Taro Pharmaceutical (TARO -7%) slides after earlier reporting Q1 earnings of $1.10 per share on net sales of $165.1M, an increase of 13.8%, from a year ago. Gross margin grew to 72.4% from 68.3%, offsetting an increase in Research and development expenses by 23.9% to $12.2M. Settlements and loss contingencies totalled $33.3M, dragging down operating income to $63.1M, or 38.2% of net sales, compared to $66.2 million, or 45.6% the year prior. [View news story]
I don't think the slide was due to the earnings report. It was released yesterday morning, I remember reading it and then seeing the stock was up 1% on a down day and figuring that meant the report had been well received.
Today was more of a fat finger trade with some antsy trader closing out a position. When you invest in small cap stocks you have to accept this, you'll have days they go down 10% for no reason at all.
I thought about buying some more this morning when it opened, I think I really need to start holding more cash on my books for days like today. This is the third time a stock I own has opened down 8-10% in the past two weeks for no reason. Then the stocks just melt up back to where they were like nothing happened. Very strange market action lately.
Why Would I Not Sell Dividend Stocks Even After A 1000% Gain? [View article]
I have never tried trading, but I think if I did the key would be that you would spend a lot of time watching the market without actually doing anything.
For example, some stocks I am long inexplicably opened down 5-8% the last two days (TARO and MAIN specifically - TARO opened down 9% today if you had the stones to buy it at the open you are up 5% already). So if I was a trader I would be looking to get in when an oversold stock starts to revert to the mean, then quickly book a 2-3% profit and move on. As an investor I see those dips on no news and I want to do some buying.
But the key is 90% of the time you would be watching the market and doing nothing. Kind of like fishing except you have to decide if it's worth trying to reel in some profits. If you can book a quick 2% gain you only have to make a trade every couple of weeks and you will be vastly ahead of the market.
Alternatively, I think momentum trading can work, but you aren't going to be able to move in an out of positions on a day to day basis. Momentum takes longer to work, even a stock in a strong uptrend won't go up every day. In fact, about the fastest way to lose money on a very short time scale is to buy something that is already overbought.
I just figured with a market cap of under 30B BIDU could be a ten bagger some day. I can definitely see them being as big as GOOG. But it's going to be a bumpy ride so it's a pretty small position.
Yeah they were a much better buy a year ago, but with new revenue and share repurchases I think 20x forward P/E is about right.
In general I don't invest that much in biotech or tech because it is just too unpredictable. Some growth stocks I like are BIDU, BOFI, CACC, DFS, INBK, TARO and TGI. BIDU is the lone exception to my tech aversion, at 85 bucks it was just too cheap to pass up.
You actually sound even more pessimistic than I am. I'm not sure where the stock will go if they lose, but $20 doesn't sound like an unreasonable guess. I would say 30-50% or $15-20, depending on how badly the market takes it. But I only think this will happen for the worst outcome, it is possible that the SC could rule against the patent ability of genes and still carve out some kind of compromise for MYGN, so I don't think the odds of an unfavorable ruling aren't quite that high.
There are plenty of stocks with a PEG ratio < 1, in fact that isn't even particularly above average for the S&P 500. Since we are talking about biotech, I think GILD is a good choice. Forward P/E of 19 with expected growth of just slightly less for a PEG of 1.07.
Investing is not about certainties, its about probabilities. For MYGN, I expect the probabilities continue to be that the stock will trade in line with the market if nothing bad happens (which it has Ytd) or there will be an unfavorable ruling and the stock will drop ~50%. I don't know which will happen, but I think that the odds don't look good.
As a result, just because the stock has not dropped yet does not mean it was a smart move to buy it. It also means that everything could go peachy for MYGN and three months from now the stock will be up 24% more. And when those three months are up I will say the same thing, that is: I think you took way too much risk to get that 24% return.
To get a ballpark figure on this, what do you think the odds of MYGN winning are? Then what do you think the stock price will do if they lose vs. if they win?
If the revenue is 74% or 80% from BRAC what do you think will happen to the stock if they lose? (I read the most recent 10K, it was 79% in 2012 and 81% in 2011, maybe projected 2013 revenue it is 74%?)
"Professionals" downgraded the stock because in their opinion the risk outweighed the reward. Even with the rally, Ytd MYGN has about the same return as the market with much more risk. So I'm not sure what the argument is here, if you are happy about day-trading a volatile stock then congratulations. But as a long-term pick I would say the risk is much too high for my taste.
Of course Scalia says something pro-business and nothing happened and the stock goes up, but the real test is when the ruling comes.
Anyway, it's just my opinion. But buying MYGN is probably a bad idea and selling puts on MYGN is a very, very bad idea. If you are short puts do yourself a favor and buy them back.
Not all low beta stocks are overpriced relative to the S&P, there are still many buys.
Personally, I have found that screening for undervaluation, low beta and share repurchases is an excellent strategy to narrow the field before doing more research.
Some ideas to consider: TRV, IBM, XOM, RNR, CACC, MO, UNH, DTV maybe CVS but a bit pricy now.
Disclosure: I'm long just about every stock in the list above except TRV, which I may be adding in the very near future.
If it would be so hard for a competitor to make a competing test why is the association for molecular pathology paying millions to bring the case before the Supreme Court?
The competition for the Colaris test is irrelevant, MYGN derives over 80% of revenues from BRAC.
I would not buy MYGN until there is clarity on the case. It isn't good risk reward at the moment.
The True All-In Cost To Mine Gold: Complete 2012 Figures [View article]
I don't think this analysis indicates that the price of gold is unsustainable below the cost of production. It says gold production is unsustainable below that cost.
If the industry mined 2700 tons in 2012 this is probably less than 1% of the gold that has already been mined. It's pretty easy to imagine a world in which future production of gold is uneconomical and so more will not be produced, however, because this change in supply is only 1% of the aggregate it is changes in investment demand that will be far more important in determining the price.
Oil, copper or iron ore are different. The commodities are consumed, not hoarded and there is not 100x annual production sitting in a tanker or a warehouse somewhere if current production were to be shut down.
I think your analysis is an excellent short thesis on gold miner's, but not necessarily a good long thesis for the metal itself.
USMV And The Low-Volatility Strategy [View article]
It is worth noting that the money spent on buybacks currently exceeds that spent on dividends for the S&P 500. The sum of the two in the final quarter of 2012 is 5% annualized.
So take 5% add future earnings growth and you have a pretty reasonable expected future return.
Gold: Over-Leveraged Portfolios Unwinding, Watch Out Below [View article]
Not really. Gold is not a commodity that is consumed, it is entirely within the realm of possibility that all gold miners could go bankrupt and the world supply of gold will remain only what has been taken from the ground to date.
If you think about it, there really isn't any reason mine gold. It doesn't do anything, it is only worth what someone will pay you for it. Thus, if the price investors are willing to pay falls below the production cost production would simply stop.
The world gold production in 2011 was 2700 tons of gold. Every ounce of gold that has ever been mined is sitting in a vault somewhere and probably this is 100-200 times annual gold production. You can see the laws of supply and demand don't apply here because the existing supply so far exceeds newly mined gold. If gold supply stopped growing that is only an effect of 1% per year. The demand issue is much more important and with prices falling it is hard to expect robust demand.
Just my two cents. But if the price of gold does fall below production cost and stay there one thing I know is that you can probably short gold miners all the way to zero. Below $1000/oz. mining gold is no longer a productive business model and uneconomic business models have a way of disappearing.
Why Would I Not Sell Dividend Stocks Even After A 1000% Gain? [View article]
I think Austin seems like a really nice destination, although I have never spent that much time in TX. FL sounds pretty good too, although you might want to travel north sometimes during the summer.
Why Would I Not Sell Dividend Stocks Even After A 1000% Gain? [View article]
You neglect to mention probably the best reason not to sell a 10-bagger, TAXES.
Consider the Buffett example with KO. If WB bought for $3 and sold for $45 he must pay state and federal taxes on the $42 gain.
For me living in MA, I would pay 15% federal and 12% state, so over $11 on the $42 profit. Maybe there is a bear market and KO goes down 30%. This uncertain loss is still only approximately the same as the certain loss to the tax man from booking the gain.
Stocks do not generally go up 1000% without corresponding earnings growth and personally I would never invest in a speculative stock that could go up 10 fold without earnings growth anyway.
I never plan to sell another stock until I retire and move to another state that does not collect income tax on capital gains. Possible retirement locations include: FL, WA, TX, SD, NV and AK.
Lastly, it should be added that a long term investor can probably avoid paying federal taxes as well. Long term capital gains are taxed at ZERO if you are in the 10% or 15% income bracket ($35k per year). If this seems far fetched consider that the residence in which I now live could easily be rented and I could deduct 3.3% per year of the value as depreciation as well as all the expenses of using it as a rental property. That means in retirement it is possible to shield up to 60k in long term gains and pay ZERO in taxes whatsoever.
Once you realize this math it makes little sense to ever buy a stock you don't want to hold forever. Buffett is smart, not only at investing but also at limiting tax liability.
High Yield Bond Market Sets New Records [View article]
I have to warn that I am not a bond inviting guru, but If I wanted to buy bonds I would probably buy Puerto Rican munis. There are some A rated ones trading at par in the mid 4% region tax free and maturing within 10 years. They are exempt from state and federal taxes and once you factor that in a 4.5% yield is similar to the high 5% range with lower risk.
Taro Pharmaceutical (TARO -7%) slides after earlier reporting Q1 earnings of $1.10 per share on net sales of $165.1M, an increase of 13.8%, from a year ago. Gross margin grew to 72.4% from 68.3%, offsetting an increase in Research and development expenses by 23.9% to $12.2M. Settlements and loss contingencies totalled $33.3M, dragging down operating income to $63.1M, or 38.2% of net sales, compared to $66.2 million, or 45.6% the year prior. [View news story]
Today was more of a fat finger trade with some antsy trader closing out a position. When you invest in small cap stocks you have to accept this, you'll have days they go down 10% for no reason at all.
I thought about buying some more this morning when it opened, I think I really need to start holding more cash on my books for days like today. This is the third time a stock I own has opened down 8-10% in the past two weeks for no reason. Then the stocks just melt up back to where they were like nothing happened. Very strange market action lately.
Why Would I Not Sell Dividend Stocks Even After A 1000% Gain? [View article]
For example, some stocks I am long inexplicably opened down 5-8% the last two days (TARO and MAIN specifically - TARO opened down 9% today if you had the stones to buy it at the open you are up 5% already). So if I was a trader I would be looking to get in when an oversold stock starts to revert to the mean, then quickly book a 2-3% profit and move on. As an investor I see those dips on no news and I want to do some buying.
But the key is 90% of the time you would be watching the market and doing nothing. Kind of like fishing except you have to decide if it's worth trying to reel in some profits. If you can book a quick 2% gain you only have to make a trade every couple of weeks and you will be vastly ahead of the market.
Alternatively, I think momentum trading can work, but you aren't going to be able to move in an out of positions on a day to day basis. Momentum takes longer to work, even a stock in a strong uptrend won't go up every day. In fact, about the fastest way to lose money on a very short time scale is to buy something that is already overbought.
Myriad Genetics: Strong Results Ahead Of Supreme Court Decision [View article]
Myriad Genetics: Strong Results Ahead Of Supreme Court Decision [View article]
In general I don't invest that much in biotech or tech because it is just too unpredictable. Some growth stocks I like are BIDU, BOFI, CACC, DFS, INBK, TARO and TGI. BIDU is the lone exception to my tech aversion, at 85 bucks it was just too cheap to pass up.
Myriad Genetics: Strong Results Ahead Of Supreme Court Decision [View article]
Myriad Genetics: Strong Results Ahead Of Supreme Court Decision [View article]
Investing is not about certainties, its about probabilities. For MYGN, I expect the probabilities continue to be that the stock will trade in line with the market if nothing bad happens (which it has Ytd) or there will be an unfavorable ruling and the stock will drop ~50%. I don't know which will happen, but I think that the odds don't look good.
As a result, just because the stock has not dropped yet does not mean it was a smart move to buy it. It also means that everything could go peachy for MYGN and three months from now the stock will be up 24% more. And when those three months are up I will say the same thing, that is: I think you took way too much risk to get that 24% return.
To get a ballpark figure on this, what do you think the odds of MYGN winning are? Then what do you think the stock price will do if they lose vs. if they win?
Myriad Genetics: Strong Results Ahead Of Supreme Court Decision [View article]
"Professionals" downgraded the stock because in their opinion the risk outweighed the reward. Even with the rally, Ytd MYGN has about the same return as the market with much more risk. So I'm not sure what the argument is here, if you are happy about day-trading a volatile stock then congratulations. But as a long-term pick I would say the risk is much too high for my taste.
I Wrote an article about it as well: http://bit.ly/131bxyZ
Of course Scalia says something pro-business and nothing happened and the stock goes up, but the real test is when the ruling comes.
Anyway, it's just my opinion. But buying MYGN is probably a bad idea and selling puts on MYGN is a very, very bad idea. If you are short puts do yourself a favor and buy them back.
Low Volatility Investing In 2013 [View article]
Personally, I have found that screening for undervaluation, low beta and share repurchases is an excellent strategy to narrow the field before doing more research.
Some ideas to consider: TRV, IBM, XOM, RNR, CACC, MO, UNH, DTV maybe CVS but a bit pricy now.
Disclosure: I'm long just about every stock in the list above except TRV, which I may be adding in the very near future.
Myriad Genetics: Strong Results Ahead Of Supreme Court Decision [View article]
The competition for the Colaris test is irrelevant, MYGN derives over 80% of revenues from BRAC.
I would not buy MYGN until there is clarity on the case. It isn't good risk reward at the moment.
The True All-In Cost To Mine Gold: Complete 2012 Figures [View article]
If the industry mined 2700 tons in 2012 this is probably less than 1% of the gold that has already been mined. It's pretty easy to imagine a world in which future production of gold is uneconomical and so more will not be produced, however, because this change in supply is only 1% of the aggregate it is changes in investment demand that will be far more important in determining the price.
Oil, copper or iron ore are different. The commodities are consumed, not hoarded and there is not 100x annual production sitting in a tanker or a warehouse somewhere if current production were to be shut down.
I think your analysis is an excellent short thesis on gold miner's, but not necessarily a good long thesis for the metal itself.
USMV And The Low-Volatility Strategy [View article]
So take 5% add future earnings growth and you have a pretty reasonable expected future return.
Gold: Over-Leveraged Portfolios Unwinding, Watch Out Below [View article]
If you think about it, there really isn't any reason mine gold. It doesn't do anything, it is only worth what someone will pay you for it. Thus, if the price investors are willing to pay falls below the production cost production would simply stop.
The world gold production in 2011 was 2700 tons of gold. Every ounce of gold that has ever been mined is sitting in a vault somewhere and probably this is 100-200 times annual gold production. You can see the laws of supply and demand don't apply here because the existing supply so far exceeds newly mined gold. If gold supply stopped growing that is only an effect of 1% per year. The demand issue is much more important and with prices falling it is hard to expect robust demand.
Just my two cents. But if the price of gold does fall below production cost and stay there one thing I know is that you can probably short gold miners all the way to zero. Below $1000/oz. mining gold is no longer a productive business model and uneconomic business models have a way of disappearing.
Why Would I Not Sell Dividend Stocks Even After A 1000% Gain? [View article]
Why Would I Not Sell Dividend Stocks Even After A 1000% Gain? [View article]
Consider the Buffett example with KO. If WB bought for $3 and sold for $45 he must pay state and federal taxes on the $42 gain.
For me living in MA, I would pay 15% federal and 12% state, so over $11 on the $42 profit. Maybe there is a bear market and KO goes down 30%. This uncertain loss is still only approximately the same as the certain loss to the tax man from booking the gain.
Stocks do not generally go up 1000% without corresponding earnings growth and personally I would never invest in a speculative stock that could go up 10 fold without earnings growth anyway.
I never plan to sell another stock until I retire and move to another state that does not collect income tax on capital gains. Possible retirement locations include: FL, WA, TX, SD, NV and AK.
Lastly, it should be added that a long term investor can probably avoid paying federal taxes as well. Long term capital gains are taxed at ZERO if you are in the 10% or 15% income bracket ($35k per year). If this seems far fetched consider that the residence in which I now live could easily be rented and I could deduct 3.3% per year of the value as depreciation as well as all the expenses of using it as a rental property. That means in retirement it is possible to shield up to 60k in long term gains and pay ZERO in taxes whatsoever.
Once you realize this math it makes little sense to ever buy a stock you don't want to hold forever. Buffett is smart, not only at investing but also at limiting tax liability.
High Yield Bond Market Sets New Records [View article]