Seeking Alpha

Michael Bryant's  Instablog

Michael Bryant
Send Message
Investor. Mission: Help people make money. Degree: Chemistry from NC State University. Featured author of Momentum Options Weekly Wrap (http://momentumoptionstrading.com/ ) Follow me on Motley Fool Caps at http://caps.fool.com/player/modestus1.aspx . For short-term ideas about big movers, follow... More
My company:
Momentum Options Trading LLC
My blog:
Instablog
View Michael Bryant's Instablogs on:
  • A Safe Strategy to Play Protalix (PLX)

    Note:  This was the article deleted back in February.  Just posted it for those who want to look at it.  The drug was rejected, as I warned in the article.

    Protalix BioTherapeutics
    (NYSEMKT:PLX) gets FDA decision tomorrow, Friday February 25th, on Uplyso, its treatment for Gaucher disease.  “Gaucher disease is a rare genetic disorder in which a person lacks an enzyme called glucocerebrosidase,” causing “harmful substances to build up in the liver, spleen, bones, and bone marrow.” http://www.ncbi.nlm.nih.gov/pubmedhealth/PMH0001590  The drug no doubt works, passing phase 3 trial and getting Special Protocol Assessment from the FDA for the trial design. http://www.fool.com/investing/high-growth/2011/02/23/will-uplyso-get-past-the-fda.aspx However, the FDA did delay approval on the drug the last time it reviewed based on “"validation of the manufacturing process."  The drug is made by plant cells.  Approval will validate their technology, making it the “first FDA approved BLA for recombinant therapeutic proteins using a plant-cell based expression system.” seekingalpha.com/article/252718-ubs-anal... Being the first is always a big jump to undertake.  And noting that the FDA has been safety oriented over the past year, plus the previous delay, makes me think approval may not happen this time either.

     

    A big red flag I see is that “one of the most enthusiastic investors, who pushed Protalix in its first days as a public company - Teva Pharmaceutical Industries Ltd. Chairman Dr. Phillip Frost - sold most of the shares he owned.” seekingalpha.com/article/254351-4-israel...  If he was a big fan, he wouldn’t sell everything before the company’s big moment unless he saw something wrong.  Any insider hints?

     

    Despite my bearish view, approval is a possibility.  Therefore, since I am not 100% certain, it is safest to take a 50-50 strangle.  Assuming it will jump or fall by 40%, I recommend buying both the March 30th $13 calls and the March 30th $5 puts.  As long as it goes above $13 or below $5, you will make money.

     

    Special thanks to http://momentumoptionstrading.com/



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Tags: PLX, Biotech
    Feb 24 10:52 AM | Link | 1 Comment
  • Freeport-McMoRan Copper & Gold (FCX) – Cheap on the Split based on Options Play

    The stock of Freeport-McMoRan Copper & Gold (NYSE:FCX), the largest copper and gold miner in North America, rises mainly with the price of copper, not gold, since copper provides a large chunk of their revenue, about 70%.  Taking advantage of the commodities boom, the company plans to spend additional capital to increase output from its mines.  This should boost its earnings, as copper prices stay high.  Global diversification, strong earnings, and bullish technicals should cause prices to head higher.  Plus, a stock split makes options cheaper.

     

    Map of Operations:

     

    -  The Grasberg project (Papua New Guinea) contains the largest recoverable reserves of copper and the largest single gold reserve in the world.  It also mines silver.  FCX owns 90.64% of the project.

    -  Tenke Fungurume (Democratic Republic of the Congo) mines copper and cobalt and is expected to produce 250 million pounds of copper and 18 million pounds of cobalt per year.  At today’s price of copper at $4.53/ounce ($72.48/lb) and cobalt at $20.25/pound, that is $18.12 billion of copper and $364.5 million of cobalt a year.  FCX owns 56% of the project.

     

    As of December 31, 2009, its recoverable proven and probable reserves totaled 104.2 billion pounds of copper, 37.2 million ounces of gold, 2.59 billion pounds of molybdenum, 270.4 million ounces of silver, and 0.78 billion pounds of cobalt.

     

    Breakdown of reserves and sales as of December 31, 2009:

     

    As of their 4th quarter report on January 20, 2011, consolidated sales for the quarter totaled 941 million pounds of copper, 590 thousand ounces of gold and 17 million pounds of molybdenum, compared to 989 million pounds of copper, 551 thousand ounces of gold and 16 million pounds of molybdenum for 4th quarter 2009.  Thus, sales of copper declined by 48 million pounds, while sales of gold increased by 39 million ounces.  Sales of molybdenum increased by 1 million pounds.

     

    Consolidated sales for the year 2010 totaled 3.9 billion pounds of copper, 1.9 million ounces of gold and 67 million pounds of molybdenum, compared to 4.1 billion pounds of copper, 2.6 million ounces of gold and 58 million pounds of molybdenum for the year 2009.  Thus, sales of copper declined by 1.1 billion pounds, and sales of gold declined by 700,000 ounces.  Sales of molybdenum increased by 9 million pounds.

     

    The company forecasts consolidated sales for the year 2011 to be approximately 3.85 billion pounds of copper, 1.4 million ounces of gold and 70 million pounds of molybdenum.   

     

    For 1st quarter 2011, they expect sales to be approximately 840 million pounds of copper, 325 thousand ounces of gold and 17 million pounds of molybdenum.  At today’s price of copper ($72.48/lb), gold ($1360/ounce), and molybdenum ($17.96), that is sales of $60.88 billion for copper, $442 million for gold, and $305.32 million for molybdenum, and a total sales of $61.63 billion.

     

    The chart below shows their earnings history.  Earnings per share are non-GAAP.

    Revenue – Quarterly Results (in $Billions)

    Earnings Per Share – Quarterly Results

     

    2010

    2009

    2008

     

    2010

    2009

    2008

    1st Qrt

    4.363

    2.602

    5.672

    1st Qrt

    $1.03

    $0.05

    $1.46

    2nd Qrt

    3.864

    3.684

    5.441

    2nd Qrt

    $0.75

    $0.71

    $1.23

    3rd Qrt

    5.152

    4.144

    4.616

    3rd Qrt

       $1.25

    $1.11

    $0.68

    4th Qrt

       5.603

    4.610

    2.067

    4th Qrt

    $1.63

    $1.13

    -$18.38

     

    As long as copper, gold, and molybdenum prices don’t plunge, the company seems on track to meet earnings and revenue estimates of $1.23 and $5.38 billion when it reports on April 21st.

     

     

    The MFI (Money Flow Index) is below 50, meaning it is neither overbought (MFI of 80) nor oversold (MFI of 20), giving it room to go up.  Money flowing into a stock (positive money flow) and money flowing out of the stock (negative money flow) has not changed much in the past month.  This, a rising RSI (Relative Strength Index) which is bouncing off the oversold border (RSI of 30), and a downward price movement means that the downtrend may be weak, there is more volume associated with price advance than with the price decline, and thus is a bullish buy signal.

     

     

    The stochastic %K and %D graphs gave a bullish signal on February 1st when the %K crossed above the %D in oversold territory (reading below 20).  Since then, both have risen above 20 but have recently reversed course and may test the oversold territory again.

     

    In the graphs, three previous examples are given to show how these technicals correlate with price.  The first example (orange line) in late April shows a bearish cross of the %K crossing below the %D in overbought territory, which is defined as reading above 80.  This correlated with an overbought W%R and thus a fall in the price.  The second and third examples (purple lines) around September 10th and February 1st shows a bullish cross as noted above, and oversold RSI, and an oversold W%R (reading above 20), and thus corresponded with a rise in price.  And the W%R appears heading back to oversold territory, coinciding with the other indicators, which seem to be flashing the same buy signals.

     

    Using the slope of 33 cents/day from its last fall, it is possible it will rise by $10 to a share price of $65 in 30 days.  But to be on the safe side, especially since 1st quarter production is lower than 4th quarter production, use the 16 cents/day slope from the last uptrend to give a 60 day time frame.  Thus, buy 60-day call for $65.  You can always sell the call before the expiration date.  Plus, since the stock recently split, the calls will be “cheaper.”  Or you can buy both the calls and puts, since there is no guarantee that it will not fall, although it is fairly unlikely.


    Disclaimer:  Writen for momentumoptionstrading.com/ .

    I do not own FCX.

    Feb 14 12:55 PM | Link | Comment!
  • Overbought Stocks

    Using an RSI greater than 90 (overbought), below is the screen for overbought stocks for February 11, 2011.

    Source:  http://finviz.com/screener.ashx          

    For each graph, top black line is overbought and bottom black line is oversold.

     

    P/S = Price/Sales                                
    P/B = Price/Book                   
    P/C = Price/Cash        
    P/FCF = Price/Free Cash Flow                                  
    EPS next Y = EPS growth next year
    EPS past 5Y = EPS growth last 5 years                    
    Insider Trans = Insider Transactions
    Sales Q/Q = Sales growth quarter over quarter
    ROA = Return on assets                                            
    ROE = Return on equity
    Curr R = Current Ratio, which “measures whether or not a firm has enough resources to pay its debts over the next 12 months.”  A ratio of 1.25 means that “for every dollar the company owes it has $1.25 available in current assets.” http://en.wikipedia.org/wiki/Current_Ratio
    Quick R = Quick Ratio          
    Gross M = Gross Margin       
    Oper M = Operating Margin
    Profit M = Profit Margin

     

    Big Lots Inc. (NYSE:BIG)

     

     
    Bloomburg notes that the discount store is looking to sell itself for about $60 per share.  www.bloomberg.com/news/2011-02-10/chipot...; Problem, many companies that do look for buyers never get a buyer or get a buyer for a lower price.  Don't bet on the hype.  This is a bad time for a merger and aquisition in the retail business.

    Price is approaching resistance and likely to fall, possibly back to support.  %K and %D and W%R are in overbought territory.  Plus, a price rise correlated with a flat or falling MFI is a bearish sign.  High price to cash (61x) and high negative insider transactions (74% selling) raise a red flag for the closeout retailer.

     

    Global Traffic Network Inc. (Pending:GNET)

     

     

    The news information company is trading for an extremely high PE (73) and PEG (3.83) for its industry.  MFI, %K and %D, and W%R are all back to the highs it set in October, as indicated by the red line.  However, this stock has momentum, so pullback may be small.  And the company formed a partnership with Clear Channel. www.bizjournals.com/sanantonio/news/2011...; This would further the hype in the stock.  But is its run up warranted?  After all, it is above its all-time high, besides the high PE and PEG noted above.

     

    Interphase Corp. (NASDAQ:INPH)

     

    The communication networking solutions company broke through resistance on upbeat 4th quarter results. http://finance.yahoo.com/news/Interphase-Announces-2010-bw-666602761.html?x=0&.v=1  Still, does a 24% rise in revenue warrant a nearly 100% rise in the stock, despite the %K and %D and the W%R are not quite overbought?  Then again, these technically usually have a one day lag.

     

    JDS Uniphase Corporation (JDSU)

     

     

    The telecommunication provider also seemed to have gotten ahead of itself, having broken through resistance.  MFI, %K and %D, and W%R are overbought.  Stock has an extremely high PE (469) and PEG (34).  Jim Cramer advises viewers not to buy into a stock with a PEG above 2.  I would advise the same.

     

    Metrocorp Bancshares Inc. (NASDAQ:MCBI)

     

     

    The Texas bank reported 4th quarter net income rose 167% from 3rd quarter. http://finance.yahoo.com/news/MetroCorp-Bancshares-Inc-prnews-3292003359.html?x=0&.v=1  Stock may have gotten ahead of itself as it crossed resistance.  However, on the plus side, forward PE looks very low at 13.

     

    MicroStrategy Inc. (NASDAQ:MSTR)

     

     

    The business intelligence software company is looking a little pricey, though it has experienced high demand on its apps for the iPad. http://www.fool.com/investing/high-growth/2011/02/09/the-1-thing-ipad-and-blackberry-users-can-agree-up.aspx  Insider sales are 85%.  Why are so many insiders jumping ship?

     

    Source:  All graphs created from Yahoo Finance.




    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Feb 14 9:26 AM | Link | Comment!
Full index of posts »
Latest Followers

StockTalks

  • "Walmart ($WMT) & McDonald's ($MCD) Prosper During Recessions." $WMT's stock is also very low. http://bit.ly/1KbMeEn
    3 days ago
  • LOL! On Black Monday, the Dow fell 13% at open. Today was no Black Monday. But yes, hang in there. We are not far from the bottom.
    6 days ago
  • I'll make a bold prediction and say the Shanghai market has another 800 to 1000 points to fall. http://yhoo.it/1QQBQ4m#{"showSma":true,"smaColors":"#cc0000,#009999","smaPeriods":"50,200","smaWidths":"1,1","smaGhosting":"0,0","showMfi":true,"range":"max","allowChartStacking":true}
    6 days ago
More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.