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David Sims is the managing member of RidgeHaven Capital LLC. We prefer distressed equities and value investing. The firm was established to manage wealth with an eye on fundamental value, but also an understanding of technical trends and market behavior. David is a Certified Public Accountant... More
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  • Volatile Post Earnings Ride For Baidu Shareholders

    With the recent up and down swings in Chinese markets, I was especially interested in the post-earnings trading of stocks like Baidu (NASDAQ:BIDU). The headline from Bloomberg was "Baidu Sales Outlook Misses Estimates on Weaker Chinese Economy."

    Baidu's sales forecast was the disappointing data point for investors, as the stock fell more than 12% after-hours. This is after the company posted 38.3% annualized revenue growth and an earnings per share beat of 10 cents.

    I recently put a sell rating on Netflix (NASDAQ:NFLX) and I found it interesting that Baidu is expanding into streaming video. This helps to reinforce my belief that Netflix has few competitive barriers, especially in unregulated foreign markets.

    Let's be real, the problem with these stocks is not the underlying business. Baidu may have lowered sales forecasts, but the current growth rate of 38.3% is spectacular. The problem is the valuation of the stock. At 33 times trailing earnings, they must execute on forecasts with perfect precision.

    That being said, Baidu may be a better buy than others in this sector. This is just a quick glance at volatility and the impact of lowering guidance.

    Tags: BIDU, NFLX
    Jul 28 7:58 AM | Link | Comment!
  • Weak ADP Employment Data Weighing On Markets

    All major U.S. market indices S&P 500 (NYSEARCA:SPY), Dow (NYSEARCA:DIA), and Nasdaq (NASDAQ:QQQ) are headed lower today on weak economic data. The ADP non-farm payrolls figure for April 1st was underwhelming.

    ADP Change in Nonfarm Payrolls Chart

    ADP Change in Nonfarm Payrolls data by YCharts

    4-Week Moving Average of Continuing Unemployment Claims

    Tomorrow's weekly data could add to concerns about the employment picture and be a preview for Friday's employment report.

    US 4-Week Moving Average of Continued Claims for Unemployment Insurance Chart

    US 4-Week Moving Average of Continued Claims for Unemployment Insurance data by YCharts

    Tags: QQQ, SPY, DIA
    Apr 01 12:34 PM | Link | Comment!
  • Update: Gilead's Harvoni About To Break Expectations

    Note: This is an update to a previous opinion titled "Expect Gilead Sciences to Outperform."

    Back in July, Gilead (NASDAQ:GILD) reported blow-out earnings and it became clear that the company fit nicely into the special category of stocks that can be labeled both value and growth stocks.

    At the time, I initiated a position and provided a $125 price target on the common shares. Midway through the 3rd Quarter, it became clear that Sovaldi sales might be a little light for the period. The reason for the "weakness" in sales was the imminent release of Harvoni, and the "warehousing" of patients headed into the 4th Quarter.

    Now that we are several weeks into the initial period of Harvoni sales, we can see clearly that this will be one of the biggest drug launches in the category. The following chart was posted on Twitter.

    (click to enlarge)

    As you can see from the chart (on the bottom right), the upward momentum in Harvoni sales indicates that sales are growing fast.

    How fast?

    In the week ended 10/31, IMS data reports that total Sovaldi and Harvoni prescriptions were 6,286. Of this amount, Harvoni prescriptions were 1,983, increasing 80% from the previous week's 1,111.

    A research note published by Barron's shows that the company needs total average prescriptions of 7,900 from Sovaldi and Harvoni combined during the period to meet analyst expectations for the quarter.

    Can they meet this figure?

    Simply straight-lining the sales gains, an investor might expect the company to hit the 7,900 total prescription figure in about two weeks. The question is whether they can maintain these sales gains and pace for the next two weeks.

    Comparing Harvoni to Sovaldi, in terms of the pace of sales gains, Harvoni is actually about two weeks ahead of Sovaldi, reaching nearly 2,000 total prescriptions in three weeks vs. five weeks.

    After 7 weeks of sales, Sovaldi hit nearly 3,000 prescriptions. Harvoni may be on track to hit this figure in the 5th week of sales.

    If Gilead meets and exceeds sales forecasts, they will have the two fastest growing drugs in the Hepatitus C market, extraordinary sales growth, and a price to earnings multiple that puts them among the cheapest of the biotechs.

    Citigroup has provided a bull case and bear case for combined Harvoni and Sovaldi sales in the following chart. As you can see, in their bull case, they expect total prescriptions (NYSEMKT:TRX) for Sovaldi and Harvoni to reach 4,302 and 2,837 for the week ended 11/7. This totals 7,139 TRx for the period.

    (click to enlarge)

    With a current forward P/E of less than 11, this stock represents a significant value. If total Harvoni and Sovaldi prescriptions hit 7,100 for the period ended 11/7, I will raise my price target above $135 per share.

    Tags: GILD
    Nov 09 2:51 PM | Link | Comment!
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