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Brendan O'Boyle  

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  • Gilead Feels The Heat Of Competition [View article]
    If the market wasn't surprised why the huge sell-off?

    The statement: "AbbVie surprised the market by undercutting rival Gilead on price" is a factual observation. I fail to see the hyperbole.

    If the market wasn't surprised then why did GILD gap down from $108 to $96? Clearly buyers at $108 on Friday's close were 'surprised' otherwise why would they pay $108/share when they could have bought on Monday's open for $96?

    If ABBV didn't undercut GILD on price then why did ESRX cut them an exclusive deal?
    Dec 24, 2014. 10:18 PM | 2 Likes Like |Link to Comment
  • Gilead Feels The Heat Of Competition [View article]
    ESRX market share is only the tip of the iceberg. Do you really think that after ESRX has negotiated a lower price other payers won't be quick to follow suit?
    Dec 24, 2014. 10:06 PM | 1 Like Like |Link to Comment
  • Gilead Feels The Heat Of Competition [View article]
    I concur with you that GILD has the better drug and stated so in the article.

    The difficulty is that we have run so far into the stratosphere in terms of cost that pressure from PBMs was assured to happen at some point.

    Best in class does not imply unlimited pricing power. I doubt that this will be the last example of that fact.
    Dec 24, 2014. 09:57 PM | 3 Likes Like |Link to Comment
  • Fed's Williams: June a good time for "lift-off" [View news story]
    Describing a potential rate hike from 0.1% to 1% as 'lift-off' is about the silliest thing I have ever read...
    Dec 20, 2014. 10:04 AM | 1 Like Like |Link to Comment
  • Junk Bonds Or Stocks? [View article]
    This is a very interesting article, well done. Glad to see you are back Ploutos.

    I have a couple of questions:

    1. Why does JNK yield 6%ish when the high yield index you mention is yielding 7%? Is there a better ETF to track the index?

    2. What is the connection between total return for the index and the level of yield? I assume over a 2+ year time horizon there must be a correlation between the yield when you buy and your total return.

    3. What is the average annual drawdown from bonds going into default? The thing that always holds me back from buying junk is that it is more or less the opposite of a dividend growth strategy. I think 1-2% of bonds go into default per year on average, so you never really collect 7%.

    You get 7% minus taxes, minus inflation, minus defaults. Granted at least this is still a positive number, but I expect the total return won't be more than 2-3% which is pretty low for the level of risk.
    Dec 16, 2014. 10:44 AM | Likes Like |Link to Comment
  • A Few Financial Concerns About Philip Morris International [View article]
    PM can issue 10 year bonds at 3.25% while the stock is yielding nearly 5%.

    Add to that tobacco has litigation risk.

    Add to that the cost of debt lowers tax liabilities so the true cost of ten year debt is more like 2%. Basically bond investors and Uncle Sam are letting PM borrow for the rate of inflation.

    Why they wouldn't sell bonds to buy stock is a better question.
    Dec 12, 2014. 10:36 AM | 12 Likes Like |Link to Comment
  • Recent Buy: ONEOK [View article]
    Oh, sorry the S&P report I was reading was out of date. You're correct the program has already expired.
    Dec 12, 2014. 12:23 AM | 1 Like Like |Link to Comment
  • Recent Buy: ONEOK [View article]
    Add to the distribution a fairly significant ($750M) share repurchase program. Over the next 3 years, but I don't know many other domestic stocks with a divvy and growth this high that also have a declining share-count.

    I'm in on OKE, may have jumped the gun a bit with a cost basis of $47. Sometimes discretion is the better part of valor, but at these prices I couldn't help myself.

    Question though: I am confused as to why the stock is selling off so badly. The commodity price exposure of OKE is pretty light. Why have we sold down to $45 from $70? I suppose panic doesn't listen to reason...

    PAA starting to look interesting as well, but I like that OKE is a C-corp.
    Dec 11, 2014. 10:51 PM | 1 Like Like |Link to Comment
  • ONEOK: Get Ready For A 14% Dividend Increase In 2015 [View article]
    Question for the author: How are the distributions from OKE taxed? Are they simply normal c corp dividends or return of capital like an MLP?
    Dec 9, 2014. 07:26 PM | Likes Like |Link to Comment
  • Legacy Reserves: The Time To Accumulate Is Now [View article]
    So far I am also disappointed with this pick. I did not anticipate oil prices would fall this far.

    However, I would also caution against judging a stock pick one month after it was given. Value investing takes time and any stock you buy has to be given years for the investment thesis to play out.

    In the article I suggested that in my opinion you would want to average into the downtrend. So the first lot of shares would have cost $20 ($21 for 1/4 and $19 for selling a $20 put). If you purchased the second lot where the stock closed today ($14) your average price per share would be $16.45, about where the stock closed on Friday.

    I don't want to make light of losses, but a stock as volatile as LGCY could easily be back to your cost basis by the end of the week. If you spread out your bets over a number of different ideas and keep them to 2% of your portfolio per idea its been my experience that your winners will make you considerably more money than your losers will cost you.

    But like I said I'm not happy about how LGCY has gone so far. I wish I had known oil would get this low. The question moving forward for LGCY is: will they stay this low (or even lower)? If the answer is yes than I would cut my losses (and the stock is probably going to ~$10/share = book value), if the answer is no then you have a stock that could easily double. Depending on where you see those odds will give you an idea of whether holding the stock is a good bet.
    Dec 8, 2014. 09:38 PM | 2 Likes Like |Link to Comment
  • Legacy Reserves: The Time To Accumulate Is Now [View article]
    1. According to the annual report last year's production was sold at an average cost of around $90/barrel. With total revenues of $485M a 30% slide in prices (where we are now) will take cash flow down by ~$150M (past 2015 since most production is hedged for the next year). For comparison sake the entire distribution costs $200M annually. Their coverage ratio provides a bit of a buffer (~1.2x), but if oil prices stay this low indefinitely a cut would probably come sooner or later.
    2. Cost of debt was $50M last year. Financing is locked in until the end of the decade. Cash and short-term assets total $126M, the company did well securing financing recently and may even look for acquisitions in the current environment.
    3. I am not certain about preferred stock. All the reports I have read predated its issuance.
    4. LGCY has another year of hedged production and the better part of a year in liquidity should that run out. Past that, where we are now would probably require the distribution to be cut in half. But it's not just LGCY, as I stated above nearly half of world oil production would be uneconomical.
    Dec 8, 2014. 09:30 PM | 1 Like Like |Link to Comment
  • Why I Expect WTI To Go Back To $100 [View article]
    Finally an article on oil with some actual data...
    Dec 6, 2014. 01:11 PM | 1 Like Like |Link to Comment
  • Why I Hate Apple [View article]
    It is interesting that Apple has done quite well as the beta has fallen.

    Oil stocks like CVX and XOM have seen increasing betas for a while now and haven't fared so well.

    But maybe this is just coincident and stocks tend to be more volatile when they are going down.
    Dec 5, 2014. 04:45 PM | Likes Like |Link to Comment
  • Sovaldi Versus Abbvie Combination: Analysis Of Abbvie Combination Impact On Sovaldi Market Share [View article]
    Contrarian hit the nail on the head.

    This is what the market is afraid of, whether it plays out or not we shall see...

    The market may be irrational here, the trouble is that it is difficult to discount a completely unknown uncertainty.
    Dec 3, 2014. 11:03 AM | Likes Like |Link to Comment
  • Be Careful With Gilead - It May Be Time To Take Profits [View article]
    I was asking this question in relation to analyst expectations for the 2017 fiscal year.

    Not saying it can't happen, just that these are pretty aggressive growth projections.
    Dec 2, 2014. 10:41 AM | Likes Like |Link to Comment
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