RenaSola (SOL: $2.60

Many of these are high-beta stocks so you need to be careful while investing. However if you do your own research and come to conclusion that these companies would survive (using common sense approach), you could possibly make investments and sell covered calls every quarter which are 10-20% above stock price. Regarding details about covered-calls, you can check out my previous post 

Hope you had great summer!

/Shyam