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Earnings season trades: 4 Stocks to Trade for the April 21st Week.

Mon, 21 Apr 2008 01:23:53 EST

Earnings season trades: 4 Stocks to Trade for the April 21st Week. - by VTCastle

Welcome to the 2^nd ever trading report from your’s truly! After last week’s big 34% gain, let’s see if we can keep the momentum flowing.

I thought I would change things up a bit, as this is essentially a work in progress for me until I find exactly what format works the best for me, and you as well. So instead of making short calls, I thought we would stick with the more traditional buy low and sell high theme. This allows the everyday investor to participate, and does not require a margin account to make short sells.

Remember, the name of the game here is a quick 1 day profit by making an entry position the day of the earnings release, and selling the preceding day. Alternatively, if earnings are released before the opening bell, an entry position could be created at the prior day's close and sold during the regular market hours. Having an account that allows after trading is also a valuable tool.

This method of trading poses a moderate to high risk level, so trade along with me only if you can afford to tolerate the risk. I would advise you trade no more than 20% of your portfolio’s net worth using this strategy.

THE MONEYMAKERS FOR WEEK 04/20/08

Arch Coal, Inc. (NYSE: ACI)

ACI is a bit of a mystery to me on occasion. Primarily because the analysts who cover the stock can't seem to agree on the global demand for coal, and what that will do to coal's price. I prefer this description: coal supplies ~ 50% of the world's electricity needs, and we'll need it for the foreseeable future. Overly simplistic I know, but this isn't brain surgery, and with demand constantly decreasing, I'm willing to ignore the white noise.

Therefore, I’m giving ACI the benefit of the doubt that they will beat earnings and possibly guide higher since pricing power is likely in their favor. The ace up their sleeve is that ACI’s coal deposits are mainly low-sulfer coal, and even China will want their coal plants to smell a little less foul thanks to the upcoming Olympic Games.

ACI reports earnings 21Apr08 before the opening bell. Early bird gets the worm!

Axsys Technology, Inc. (NASDAQ: AXYS)

Probably one of the best defense companies out there and has quietly slipped under 90% of the Wall Street’s radar – and I know, b/c I’m an CNBC addict. The folks at TheStreet.com brought it to my radar, so I must give them credit for alerting me.

AXYS makes equipment for the defense, space, and many other commercial industries, so it’s well diversified over the entire economy. It also beat earnings 3 out of 4 times in 2007, and that kind of leadership usually repeats itself. Not to mention, the defense sector still has some positive momentum behind it.

If AXYS beats earnings, I will likely keep my position and hold it as a long term buy.

AXYS reports earnings on 23Apr08 after the close.

Potash Corp of Saskatchewan (NYSE: POT)

If you follow any financial news service, chances are you have ran across multiple Potash Corp articles. Therefore, I won’t bore you with the usual praise, but I will direct you to a recent article I wrote covering the near insatiable demand for fertilizer in which POT is literally sitting on top of the world.

Whether the demand for fertilizer is inflated or real, the stock price keeps climbing and climbing. Some feel this rise is due in part to the popularity of agriculture ETFs and every Mom and Pop investor is buying them for their IRAs, but as a trader, that’s not my immediate concern.

POT has also seen another large run up last week, so buy this one with extreme caution and keep those stop loss orders set tight.

POT reports earnings on 24Apr08 before the opening bell.

Occidental Petroleum Corp. (NYSE: OXY)

One would be hard pressed to find a more diversified hydrocarbon company than OXY. It explores for oil and natural gas, and subsequently develops their findings according to their own interests. Not to mention, it has a very diverse chemical production business from basic, everyday chemicals to specialty substances for industrial applications.

Analysts seem to be going nuts over this stock because several have revised their targets in the last month. So many, that it is difficult for me to even quantify them all. Enough said – right?

OXY reports earnings on 24Apr08 before the opening bell.

Disclosure: Author has long positions in POT and OXY. Other trades may be entered after publishing as earnings data is released.

Earnings Season Trades up 34%! Intuitive Surgical short call and Badger Meter goes long!

Sun, 20 Apr 2008 14:41:54 EST

Earnings Season Trades up 34%! Intuitive Surgical short call and Badger Meter goes long! - by VTCastle

For those who checked in on my FIRST EVER trading report, I hope you enjoyed the wild ride and the 34% profit. Not bad for a weeks “work”.

I must say I was cautious of making the short call on Intuitive Surgical Devices, one of Wall Street's Darlings from 2007, so allow me a few minutes to revel in my brilliance while the other analysts brood in their respective corners. Every dog has his day so they say.

The results are included in Table 1, but to make something perfectly clear that I might have overlooked from the initial article, I do not suggest you make trades on “The Wildcards” section because they are essentially a mystery to me. I include these companies for those individuals who might know something that I don't, or who might have an idea that can help me make a better judgment call. In fact, these wildcard stocks are often the ones that pay off the most because no one really has an idea of how well they performed during the quarter.

Table 1: Performance of Buys and Shorts for the 4/14/08 earnings season trades.

HINDSIGHT VIEWS: NEWS AND REASONING BEHIND THE BIG MOVERS

Badger Meter, Inc. (AMEX: BMI)

Blew away earnings as I anticipated! However, the majority of their earnings did not come from overseas as I previously thought. I was surprised to hear that they come from right here within the US, which can be seen as a positive, because the US has an aging water infrastructure, so BMI could stand to benefit. Furthermore, I've added it to my watch list for a potential long term buy.

Reported $0.41 actual vs. $0.33 estimate. BMI credits the growing demand for radio enabled water meters for the aging US fresh water infrastructure as key factor in company beating earnings.

BMI popped 15% after hours, and tacked on another 3% during the next following trading day. CNBC even had the CEO and Chairman, Richard Meeusen, the next day to discuss how the company surpassed analysts expectations.

High Flying Stock

Intuitive Surgical Devices, Inc (NASDAQ: ISRG)

If I had to do it all over again, I wouldn’t have posted this one because everyone will now expect results like this in the future.

Shorting ISRG was a pure gamble on my part, albeit, I was playing the 5 to 1 odds that they would lower guidance based on the GE Healthcare earnings shortfall from earlier in the month. GE had warned that hospitals were tightening budgets because the cost of borrowing money has risen so sharply that capital equipment purchases were cost prohibitive.

That foreboding alert set off my radar for a sales slowdown, and that is exactly what happened when ISRG raised earnings forecasts, but less than Wall Street was expecting – which resulted in an immediate drop after hours and again the following trading day.

Nothing is wrong with ISRG’s business model; it’s just that doing business with their primary customer (i.e. hospitals) will be more difficult in the current economy. The Da Vinci surgical system they manufacture is supposedly quite remarkable, so this $60 drop in price could have the bargain hunters (like me) looking very closely at making a quick buck on Monday morning.

Potash Corp: Stellar Stock Performance but at What Price?

Wed, 16 Apr 2008 01:27:42 EST

Potash Corp: Stellar Stock Performance but at What Price? - by VTCastle

Yesterday as I was closing out my trading software, I caught a brief glimpse of a 3 year chart for the largest holding in my portfolio – Potash Corp (NYSE: POT).

Instead of marveling at my trading genius, I began thinking back about the similarity of Potash Corp's parabolic price appreciation and that of several semiconductor stocks I frequently traded back in 1999 to 2000. Nostalgia faded quickly as I shifted into semi-panic mode because those who were active traders in those days certainly remember the sell off in the semiconductor stock index and the greater NASDAQ market in general.

Not being one to ignore instincts, I was prompted to open up my trading program again to review the similarities from a technical point of view. Reason being, I use technical analysis to identify entry and exit points for the stocks I trade. Check it out for yourself.

Within seconds, you can obviously see the similarities between Potash and Applied Micro Circuits Corp (NASD: AMCC).

Naturally, I started reviewing P/E ratios, pulling income statements and even POT's latest conference call transcripts. Soon after, I started feeling better about my situation b/c I came up with the following results:

P/E (ttm): ~ 57 --> moderately high

Forward P/E: ~ 20 --> looks good

Year over year Growth Estimate for January to March 2008 quarter: ~ 150% --> astounding!!!

Anticipated growth for 2008: ~ 125% --> say what? Triple digit earnings again?

After seeing this, I'm starting to feel better about the rapid price appreciation. But I'm not exactly sure if I should begin selling some of my position to lock in profits. If only there was some sign that could convince me to hold on to my shares.

Next morning, no joke, I flip on the TV this morning and find out that God's top man, the Pope himself, is showing up to see good ol' George W. Bush at Andrews Air Force Base. A sign from above?

Maybe, but I'm not a big believer in guy who supposedly has a free pass to heaven, but for some reason, has to ride in a car fitted with a 12” of bullet proof glass. What brings the Pope to visit Washington DC after a 29 year absence? Jury is still out, but I do have an idea.

My reasoning to this suspicious visit could be, at least in some small part, due to the foreseeable spike in global food prices that any 1st year economics student could have spotted. I'm not saying the Pope's visit is a "mission of mercy" to help those less fortunate, but I'm assuming that's still listed somewhere in his job requirement and I'm fairly certain it will come up in conversation.

But thanks to the geniuses in Washington DC, the USA has decided to take a poorly managed energy addicted nation and turn it into a dim witted, poorly managed energy addicted nation by taking our food supply - yes I said food supply - and making it into ethanol to run our 10 mile per gallon SUVs so that Mrs. Cleaver can take Wally and The Beaver to soccer practice.

In the meantime, people in Haiti and Egypt are rioting over food they can barely afford, or in some cases, can't afford at all. I wonder what would happen in the US if the price of bread or rice spiked above our ability to absorb the excessive prices. The politicians would likely be throwing off their $4000 suits and donning a John Deere hat with a corn farmer's overalls as quickly as possible while joining in the anti-establishment melee.

I digress... or do I?

This is one of the difficulties in being a successful investor/trader while also being a card carrying member of the working class. I know that there are people less fortunate, but my job and that of the colleagues I advise, is to find stocks that are making money. So my diatribe is actually a supporting call for Potash Corp, but also a notification that current events will become more frequent, and quite possibly, even more serious.

Couple reasons why:

Global demand for food is at an all time high. For example, Brazil is chopping down more rain forest every week to boost available farm land, and people are literally rioting in the streets.

The global spot price has rapidly increased in the last 12 months. Proof you ask? India recently signed a trade agreement with Russian potash suppliers for $625/ton versus the price 12 months ago at $270/ton. That is a 130% increase in 1 year alone. Not surpringly, India has simultaneously set about buiding a potash mining operation in Ethiopia to combat the rising prices. Therefore, India and other nations realize the demand is real and taking adequate steps to ensure they have enough fertilizer to produce their crops.

Potash Corp. has a near monopoly on the Earth's potash supply. Several other companies like Uralkali (Russia) and Belaruskali (Belarus) maintain a significant proportion, but Potash Corp is the worlds largest potash supplier. The stats don't stop there, as Potash Corp. is the worlds 2^nd largest producer of nitrogen and 3^rd largest supplier of phosphates. All of which are used as fertilizer or fertilizer components.

So one could argue, that Potash Corp has precisely positioned itself to do no wrong for the foreseeable future. Considering that a global food shortage has already boosted food prices, and nations are clamoring to enhance their ability to grow their own crops at an alarming rate. In addition, adding further difficulties such as the world's breadbasket (i.e. The American Great Plains) is now growing food for ethanol production, and those the nice juicy T-bone steaks or thick cut pork chops we love to eat every day requires approximately 10 times the amount of grain to grow to an age suitable for “processing”.

So adding all these variables together, Potash Corp couldn't be in a better spot - sitting on top of the world so to speak!

Having come to this conclusion, and having the foresight to say that human race never lose it's desire to eat, my fears of owning an overvalued stock have subsided. Therefore, I'm impatiently waiting for Potash Corp to blow away earnings on April 24, 2008. If they do half as well as The Mosaic Company (NYSE: MOS), another high flying fertilizer company that reported earnings 10 fold higher than expected, Potash Corp. should do very well indeed.

Many analysts also agree with me by raising expectations and boosting price targets to a range of $195 to $260 per share. Quite a significant price range between those values, however, four analysts have upped their EPS estimates in the last month, and one has done so in the past 7 days.

Growth investors, and especially momentum investors, look for these impressive indicators as a beginning or continuation of a trend. In Potash Corp's case, this trend will certainly continue for many months (or years) to come.

Any questions / concerns / comments are much appreciated!

Disclosure: Author owns Potash Corp. shares at the time of publishing.

Earnings season trades: 9 Stocks to Trade for the April 14th Week.

Mon, 14 Apr 2008 10:51:41 EST

Earnings season trades: 9 Stocks to Trade for the April 14th Week. - by VTCastle

Earnings season is upon us once again and I thought I would highlight 3 different categories of stocks reporting during the week of April 14th through April 18th that will...

Likely beat earnings – the consistent money makers due to excellent management or hot global trends.
Remain an unknown until earnings are released – the wild cards.
Likely miss earnings – the gloomy short sell candidates.

Be advised, buying or selling stocks in earnings season increases your trading risk.

THE MONEYMAKERS

Badger Meter, Inc. (AMEX: BMI)

Maker of all things related to fluid control - water systems, sanitation systems, oil/gas/chemical plants are all in need of fluid control components. BMI manufactures and markets valves, flow meters, and other high tech toys chemical engineers love. These products are in high demand thanks to global infrastructure continuing to outperform, companies like Fluor Daniels and Shaw Group will be putting in big orders to companies like these.

BMI reports earnings on 15Apr08.

Gilead Sciences Inc. (NASD: GILD)

Makes antiviral drugs for two life threatening diseases which will remain a serious global public health issue for many years to come – HIV/AIDS & Hepatitis. Company recently received approval to treat Hepatitis, and thus will positively affect earnings when sales are being made into this new market.

GILD reports earnings on 16Apr08.

CSX Corp. (NYSE: CSX)

A coast to coast railroad company with lots of insider buying and an excellent management team. With US gas prices hovering at all time highs, more companies are seeking rail transport to offset costs. Additionally, with several US coal companies exporting coal, that coal has to be transported over the rails, and CSX will likely be a huge benefactor of global energy needs.

CSX reports earning on 15Apr08.

THE WILD CARDS

Cubist Pharmaceuticals Inc. (NASD: CBST)

A biopharmaceutical company specializing in antimicrobial agents. Specifically, CBST has one product approved for methicillin resistant Staphylococcus aureus (MRSA), which made several newsworthy headlines in 4^th quarter 2007 and 1^st quarter 2008. Company is expected to report a YOY gain of 170%, and if met, could generate substantial upside.

CBST reports earnings on 17Apr08.

New Oriental Education & Technology Group (NYSE: EDU)

A Chinese based education service provider that teaches everything from collegiate level computer programing to primary school linguistics. With China becoming a global power more each day, it's likely that the country will see it's huge population as one of it's greatest natural resources, and choose to educate them to increase productivity as much as possible. EDU presents some risk because the Chinese market has sold off recently, and due to the cultural differences, it's a difficult trade for an American (such as I) to make without more knowledge.

Anyone have an opinion on EDU?

EDU reports earnings on 16Apr08.

Southwest Airlines Co. (NYSE: LUV)

A well known and one of the few passenger airline companies that has a history of generating profits in an industry plagued by excuses and mismanagement. With high fuel costs, the unexpected grounding of 4% of its planes for maintenance reasons, and amid an industry under constant merger speculation, it would be curious to see if LUV's management can pull off an earnings surprise.

LUV reports earnings on 17Apr08.

THE SHORT SELL CANDIDATES

Intuitive Surgical, Inc. (NASD: ISRG)

A maker of specialty surgical equipment that provides surgeons with a high value added micro-surgical system capable of reducing excess surgical recovery periods and hospital stays. One of Wall Street's darlings in 2007, ISRG could potentially follow the path General Electric's earnings miss last week. GE Healthcare saw profits fall 17% capital equipment purchases in 1^st quarter 2008, and could negatively impact ISRG if many private or smaller, community based hospitals are feeling the impact of the US based credit crunch. Meaning, how will ISRG's sell of surgical systems be impacted by higher interest rates on business loans?

I'm likely to take some heat for this call, but if GE is warning about a reduction in healthcare capital equipment, it's likely to turn heads. Which actually happened on Friday (04/11/08) when GE released earnings, and knocking ISRG's high flying, high P/E share price down a whopping 6%by the day's close.

ISRG reports earnings on 17Apr08

Capital One Financial (NYSE: COF)

This one is almost a no brainer. Many experts are looking for COF to announce more write downs, which will more than likely cause a drop in share price. Unless of course, they guide analysts higher for 2008 or give some mention of a bottom in financials.

COF reports earnings on 17Apr08

Washington Mutual (NYSE: WM)

New stock, same old financial stock story for WU. Avoid this stock due to an uncertain amount of write offs and general negativity in general toward the financial industry.

WM reports earnings on 15Apr08.

Disclosure: Author owns GILD and CSX as long positions. Other trades may be entered after publishing for short term trades.

PLEASE READ!!! NEW POSTING REGULATIONS FOR NON-ORIGINAL CONTENT!

Mon, 18 Feb 2008 17:32:23 EST

PLEASE READ!!! NEW POSTING REGULATIONS FOR NON-ORIGINAL CONTENT! - by VTCastle

Fingad authors,

It has come to our attention that several members have posted reviews that are 100% verbatim copies from other websites. These actions must and will stop immediately.

We are running into duplication issues with social bookmarking sites like Digg.com, and thus, hurting our chances of gaining new visitors to our site. I ask that anyone who has posted an article from a copied source remove their article, or it will be removed for you within 24 hours of this posting.

If you find an article that you wish to share with Fingad.com members, please write your own review of that article and reference/quote, the sections of the article that inspired your to write a review in the first place. Simply giving the author his/her due credit for writing the article is not satisfactory.

My reasoning is two-fold:

1) Duplicated material hurts our search engine rankings.
2) We lose public credibility by providing non-original content.

If you have questions, you may direct them to the Fingad management team.

Thank you,

Matt Castle
SVP of Research & Operations

Investing in Sin: 7 Recession Proof Stock Picks. PART II

Sat, 09 Feb 2008 10:46:24 EST

Investing in Sin: 7 Recession Proof Stock Picks. PART II - by VTCastle

Part II of my Investing in Sin series covers the high risk trading strategy known as "momentum investing." Essentially, traders who are after a quick buck, simply tag along with the rest of Wall St. for the wild ride upward. This is typically done without concern of the company's fundamentals or business model, but because it's making higher highs each day, traders keep bidding up the price.

Companies lucky (or unlucky) enough to have such an event happen, usually attribute their new found popularity to blowing away a series of earnings reports, or maybe something as simple as a well timed series of appearances on CNBC. A great example of this would be the recent explosion of agriculture stocks, such as The Mosaic Company (Chart #1), which is benefiting from the increase in fertilizer prices.

Chart 1: 2 year chart of MOS

Many times, these types of run ups can yield substantial, even massive, returns. Then again, if a trader is caught in a down draft where the majority stock owners (traders or investors) are taking profits and/or simultaneously short selling the same stock, the losses can be just as staggering.

The tell-tale signs of a momentum stock can be seen in its chart performance. They often resemble a hyperbolic (exponential) increase in price, but has not "shot the moon" when plotting its price performance chart. Once this is noticed by the news media, you can guarantee that an increase in media coverage will certainly follow. The danger in holding a stock such as this is that the forces of gravity also seem to apply, meaning... What goes up, must come down!

Traders who use these tactics are typically full time traders (like myself), who have watched and learned the quid pro quos of a fastidious and winner take all stock market. As mentioned, the profits produced can yield double digit percentage returns daily, and for this reason I have labeled my #2 pick as... GREED!

THE 7 DEADLY SINS

I) GLUTTONY
II) GREED

The stock I have chosen as an example for a greed based theme makes it's money by selling a commodity that can arguably be labelled one of the greatest sources of conflict throughout mankind's written history - GOLD! Of course, I also think the stock makes a great investment choice for someone looking for a company in the precious metals sector.

Compania de Minas Buenaventura S.A.A.

Compania de Minas Buenaventura (NYSE: BVN) is a mining and exploration company based in Lima, Peru. Gold and silver are BVN's primary products, but it also participates in the zinc and copper markets by having several mining locations in its product portfolio. It also co-owns several mining operations with industry competitors such as Newmont Mining (NYSE: NEM)

In the last year, BVN has seen a substantial gain ~ 140% and appears to be forming the introductory phases of a hyperbolic charting pattern. With a P/E ratio in the high 30s, BVN isn't cheap compared to the market as a whole, but when comparing it to one of Jim Cramer's favorite stocks by the name of Yumana Gold (NYSE: AUY) who brings along a P/E ratio in the low 50s, BVN still has some room to climb. In addition to the difference of P/E ratios among competitors, BVN is beginning to show the introductory signs of a hyperbolic chart breakout (Chart #2).

Considering that BVN has a very similar chart to MOS, it is possible that BVN could go hyperbolic in the near term but would require a substantial catalyst or critical piece of news. Of course, serious consideration and caution should be used in this type of trade, so my tactics during these types of situations is to use a tight trailing stop order.

The Catalyst

When examining the latest news reports, I discovered that BVN has filed (as of 02/06/2008) to remove hedges preventing the sell of it's current gold inventory due to previously agreed upon contracts extending as far as 2012. This is an important finding, because BVN can begin liquidating gold and securing profits while the price of gold is at record levels. This strategy conforms with Trader 101 dogma, so as a fellow trader, I applaud this move, which came at a substantial financial price because breaking the hedging agreements came with a $434 million price tag. However, these prices will be off set due to the current price of gold.

In business and in life, it is important to lock in some profits given the opportunity. Therefore, the main lesson of the article is DON'T BE GREEDY and begin to take your profits when the opportunity presents itself.

Summary

Compania de Minas Buenaventura SA certainly has a bright future ahead of itself in the short term. The ability to liquidate large proportions of gold, and other metal reserves, will add significant gains to earnings projections as 3 analysts have increased earnings estimates for 2008.

BVN could make a valuable, and shiny, addition to your portfolio. Remember, this is a stock under heavy momentum swings and will likely see substantial price movement up (and down) on a daily basis. Use caution and stop loss orders to your risk acceptability.

Disclaimer: Author does not have a position in Compania de Minas Buenaventura SA at the time of publishing (02/09/2008), but may open a position on the next available trading day. This article is not a recommendation, but an informational resource only.

Investing in Sin: 7 Recession Proof Stock Picks. PART I

Tue, 05 Feb 2008 05:42:03 EST

Investing in Sin: 7 Recession Proof Stock Picks. PART I - by VTCastle

In an attempt to calm fears of a US based recession, I thought I would begin writing a 7 part series on Investing in Sin. The purpose is not to display specific lifestyles, but to illustrate a contrarian method of stock selection that identifies defensive stock plays to protect one's portfolio in case we are (or are not) in a recession.

Those of us here in the Fingad.com community come from many diverse backgrounds in terms of culture, religious beliefs, and educational backgrounds. Granted we all have our differences, but we can all agree there certain "No No's" for each of our practiced religions. I was raised under the Christian faith, and was subsequently taught the specifics of the Seven Deadly Sins, which will serve as my underlying story line for the remainder of these articles.

The Basic Concept

If we plunge into recession (global or country specific), one of the best areas of the market to invest are the basic needs and desires that we as humans find essential to our survival and allow us to enjoy the precious time we have on the 3rd big rock from our sun.

The trick is - finding the companies that are poised to take the lead in supplying or resolving the products/services in question. Now then, without further adieu, let me introduce you to...

GLUTTONY

When most of us think of Gluttony, we think of lazy and/or lethargic individuals who refrain from physical activity or spend too much time eating at Kentucky Fried Chicken. Therefore, it took very little time to chose a wide spread and deadly disease that follows gluttony hand in hand... Diabetes.

As many of you know, diabetes is an incurable (to date) disease caused from several different factors. Obesity is often one of the main culprits of this life threatning disease.

In fact, the Centers for Disease Control (CDC) and the World Health Organization (WHO) have gone so far as to classify obesity as a global epidemic due to its leading role in heart disease and certain types of cancer.

Often considered an affluent-only condition, epidemiologists have concluded that obesity is definitely a global problem requiring immediate action. However, it doesn't take a PhD in psychology to understand that people will continue to a high calorie, high fat diet due to its taste appeal. Thus, obesity will pose a seemingly impossible disease to cure.

All of this reasoning points to a strong demand for treatment products for those afflicted with diabetes, as well as a rapidly growing market of potential LIFELONG customers thanks to the increasing popularity of fast food chains in non-US markets from companies like McDonalds and Yum! Brands (Kentucky Fried Chicken, Pizza Hut, Taco Bell), as well as increasingly educated work force that generate a sedentary lifestyle.

The Business Minded Person Checklist

We have a growing number of customers (diabetics) with no end in sight
A constant demand for our product
Once the patient is diagnosed, it soon equates to a consistent revenue stream.
Increasing global health standards will allow undetected cases will be more accurately diagnosed, equating to new patients.

I SMELL OPPORTUNITY RISING!

Novo Nordisk A/S (ADR)

Novo Nordisk A/S (NYSE:NVO) is a pharmaceutical/medical device company focusing upon insulin treatments for those afflicted with diabetes. Based in Denmark, NVO is currently the world's largest producer of insulin based treatments.

With an estimated 250 million people currently classified as a diabetic, and an estimated 450 million more classified as a "pre-eminent" diabetic, the demand for NVO's products are quite staggering. In fact, when considering that obesity affects an estimated 60% of Americans (CDC data), and the rapid introduction of western based, high calorie foods into the Asian markets, demand is likely to skyrocket in the next 5 to 10 years. At present, an estimated 40 to 45 million diabetics reside in India and China, which will likely increase in the near future.

The stock value is up a very generous 37% over the last year, and a whopping 353% over the last 5 years (Chart #1).

Chart 1: 5 year chart of Novo Nordisk A/S

With a P/E in the low 20s, it presents an attractive purchase price. The basic fundamentals could not be better for NVO. The company grew profits by 32% in 2007 and has guided analysts higher for 2008 expecting a minimum net profit increase of 25%.

Summary

Novo Nordisk is a company whose products are in very high demand, and will continue to be in demand for the foreseeable future. Being the world leader in the insulin supplier market, and having many distributing partnerships located all over the world, it is poised for a strong and prosperous future.

Disclaimer: Author does not have a position in Novo Nordisk at the time of publishing (02/05/2008). This article is not a recommendation, but an informational resource only.

Google – Potential Buy Signal for Spring Rally!!!

Wed, 30 Jan 2008 01:30:13 EST

Google – Potential Buy Signal for Spring Rally!!! - by VTCastle

UPDATES --> SEE BELOW

January 30, 2008.

I thought I would change up my normal in-depth research report format to inform the Fingad community of an important trading opportunity I identified today.

So instead of boring everyone with a write up on a very well known company such as Google, I think the lessons learned from the potential trade itself justifies the posting of this information.

I have identified what I consider a possible buy signal for our our old friend Google (NASDAQ: GOOG).

GOOG has seen a significant stock price reduction from previous highs, and is offering a fairly attractive discount of 25% from its 52 week high. I have not identified any change in the financial fundamentals (as yet), therefore, I see no reason to shy away from GOOG at this time.

The reasons for the recent sell off, in my opinion, could be blamed for the recent pull back in the broader markets and/or the over-inflated stock price.

Chart #1 illustrates the complete charting history of GOOG since the IPO in 2004. Upon examination, GOOG demonstrates a predictable trading pattern during its short lifespan on the trading markets. The historical uptrend combined with GOOG's forecasted growth rate of ~ 50% annually make a strong case that the uptrend should continue.

Chart #1: Complete trading history for GOOG from 2004 to present.

To further confirm my reasoning, I narrowed the trading range into a 2 year weekly candlestick chart (Chart #2). The same trendline seen in Chart #1 was immediately identifiable, as well as reproducible.

Chart #2: 2 year weekly candlestick chart of GOOG.

When examining the trendline (broken white line) in Chart #2, the buy signals become quite obvious. However, prior trading history is not a guarantee of future performance, but it gives a reasonable prognostication of possible directional changes.

In addition to the reproducible trendlines of the Chart #1 and Chart #2, two other key events are apparent (yellow circles). When a high volume trading day is followed by a day of significantly lower volume, its indicative of a potential change in trading direction. Also, GOOG has seen a substantial sell off in the past month, which can be seen in the oversold stochastic indicator.

All these events taken individually do not make a strong case for a direction reversal, but combining all three with a more stable broad market could prove very advantageous for a big move in GOOG's stock price in the near future.

Related News

Google is set to report earnings after the market close on Thursday (01/31/08). With Yahoo currently underperforming the market while simultaneously getting spanked by Google in the search engine market space, its likely that additional revunues missed by Yahoo will translate to higher profits for Google.

At present, Google also generates 50% of its earning from foreign markets, thus it is relatively well cushioned from any potential domestic earnings shortfalls.

The only potential shortcomings could be a delay or rejection of the Doubleclick acquisition by the European Union in the 2nd quarter.

The potential pros/cons of Google entering the mobile communications market by implementing their new Android technology is still cloudy at best, so some uncertainty still exists for one the NASDAQ's favorite stocks.

Precautionary Words

I am a lifelong fundamental analyst, but I also use technical analysis (TA) to identify entry and exit points with strong momentum driven stocks such as Google. TA is very useful during a volatile market, and unless you have been living on Pluto since the turn of the 2008 new year, you may have noticed the volatile trading sentiments in several of the world's leading indices.

Traders such as myself live for these types of markets because it gives us very sharp swings in stock price, but it also speeds up the time required to hold a stock (or option) to reach our price target. Therefore, we can move in and out of positions in a matter of minutes or a few days instead of the normal weeks to months (or longer). These types of markets are difficult to predict, even for those of us with years of experience, so if you are a novice trader it's probably best you stay with long term investing or backtest your trading strategies before attempting to do so yourself.

For all the seasoned traders in the Fingad community, I apologize for the elementary tutelage, but the last thing I want to have is hate mail blasting me for GOOG dropping below the trendline I have just identified. Experience suggests that even if you wish to trade this information, it is best to wait for an uptick in price to indicate the reversal is real and not random price flucuations.

Therefore, trade this information at your own risk.

Disclaimer: Author does not have a position in GOOG at the time of publishing (01/30/08), but may open a long position prior to the earnings report based on market speculation. As always, this is for informational use only and should not be endorsed as a professional recommendation.

UPDATE: JANUARY 31st, 2008 @ 1700hrs EST.

For those of you following the after hours activity, Google has gotten hammered! Missing earnings forecasts during a period of financial negativity is a perfect chance for short sellers to pick apart a stock's vunerable support levels faster than a flock of vultures to a fresh lion kill.

If you tracked the trading activity today, Google actually traded up going into the last hour to half hour of trading until it began to sell of. Later in after hours trading, GOOG reported top and bottom line numbers Wall Street did not want to see and subsequently was "taken behind the woodshed." For all of the non-US Fingad contributors, "taken behind the woodshed" is a southern American adage for getting a severe beating!

What I do know, is that Google should continue to be a great company but it's going to lose its high tech darling status for a while (not sure how long). The indescriminate buying of GOOG shares in November 2007 reminded me of the 1999 - 2000 year Nasdaq internet bubble, so that is when I liquidated my entire position because I do enjoy sleeping at night.

For full disclosure, I will be picking up a few shares of Google in the after hours market in the $520 area. I think it should pick up within the next few weeks.

AGAIN! Trade these markets at your own peril! If today's trading activity doesn't frighten you at all, you either have ice in your veins or you love gamble.

Good luck!

Following Big Pharma - 3 Companies that Big Pharma Can't Live Without

Mon, 21 Jan 2008 02:00:14 EST

Following Big Pharma - 3 Companies that Big Pharma Can't Live Without - by VTCastle

Major pharmaceutical companies like Pfizer, Merck, and Sanofi - Aventis sit upon billions of cash reserves while raking in billions more every year. Considered by many to be traditional defensive stocks during periods of negativity (real or perceived), the real question then becomes... what do they do with all that cash?

The answer isn't exactly an easy one. Any number of possibilities could arise ranging from litigation related to intellectual property protection to the incessant marketing campaigns to “inform” the public about their newest innovation in erectile dysfunction treatments.

The lifeblood of any pharmaceutical company obviously comes from its drug pipeline. Without a solid drug portfolio, any pharmaceutical company will be forced to make acquisitions to keep the cash flowing. Therefore, research and development, clinical trials, and cost efficient manufacturing of new and existing drug products is one of the most, if not the most paramount divisions of the company.

This article identifies 3 different segments of the pharmaceutical services market that often go unnoticed and frequently miscategorized into the medical services or pharmaceutical industry at large.

FLUOR CORP

Fluor Corp (NYSE: FLR) is a global engineering and infrastructure company covering a wide range of growing industries with 40,000 employees on 6 continents. FLR maintains a several distinct divisions focusing on many industries, but several of the highlights are:

Energy – oil, natural gas, nuclear fuels, and a host of alternative energy solutions.
Governmental – a preferred vendor to the US government as well as allies abroad for military and non-military applications.
General Manufacturing – provides services to food services, timber production, telecommunications, and many other types of raw product manufacturing solutions.

FLR is definitely profiting from the global infrastructure boom. In the last quarter alone, they have received billions from foreign sources including Saudi Arabia, China and Russia just to name a few. Several billions in annually renewing contracts has also been secured from the US Government's Dept. of Energy.

FLR has pulled back roughly 15% along with other infrastructure companies and the S&P 500 in the last few weeks making it an attractive purchase for potential bottom fishing. With a P/E ratio in the high 20s, the long term investor should give this stock a serious look (Chart #1). With a full backlog of projects and a booming global economy, FLR could be a good choice for the long term investor.

Examine Fluor's finances and project lists in this CNBC interview. Alan Boeckmann, Fluor's CEO describes current operations and specifically comments on sectors where business will increase over the next 1 to 2 years.

Chart #1: 3 year chart of FLR

Covance Inc

Covance (NYSE: CVD) is a contract manufacturing organization (CMO) that provides product development for both large and small pharmaceutical, biotech, and medical device companies. CVD's clients are generally smaller companies lacking in the highly specialized technical knowledge and/or facilities to produce their products as well as larger companies that have deep pockets but prefer to outsource the work for any number of reasons.

CVD also provides a broad range of laboratory services in the pharmaceutical market, but also performs these services for the agricultural, chemical, and food industries. These analytical services are often a distinguishing criterion for CROs because it allows greater client confidence along with increased revenues. These services combined with clinical trials management makes a strong impression to companies looking to get a new product approved as quickly as possible by the FDA/EMEA.

CVD has performed very well posting a 132% gain in 3 years as a 53% gain in 2007 (Chart #2). The company is expected to post an EPS growth rate of 17% for 2008 and has a 5 year growth rate of 23%. CVD has zero long term debt and is definitely well positioned to become the dominant player within this CMO niche of the pharmaceuticals market.

Chart #2: 3 year chart of CVD

Thermo Fisher Scientific Inc

Thermo Fisher Scientific (NYSE: TMO) is the leading scientific products supplier in the world. Their products can range from the ultra high end computerized analytical systems to basic chemicals and laboratory consumables. They possess a strong portfolio of products to serve a wide array of markets, such as:

Pharmaceutical / Biotechnology
Academic Research
Governmental Agencies
Medical / Clinical Labs (Hospitals)
Industrial / Chemical Corporations

TMO has consistently made acquisitions of various types of technologies that are niche specific and a strong market competitor within that specific sector. If an acquisition is not in their best interest, TMO will generally attempt a distributor type agreement that allows them to market select products within their sales program. By combining nearly every imaginable scientific research tool into one convenient location, it makes TMO a very valuable resource to purchasing agents and as well as a preferred vendor among the entire pharmaceutical or research community.

TMO's share price has done well over the last few years with a 3 year return of 80% and a 1 year return of around 13%. The 1 year performance has been substantially affected during the market downturn following the January 2008 sell off. However, TMO has increased sales 230% (13x its competitors) and net income 300% from the previous year. These substantial increases in sales offers justification for the high P/E ratio in the mid 40s but with a forward P/E floating in the 18 range its appears to have a positive upside.

TMO is a great play within the life sciences industry as big pharma will always spend billions each year on research and development, and TMO is most likely on speed dial to each and every one.

Chart #3: 3 year chart of TMO

Summation

With the ever increasing demand for new medications as well as the financial incentives for owning the next big blockbuster drug like Lipitor or Viagra, the demand for service companies such as these will always be in demand. These are prime examples of defensive plays as well as growth stories considering that pharmaceutical research will be here to stay for the foreseeable future with no concievable end... unless someone finds the fountain of youth.

Disclaimer: Author has long positions in Fluor and Thermo Fisher Scientific. As always, this article is intended for informational use only and should not be endorsed as a professional recommendation.

Sadia: Now Serving 6.7 Billion People Everyday!

Wed, 16 Jan 2008 23:32:44 EST

Sadia: Now Serving 6.7 Billion People Everyday! - by VTCastle

The human population is now topping 6.7 billion people. Yes that was a billion with a “B”, which equates to 4 babies being born every second. Quite staggering when you think about it... right?

We are now in a parabolic growth curve which only means more of us are required to share the real estate currently under your feet right now. According to the law of causality, all of the things we require to exist - or more appropriately coexist - are going to be increasing at the same parabolic rate.

Unfortunately for us, the basic commodities we take for granted everyday will eventually be of far more importance than an Iphone or keyword tags for a search engine. Consider the impact of 2 to 3 years of poor grain harvests due to droughts during summer months. Hunger would quickly elevate the prices of these commodities as we are currently witnessing with the increasing probabilty that the US ethanol quotas will be tightening the current supply of corn. As of this week (January 14th, 2008) corn has reached an all time high, and this happened without any type of unnatural weather patterns.

This isn't intended to frighten, but to enlighten all of us upon the microtrends of change are becoming macrotrends of a permanent nature.

So what can we do to eliminate or reduce these types of events? Lets start by identifying a way to do more with less, and identify a streamlined corporation that provides a life sustaining resource... food perhaps.

Sadia S.A. ADR

Sadia (NYSE: SDI) is a Brazilian food processing company specializing in refrigerated and frozen protein rich products (beef, chicken, pork). From the farm to the grocery shelves, Sadia operates an all inclusive business that covers the gambit of meat production for Brazil, as well as being one of the leading food distributors in the world.

Literally translated as “healthy” in Portuguese, Sadia produces over 1000 different products worldwide. An estimated total of 2.6 Billion pounds of protein are consumed around the world each year thanks to Sadia and with the ever growing world population that number is sure to increase. Half of Sadia's products are consumed in Latin America, while the remaining 50% is shipped to its other customers in Asia, primarily China and India.

Despite a 90% return in 2007 and a 3 year return of near 200%, SDA is surprising cheap by posting a very conservative P/E ratio of 11.3 (Chart #1). However, SDA is much more than a growth company. It is also a prime example of a value stock for dividend investors, which happens to have a current dividend yield of 4.17%. Within a volatile stock market, it presents itself as a possible defensive stock as well.

Chart #1: 3 year chart of Sadia.

The Numbers

Sadia, like most large food companies, is not high paced growth company. It has a forecasted a 12% - 14% increase in sales for 2008, but did not give any guidance on EPS which could leave some extra “wiggle room” to sneak in an earnings surprise. When looking at Sadia's conservative management, its best to consider this a glass half-full versus the alternative.

Several other key numbers/ratios jump out that separate SDA from its competitors, such as:

SDA has a Cost of Goods (COGs) result that is roughly 20% lower than its industry competitors. This is significant because it increases the net profit and EPS even if competitors achieve higher sales increases than SDA.
The dividend growth rate is three times higher than industry competitors. Combined with a stock price that doubled in 2007, it makes SDA twice as attractive to mutual fund investors as a play on growth stocks, but also as a high yield dividend stock as well.
Sales are roughly 28% higher than industry competitors over a 5 year basis.
3^rd quarter 2007 was 180% higher than the year over year quarter.
Estimates range from only 10% to 17% of mutual fund or institutional ownership in this stock. Could be very significant if some type of positive news is released, and the investment managers begin to take notice of a solid growth company with little downside risk.

SDA is also a master of globalization. With partnerships in the United States, Russia, Asia, Europe, Africa, and the Middle East, its quite possible they could become the global standard of protein based foods in years to come. Sadia has maintained a high rate of quality, and therefore their products are well received. In many countries, their products are viewed as the best in their respective category.

Summation

Sadia is a well managed, international food company with a realistic chance of becoming the #1 protein supplier in the world. It is growing quickly for such a large food based company, but this is due to its consistent ability to penetrate new markets, both domestically and internationally. Amazingly, it has integrated a well planned business model into the high tech western world as well as the emerging markets.

Impressively, the management team must be recognized for having the strategic foresight and sales skills to perform so well with an extremely diverse portfolio of clients.

The closing price of Sadia (NYSE: SDA) upon the publishing date (01/16/08) of this article was $56.98.

Disclaimer: Author does not have a position in Sadia S.A. prior to submitting this article. Always do your own research before making any investment based on a 3rd parties recommendation

Global Telecom: 3 Emerging Market Plays with Massive Upside!

Fri, 11 Jan 2008 15:13:00 EST

Global Telecom: 3 Emerging Market Plays with Massive Upside! - by VTCastle

The wireless telecom revolution of the late 20^th century has no doubt been one of the great global paradigm shifts since World War II. It doesn't rank as high as the internet, penicillin or dare I say – Viagra. However, wireless telecom is a technology that has changed, and will continue to change the way we interact with our fellow mankind.

Initially, mobile phones were a hulking piece of plastic with horrible reception. Now its 10 millimeter thick, full color touch screen with download/upload speeds that seem to double every year. Quite amazing to think the technology has matured as quickly as it has, and as a certifiable technology addict, I'm chomping at the bit for each tidbit of news.

Next time you catch yourself marveling at your newest gadget, consider the unlimited potential that wireless technology offers when viewed on the global scale. If you can't, take a look at how William Shatner and Star Trek changed the world.

Whether you are in a remote location in Mexico on a road trip that went off track, or hiking through the scenic back country of Thailand, chances are its going to be difficult to find a traditional land based telephone. So as a govermental leader looking to provide communications for your nation, or a CEO looking to cut infrastructure costs, building a completely wireless telecom system is ostensibly the way to go. Not only can you save capital by avoiding investment of traditional land line systems, but their eventual replacement by wireless networks is a realistic possibly. Case in point, the major American landline companies like AT&T or Verizon rushing to grab as much of the wireless market as possible in the mid 1990s. Its not a question of “will it happen,” but more appropriately “when will it completely dominate the world?”

This article highlights 3 global wireless telecom companies that will play a key role in connecting our world through satellite based communications. They have either been in place for several years, or just beginning to show up in the emerging markets with immense growth potential. Thus, I have purposely excluded what I deemed markets that are near saturation points, such as the USA, Australia, most of western Europe (some Eastern to), and Japan.

America Movil S.A.B de C.V. (ADR)

America Movil (NYSE: AMX) is the dominant wireless telecom company in Central and South America. Based in Mexico, this 69.5 Billion dollar company controls 70% of the wireless market in Mexico as well as a growing market share in 15 other counties throughout Central and South America. It has aggressively pursued acquisitions such as Oceanic Digital Jamaica and Compania Dominicana de Telefonos in Puerto Rico during 2007. It currently maintains a massive number of subscribers at a total of 147 million and growing.

Current estimates project a growth rate of 35% for 2008 and 32% over the next 5 years, which would outperform its industry competitors on a percentage basis of 40% and 50% respectively.

Mexico alone has an annual increase in wireless subscribers of 50%, so AMX is well positioned to take advantage of this. As of now, very little penetration of wireless internet has been achieved and this will undoubtedly grow thanks to Apple's Iphone and Research in Motion's Blackberry (aka – Crackberry).

AMX has traded sideways for the last year, but at a price of $59 its a steal now that the P/E ratio is in the low 20s. Especially when AMX has a 5 year average Return on Investment 8 times higher than its industry competitors (19.1 vs. 2.4).

Vimpel-Communications (ADR)

Vimpel-Communications (NYSE: VIP) is the largest wireless telecom provider by market cap in Russia, and the majority of the former satellite countries from the former Soviet Union. However, it has fewer subscribers than rival Mobile TeleSystems OJSC (NYSE: MBT), but appears to be gaining ground in this category.

VIP has sought to strengthen its telecom position by adding value to its services portfolio, namely in the areas of business related services. Announcing today that it has agreed to purchase Golden Telecom (NASDAQ: GLDN), which provides broadband connectivity via fixed land systems (fiber optics) and mobile (satellites) based systems for faster voice and data devices. The approach is obviously to gain market share by providing a superior product portfolio to business customers and the net savvy citizen.

Looking at the financials for VIP, one has to be IN AWE of the stock performance. Forget Google, how about a near 500% return on your money in 3 years time, which outperformed Google's 250% over the same 3 year time period. Shockingly, VIP is still cheap with a P/E ratio around 33 it isn't exactly cheap, but the forward P/E is around 13, so you're paying a little extra for all that potential growth. Speaking of which, the growth estimates for 2008 is 39% thus far, which is 50% greater than its industry competitors. This hasn't yet calculated the additional revenue that Golden Telecom should bring in so its quite possible that growth will exceed the prognostications this year in the earnings year.

Matter of fact, Ken Heeber of the CGM Focus fund and Morningstar's top fund manager of 2007 has a substantial state in VIP having a whopping 6% of the funds assets in this one company. Heebner coming on board with his past success is a very bullish sign for those who are currently on the fence. Checkout one of Heebner's latest interviews from CNBC on his core holdings of his 5 star CGM Focus Fund discussing VIP as well as Petrobras (NYSE: PBR).

Videsh Sanchar Nigam Limited (ADR)

Videsh Sanchar Nigam Limited (NYSE: VSL) doesn't quite fit the mold of a pure play wireless provider, but VSL encompasses a growing telecom company in all aspects of a rapidly growing dominant power. By covering several aspects of India's telecom market, VSL offers a diverse opportunity for the entire India telecom market as well as being a player in the global markets by having acquired Teleglobe in 2006. Specifically, it has strategically placed assets in Western Europe, South America and Southeast Asia.

VSL is building a core infrastructure to permanently secure its place as a high speed information provider. Its currently constructing two massive telecom cable systems to Southeast Asia and Europe at a total cost of $550 million dollars to supply its growing portfolio of user based products such as internet telephony (VoIP) and Wi-Fi hotspots which attract the everyday consumer as well as the growing businesses seeking enhanced connectivity. As of December 2007, VSL has a subscriber list of 500,000 customers and with recent deals like teaming up with Marshall Media to provide streaming Video on Demand (VOD) its appeal among users will only grow.

VSL earnings history has been unstable at best, but the current outlook is that the company will turn itself around to be a bigtime revenue generator. With sales doubling from 2006 to 2007, it presents a generous opportunity for share price appreciation over the long term. In addition to being a state owned company, its doubtful that the Indian government will be liquidating its shares in the future plus any potential preferences to invest nationally versus internationally when a foreign corporation pursues interests similar to those of VSL.

My estimation is that with a strong broadband product portfolio, the broadband wireless markets will be a viable new investment now and many years to come for VSL. Being that India has a low cell phone per citizen ratio, the selection of a new generation wireless device could likely be the first mobile phone purchased by many of India's growing middle class.

Disclaimer: Author does not own stock in any of the companies mentioned prior to publishing (Jan 11, 2008). As always, this is for informational use only and should not be endorsed as a professional recommendation.