Last of the Mohicans

Over the past 5 years, the single best sector to invest in has been in biotech. Big pharma has been desperately seeking to grow through acquisition, using their cash hordes to buy publicly traded r&d centers. More than that, they’re buying free cash flow, executing deals that are accretive to earnings. The latest takeout, SLXP, is just one of many that have been executed in recent years.

So who’s next?

For that, I did a simple search, scouring for companies doing over $100 million in revenues, free cash flow positive, growing revenues by more than 15%. Here is the short list.

DEPO
ACOR
ANIK
CBM
EBS
ENTA
INSY
LCI
PDLI
TECH
SGNT
ACET
CRL

Within the larger pharma names, here are my favorites to get taken over next.

JAZZ
MDVN
PCYC
TARO
QGEN
UTHR

That’s it. There’s a lot of chaff out there, names without revenues and earnings, pure speculative dice rolls. But there are only a few, with market caps under $20 billion, that are still independently traded. My favorites are JAZZ and MDVN, who are cash cows trading at reasonable valuations.

Nothing can stop this.

You know how I feel. What you are witnessing isn’t a stock market rally, a short squeeze, or a technical move off the ass-end of a long consolidation.

This, ladies and gentlemen, is a celebration of mankind. You are fortunate to be alive at a time when barbarians roam the earth, beheading people for titling their heads sideways during prayer, then posting the video of the ordeal onto social media.

For every reason not to invest in stocks, I can counter with 100 for. These are the days of your lives, an era of grande profit and distinguished decadence. Celebrate this day, all of the days, amidst your harems. Ask your mistress to serve you some caviar along with the usual order of champagne this evening. There will be great profits to be had. All you need are the tools to mine said profits.

As luck would have it, the good folks at iBankCoin are about to undergo a new venture in the capital markets, by offering to you, the daily pleb, FREE boot camp courses, for both 12631 and After Hours with Option Addict members, during the month of April, led by some of the tabbed bloggers of this virile site. Those who are not members, there will be a nominal fee to gain entry, as time costs a great deal of money. Along that vein, this will last throughout the month of April.

Details will be forthcoming.

I was up 1% for the session, now +12% year to date.

Big moves happening in the solar sector today. I would not chase those fuckers after such a run higher. Although I liked the airlines, I’ve convinced myself that crude is going to bounce this week. As such, I eliminated my exposure to the airlines and added to my oil longs. The QIWI position is nothing more than a play off Russia. Given my bullish position in crude, I figure Russia will bounce with stronger oil prices. Plus anyway, QIWI is trading at a 50% discount to where it was trading last year, in terms of PE and P/S ratios.

Everyone expected Yellen to disappoint today. I think the speech went well and there is no fucking way the Fed tightens now, as the CRB index hits 1996 lows. I’ll say it again and to the point: THE FED IS NOT GOING TO HIKE INTEREST RATES, NOT NOW, NOT EVER, ESPECIALLY WHEN WE ARE FIGHTING DEFLATION.

What if they did hike rates?

We would deflate further and the stock market would fall. In what world is that a desirable outcome for the Federal government, who is reliant upon cap gains taxes and market appreciation to sustain underfunded pension funds? I hope you understand by now, for good or for worse, that governments around the world are in a pickle. This situation lends to their desire to see equity prices continue to rise, in order to avoid budget cuts and recession. They will continue to buoy markets for as long as they can, so you might as well get it out of your immature minds that stocks are heading lower.

While individual sectors might weaken and markets transition from one phase to the next, the over-arching story in our lifetimes will be one of a bullish design.

Trade accordingly.

Listen to me. I sold out from my airplane stocks, not because I hate them, but because I have fell in love with something else. It’s not the airlines fault that I am leaving them, but my own. As such, I booked gains on both AAL and JBLUE and made what appears to be a ‘lateral move’, gobbling up shares of WFT and Russian mafia firm QIWI.

That’s right, I’m back in the well, full Russian.

We’re just coasting along here, aren’t we? It’s sort of eery, being able to make money without drama. Then again, if I recall correctly, last year offered a similar circumstance, until all hell on earth broke loose in March. Part of me wants to move to the side here. My aggressive side wants to stay the course, press the envelope. We’re all gamblers here, at the end of the day.

Even hamburger stocks are behaving. Nothing is this easy.

Oil is stable; but oil stocks look weak. I think you buy them into today’s weakness and sell them towards the end of this week.

I’m not afraid of the Fed. Then again, maybe I should be, since Yellen is a god damned crazy old sea-hag.

TOL posted great numbers. PANW caught an upgrade. AAL caught a downgrade. The world turns and ISIS is still free to sever heads without any tangible ramifications. The armies of the middled east are without penis.

Moving on. I believe NDRM is going to moonshot soon. I don’t have any reason to believe it will sky-rocket, other than the indelible fact that “The Fly” wins all the time. There are always side-notes to my trades that I am unable to share with you, the strange people from the internets. At any rate, I have a busy day ahead of me. I’ll be sure to share my thoughts if anything changes in the market today.

Ciao

You know I’ve been reticent about drilling for oil in this environment. I’ve advocated to sell some oils and lock in gains. However, every once in awhile The PPT shows me something I wouldn’t normally see on my own. In this case, there aren’t any notable oversold signals yet, or momo screens to reference, but a chart.

That’s right, I am about to cite a chart.

Bear in mind, my charts are smart, intuitive, not idle and lazy like the ones you prefer to draw lines on.

Here it goes.

What is this nonsense that I present to you above? It is the ‘hybrid’ score of the entire oil/gas drilling and exploration industry, which is, essentially, a combination of technical and fundamental factors. On top of that, several other things comprise the hybrid score, such as intra-day currency, commodity and treasury moves. In other words, our sub-rosa is somewhat complicated and proprietary.

Over the past week, dozens of oil stocks are down double digits. This sector has pulled back to the point that it has become buyable, especially if you’re banking on a spring revival in oil–ahead of the driving season. Looking at the hybrid score, you see we are now at the low end of the trading range for the past 6 months.

Which stocks do we want to target?

We don’t want outliers. We want to buy names that have been participating in rallies, that are big cap. Enough with the small cap time-bombs, god damn it.

Here is my short list.

CLR
AR
HP
WLL

Oil/gas and equipment

BHI
WFT
SDRL
EXH
SLCA

Keep in kind, this might not bounce tomorrow and this industry might sell off some more. But it’s likely buyable down here. Establish a process by which you can add to some names, hopefully with the proceeds from some stocks that you took profits on last week.

I added to my HABT position towards the end of the day. My best performers for the day were NDRM, AAPL, KLXI, WRE, GILD, JBLU, HCA, LPNT, MD, COST, AAL, MUSA, WFM, BWLD, JAZZ, WMT, SBNY, EBAY and AMGN. My losers were SLCA, YNDX, CHK, PANW, MU, PACD, N, SGEN, TOL, BABA, MS, BEAV, TA.

Do you know the difference between you and a person such as myself? You are merely the family idiot, partaking in Faustian fantasies, whereas I am a professional, toiling away in the markets under the banner of proper asset management. Yes, it’s true, I had a down year in 2014. But it’s also true that I’ve rained fire upon my enemies for well over a decade, ebbing and flowing through these markets as if it were my personal, hacked, ATM machine.

I was down 0.10% for the day. My allocation is working, up 11% for the year, leaps and bounds ahead of my competitors, only trailing those who don’t matter, unimportant catamites addled on tank chocolate.

Rumors of OPEC uniting to form voltron sent crude to a rally, just before it headed back lower again. This is what I’d call an ‘off-day’ at the office, one of those moribund, nothing to see here, types of days that lures you into making poor decisions.

Early this morning the airlines looked great. But now, after they’ve reversed in the face of weaker crude, not so much. Then again, it all depends on what your time horizon is, with regard to the investment. This year I am reverting back to an era when I’d buy and hold, asset allocate, and use my trading acumen to juice returns. Gone are the days of the Four Horsemen of Financial ruin. We have things to accomplish in 2015 and I’ll be damned if I booked another down year.

Thusly, I am down 0.3% for the day, a non-event. Shares of NDRM are strong, alongside many biotechs. My oil plays are weaker and everything else is a mixed bag. AAPL, of course, is in a class of its own and is one of my best performers this year. GILD is bidding higher too, which leads me to my next suggestion.

Focus on free cash flow. It’s all the market cares about these days. Have a look into my purchase on Friday of MD, another free cash flow generating machine.

Off the coffee store.

Early this morning a suspicious set of chaps rolled into my cul de sac, entering my domain at alarming speeds. At first glance I figured it was merely the NSA or some arm of the Grande Recursive Order of the Knights of the Lambda Calculus coming to pay me a visit. But then I noticed they all looked like rap stars, effectively ruling out the former. It’s a good thing my windshield was frozen solid with ice. Normal people simply scrape it off with little plastic tools, but not me. I had a giant fucking Rambo knife out, chiseling away at that shit, wearing a black ski hat and beard. The rappers in the car probably figured I got to the house first, killed its inhabitants, and was now killing the windshield. Upon seeing me, they quickly did a U-turn and made their escape.

Now regarding my favorite sector, the airlines, let’s have a look, shall we?

Oil is completely fucked up. The easy money has been made in oil. You’d be wise to follow my lead and reduce exposure. At the same time, airlines offer a unique play on a booming travel environment and windfall thanks to cheaper crude. Without getting into the details of who’s hedged and who’s not, I am going to toss out some airline ideas based solely on the numbers, courtesy of The PPT.

Largest cap: AAL
Cheapest p/s: SKYW
Lowest p/e: RJET
Best performing YTD: ALGT
Worst performing YTD: GOL
Most Shorted: JBLU
Best fundamentals: CPA
Best Technicals (time sensitive): AAL
Highest Revenue Growth: AAL
Highest Earnings Growth: ALK
Most Revenue: AAL

VRX buying SLXP for $14.5 billion is a huge deal. For one, SLXP is a piece of shit, which recently descended into hell after bad data. But like most biotech stocks, once the stock got flushed out, bargain shoppers stepped in, jacked the price higher–leading to a takeover.

In order to properly asses this deal and not get overly excited about the piece of shit micro caps that you own, let’s look at SLXP’s numbers.

1. The deal is being done at present levels, without a premium. This makes sense since SLXP is a piece of shit and is up 53% over the past 3 months.

2. SLPX’s market cap is $10 billion.

3. SLXP does over $1.3bill in revenues, growing in excess of 40% per annum.

4. SLXP is trading 7x sales

5. Up until recently, SLXP was netting between $20-50 million per quarter. Right now, they are bleeding out, likely due to ramping up R&D or marketing.

6. The company specializes in gastro-ailments.

Using the company search tool in The PPT, here are some results.

By industry:

ANIP
VIVO
ARDX
ASMB
ETRM
IRWD
HZNP
TRGT
SNGX
SGYP

By the numbers.

JAZZ (best match)
MDVN
PCYC
BMRN
ILMN