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Michael Michaud
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Michael Michaud is the founder of Invest2Success.com (http://www.invest2success.com/) and the Invest2Success Blog (http://invest2success.blogspot.com/). He has been investing and trading in the financial markets since 1989. He founded Invest2Success.com to empower individual institutional... More
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  • Facebook Ad Revenue Growing
    Facebook Earnings Increase

    Facebook Pleasantly Surprises Us, Shares Fairly Valued by Morningstar Investment Research

    Ad revenue growth and increasing engagement have led us to increase our fair value estimate for this wide-moat company, notes Morningstar's Rick Summer.

    Facebook's (NASDAQ:FB) ad revenue growth and increasing engagement continue to surprise us, particularly as the Internet behemoth takes slow and calculated steps in launching advertising on other platforms such as Instagram, and WhatsApp. We have underappreciated the near-term growth potential, and we are revising our fair value estimate to account for more robust near term revenue growth. Expense growth continues to outpace revenue growth (as management has guided), but some products remain in the incubation stage (such as WhatsApp and Oculus), while others (Instagram) have only begun to tap their revenue potential. We reiterate our wide economic moat rating, and consider the shares fairly valued at this time.

    Revenue grew 42%, paced by advertising revenue, which grew 46% (55% on a constant currency basis) to $3.3 billion, ahead of our prior forecast for 2015 growth. This outperformance is primarily driven by continued growth in engagement (as measured by a percentage of monthly users accessing Facebook every day), while total users and revenue per user continue to grow. Ad revenue per user grew 29% versus 2014, while mobile revenue per user grew 46%. Total DAUs (daily active users) grew 17%, to 936 million, while engagement grew across every reported geography. Clearly, the risk of "Facebook fatigue" is not materializing today. During the quarter, 65% of users accessed Facebook every day, versus 63% in 2014.

    On the profitability front, non-GAAP operating margins came in at 52% (26% GAAP), a decline of 450 basis points versus 2014. This discretionary investment in products such as Instagram, WhatsApp and Oculus Rift are investments that are clearly depressing current operating margins. We continue to forecast normalized operating margins at approximately 45%, as these investments either bear fruit or management chooses to ratchet down this level of spending.

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    Apr 23 6:58 PM | Link | Comment!
  • Top Healthcare Stock Investments
    Healthcare Stocks

    Amgen Shares Still Look Undervalued and Express Scripts has One of the Widest Moats in Health Care by Morningstar Investment Research

    Amgen

    The firm's recent pipeline productivity should help stabilize its wide economic moat, writes Morningstar's Karen Anderson.

    Amgen (NASDAQ:AMGN) reported strong first-quarter results and raised its adjusted earnings per share guidance range to $9.35-$9.65, ahead of our expectations. While we expect to lower our operating expense assumptions for 2015, we don't anticipate any substantial changes to our long-run growth assumptions, so we're maintaining our $189 fair value estimate. The shares continue to look undervalued, and we think this wide-moat firm is coming closer to stabilizing its negative moat trend as its pipeline advances.

    Amgen is entering a period of heavy launches, a tribute to its recent pipeline productivity. The firm is launching heart failure drug Corlanor this month in the United States, and the launches of acute lymphoblastic leukemia drug Blincyto and a more convenient version of Neulasta (to defend against future biosimilar entrants) are already in progress. The biggest launch of the year is likely to be PCSK9 antibody Repatha, which could receive Food and Drug Administration approval in August. While Sanofi and Regeneron are poised to launch a similar product in July, we think both drugs will generate multi-billion-dollar sales, even if payers are able to negotiate discounts, given the millions of patients who will be eligible for therapy.

    Amgen's revenue grew 11% to $5 billion in the first quarter, as several blockbuster therapies--Enbrel, Sensipar, Prolia, Xgeva, and Epogen--saw double-digit growth. While growth for older products like Enbrel and Epogen was driven by price increases, Prolia (39% growth) and Xgeva (22%) were driven by strong demand growth, as both are increasing market share. Sales of cancer drug Kyprolis grew 59% to $108 million, and strong prospects for expanded approval put this drug on track to surpass $1 billion in sales in 2017. Amgen saw 33% adjusted EPS growth in the quarter, virtually all due to 3% operating expense declines. Cost-cutting plans and improved R&D processes boosted operating margins above 50% ahead of Repatha's launch.

    Express Scripts

    Investors can pick up shares of this pharmacy benefit manager, which enjoys enormous supplier-pricing and scale advantages, at a significant discount.

    We recently conducted a competitive analysis of many health-care-services players, and one name that was very close to the top was Express Scripts (NASDAQ:ESRX). When we couple this analysis with the firm's current market valuation, we believe it provides investors an opportunity to buy shares of a quality company at a significant discount. Express is the largest pharmacy benefit manager in the U.S., as it processes approximately 1.3 billion prescription claims annually, giving it about 22% market share.

    PBMs help to manage a health insurance provider's drug benefits from construction of the plan to processing a prescription for a provider's member. The PBM industry is largely a "rational oligopoly," with Express leading the pack. CVS Health (NYSE:CVS) and the new UnitedHealth/Catamaran PBM each process about 1 billion to 1.2 billion claims annually themselves, which gives three major players control over 65% of all prescriptions filled in the U.S. This dynamic endows these players--and especially Express Scripts--with enormous supplier-pricing and centralized-scale advantages.

    With that said, I believe these players are some of the most competitively advantaged within the health-care ecosystem. Express trades at a material discount to our $100 fair value estimate, and this gives market participants the ability to own a high-quality business below its intrinsic value.

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    Tags: AMGN, ESRX, JNJ, NVS, TEVA, BIIB, GILD, ACT, MYL, PFE, GSK, SNY, RHHBY, AZN, ABT, BMY, CTRX, HCA, ANTM, AET
    Apr 23 12:01 PM | Link | Comment!
  • SP500 Forecast Outlook
    SP500

    Three Visuals That Show the Aging Bull Still has Room to Run by Dr. Van Tharp Trading Institute Courses and Workshops

    Have you heard lately about how old this bull market is getting? I've been hearing about it plenty for quite a while now. A quick Google search shows a plethora of articles on the topic dating back to 2013.

    And yet, this market just doesn't want to go down - at least not for long. In fairness, it hasn't made much headway in 2015. But the flipside of that coin is that the S&P 500 index has spent almost the whole year within a few percentage points of all-time highs.

    Two charts and a data table really caught my attention this week as we contemplate whether this decidedly mature bull market can keep floating to new highs. Let's take a look at each of these and then draw some conclusions about how to think about longer-term money.

    Just How Old Is This Bull Market?

    Periodically, Bespoke has been updating the age of our current bull market. So for our first visual, we have a treat for the data junkies out there. (For Van and those other Neuro Linguistic Programming folks - this visual is for the "audio digitals"). Bespoke defines a bull market as a rise of 20% preceded by a peak to trough pullback of 20% (all data on a closing basis). The data set on the right shows bull markets in chronological order form oldest to newest, while the one on the left (framed by blue) shows the bull markets since 1927 ranked by duration.

    SP500 Forecast Outlook

    We see that the current bull is already the fourth longest of the last 90 years, and within the next couple of months will move into third place. So while the bull has some years on it, it is a long way from being unprecedented in its duration.

    Gallup on Finances

    Every year, the good folks at Gallup ask a binary poll question about overall finances. This year, here's part of their analysis from the news release:

    "A majority of Americans, 52%, say their financial situation is "getting better," the highest percentage to say this since 2004. It is also the first time since the recession that this sentiment has reached the majority level.

    These data are from a Gallup's annual Economy and Finance survey, poll conducted April 9-12. The percentage of Americans saying their situation is getting better rose nine percentage points from last year."

    And the accompanying chart:

    SP500 Forecast Outlook

    In the long run, this will most likely be a contrarian indicator. But if you look at the previous higher level in 2004, you'll notice that we didn't hit a market top for another three years. So while we're at an 11 year high in financial satisfaction, this is a very long term contrarian indicator.

    The Troops Are Still Following the Generals

    My business partner, Christopher Castroviejo, is a veteran Wall Street insider. One of the sentiment indicators that he got me in the habit of watching many years ago is the cumulative advance-decline line or cumulative breadth. As the header infers, this gives us a useful indicator of whether there is broad-based participation in a move or if there are just a few stocks or sectors pushing the market higher while others lag. Let's look at a monthly chart showing the cumulative breadth vs. the S&P 500 cash index.

    SP500 Forecast Outlook

    By this measure, there are not any signs of declining participation. A classic topping pattern would involve a modest pullback in the S&P followed by a push to new highs, with lagging or divergent breadth.

    Our bull market is already one of the longest-running of the last 90 years. And with monetary liquidity still pouring in from Europe, Japan and China this bull could have at least one more big push to upside.

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    Use the CandleScanner trading software to automatically scan for profitable trading setups on any timeframe. Stock forex and futures candlestick trading courses to throughly understand how to profit from candlestick chart patterns. Free newsletter and live trading webinars. Steve Nison is the authority on trading and profiting using candlesticks.

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    Trading Softwares available to improve your investment returns.

     
     
    Apr 22 10:47 PM | Link | Comment!
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