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Over 30 years of investing in individual stocks. Extensive business experience with small to mid-size companies, including as CEO. Many hundreds of blog posts on financial and economic matters since 2008. Focus on value with catalysts for upside price action. Background as a physician and... More
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  • Apple And The Apple Watch Get Big Wins At Best Buy And In China; Stock Cannot Be A Pinata Forever

    Good Apple (NASDAQ:AAPL) news came Tuesday from Best Buy (NYSE:BBY), which reported a quarterly "beat.".

    Per Bloomberg News:

    The company (Best Buy) also saw strong demand for the Apple Watch, (BBY's CEO) Joly said on a conference call with analysts...

    The company also saw strong demand for the Apple Watch, Joly said on a conference call with analysts. That led the chain to increase distribution of the gadget (faster than planned: ed.) After initially offering the watch in 100 locations and its website, Best Buy will expand that to 900 stores by Sept. 4. Every one of its 1,047 U.S. locations will get the product by the end of next month.

    The broader rollout of the Apple Watch is part of plan to give more space to the tech giant's products. Best Buy is revamping its Apple departments -- known as stores-in-stores -- and expects to have 520 completed by the holiday-shopping season. The upgrades include new fixtures and additional display tables. This move coincides with Joly's strategy to strengthen relationships with top vendors.

    Some additional info comes from Fortune:

    "Demand for Apple Watch has been so strong in the stores and online," Best Buy CEO Hubert Joly told Wall Street analysts on a conference call.

    Joly also announced steps that will deepen Best Buy's relationship with Apple. It is currently updating its Apple shop-in-shops at 740 stores, including new fixtures and more display tables for phones, computers, and tablets. The work is already complete at 350 stores, and will be finished at another 170 in time for the key holiday season. He also said that Best Buy will begin selling AppleCare product service and support this quarter, and will start testing out being an authorized service provider at 50 stores.

    This has to mean that Apple's products, including Macs, are displacing PC's at Best Buy stores.

    Given Best Buy's role as a mid-price store where average consumers go to buy bargains wherever possible, the fact that Apple, Macs and likely iPhones are combining with a very strong start to Apple Watch sales is great for Apple's attempt to keep pushing Microsoft (NASDAQ:MSFT) into a defensive posture.

    On the enterprise side, IBM (NYSE:IBM) is going to put additional pressure on the Windows franchise in favor of the Mac, and will point to IBM becoming a Mac-dominated company. This from the inventor of the PC is meaningful.

    Add to this the news from Apple's CEO that its business has been accelerating upward in China and AAPL is one of the few stocks in the entire market that has a historically-normal P/E and an above-average growth rate.

    It's difficult to see AAPL underperforming lesser companies' stocks much longer.

    Tags: AAPL, MSFT, computers
    Aug 25 7:16 PM | Link | 2 Comments
  • Comments On The Biotech Sell-Off

    As the tone of some of my articles the past couple of months shows, I have gotten more cautious about the short-term prospects for biotech (NASDAQ:IBB) given its tremendous YTD outperformance (as of June 19, when I first addressed the biotech bubble question). On August 7, in Shaken, Not Stirred: Is The 'Biotech Bubble' Beginning To Burst?, I said in the concluding remarks:

    Thus my base case continues to be for short-term turbulence in biotech with an elevated chance of more downside action, but longer term for the Age of Biotech to continue to assert itself as the years and eventually the decades roll along.

    This was all in the context of a 1998-type scenario in which a multi-year bull market in a sector underperformed the benchmarks in the setting of global financial and economic turbulence.

    Obviously, profit- (and loss-) taking in biotechs has begun to show the same sort of illiquidity I've been talking about. However, again the weakness is centered on China and oil, with Europe's PMI's decent today. The US economy shows conflicting trends. None of the fundamentals that are roiling markets are bad for pharmaceuticals. My take is that on balance, they are favorable. The pharma sector does best in a slow-growth world with low or declining interest rates, given the relatively non-cyclical nature of legal drug use.

    I am beginning to see attractive-priced biotechs that have sold off, and are selling off again, in a panicky manner. In our accounts, I have begun the process of tilting back toward growth (biotech for now) from appreciated Treasury bonds - though the 1998 analogy suggests a good deal more downside potential in interest rates and therefore in the biotech averages.

    If time permits, I will work on an article with updated comments on smaller biotechs that do not merit their own full article, while hoping to also submit the final installment of the Gilead (NASDAQ:GILD) 3-part pipeline article.

    Aug 21 9:53 AM | Link | 7 Comments
  • Intercept Plummets On Morgan Stanley "Underweight;" Brief Rationale For Buying The Dip

    Intercept Pharmaceuticals (NASDAQ:ICPT) is down 6% today to $218 on a coverage initiation from Morgan Stanley (NYSE:MS) with an "underweight." (Some feel that this rating tends to mean that another arm of the brokerage wants to buy the stock.) I have not seen the note itself. One of my brokers' Bloomberg terminals provided the info that the MS note referenced concerns about cholesterol effects that the FDA might be concerned about in its review of ICPT's NDA for its lead drug OCA for its lead indication of the often-fatal disease PBC.

    This is the sort of dip that I'm willing to buy with risk capital, so I just bought some more ICPT at $218. No one really knows how many PBC patients there are in the US, but that number is reported to be greater than the number of patients that Kalydeco treats. Just based on US sales, I think that OCA for PBC could reach $1 B in sales, with the EU and elsewhere providing potentially very significant upside potential. Whether ICPT markets ex-US is to be determined.

    More broadly, these sharp sell-offs, which are nothing new to ICPT, are part and parcel of my 1998 analogy, where the hot sector of the time, Internet and other computer stocks, went into a brief bear market due to a global recession or near-recession, marked by extensive currency devaluations and a 62% plunge in the price of crude oil. Sounds familiar? These events cause illiquid markets where sellers are, or feel forced, to sell winners and cut leverage.

    Thus I am making any new stock buys, and keeping my old ones, with patience as well as with cash/Treasury positions as offsets.

    Aug 13 12:07 PM | Link | 4 Comments
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