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PSalerno
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Private full time investor since 1994, graduated in medicine, with interests in art and philosophy coming from Italy and living in Hungary, dealer in old masters painting until 1996. Overcame 2 big market crashes in 2002 and 2008. The strategy is to divide the assets in 2 categories: the first... More
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  • One Positive Outcome For Myriad Genetics

    Myriad Genetics (NASDAQ:MYGN) is a biotech company working in the molecular diagnostic sector.

    You can find more information about this stock here.

    After the Supreme Court's ruling, many companies announced similar products analyzing the BRAC genes in order to detect genetic risk for breast and ovarian cancer, including Genebygene, Ambry, Quest Diagnostic. MYGN and other patent's owner sued these companies, because other patents were in place and used in testing, while the Supreme Court invalidated only one patent linked to the isolated DNA and not other patents covering the methods.

    Many analysts thought these patents covering the methods were unenforceable and they criticized me harshly because I wrote that these patents could be valid.

    Unfortunately for them, they did not understand all the technical implications involved in the genetic testing.

    Now the outcome is that Genebygene settled the case with Myriad, stopping to offer BRAC-1-2 analysis as stand alone test in North America, while keeping offering the BRAC analysis as part of WGS analysis.

    I see this outcome as positive for Myriad and it is possible that other companies will try to reach an agreement with MYGN as well.

    Additionally, last quarter result showed little effect of competition on the Myriad's revenue, the company beat forecast and rose guidance. In the conference call, the management told just 15% market share were lost, but the buyout of Crescendo opened an entirely new market in the autoimmune sector and more precisely in the rheumatoid arthritis. This buy-out is all cash and this is an indirect confirmation about how the stock is undervalued.

    Given that the settlement looks to take place instead of price war, it is possible that the removal of competitors will push Medicare to bring up again the lowered reimbursement for BRACAnalysis.

    We'll know soon if this is going to happen in the next 1-2 months.

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in MYGN over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: I already have short puts on MYGN

    Tags: MYGN, long-ideas
    Feb 07 9:51 AM | Link | 1 Comment
  • Vantiv: Recent Spin Off Already Under Threat

    In this article I am going to describe a short candudate in the payment space.

    I think this stock can be shorted in a pair trade going simultaneously long on NCR os PAY.

    The stock is Vantiv VNTV, a small cap spun off by Fifth Third Bancorp in March 2012.

    VNTV is an integrated payment processor using s single proprietary technology platform. The products are ATM services, data management, loyalty programs, digital wallets and mobile payments.

    The stock is a beneficiary in changing payment habits, shifting from cash and checks to credit cards as showed in the Nilson Report.

    Latin America is considered the region with highest growth, but there are strong competitors there like Evertec and Bladex.

    Results: last quarter's results were a slight miss for VNTV, the expectation for the next quarter were also lowered.

    The management is confident about a customer's conversion posponed after the holyday's season, but they were a little bit too reticent about it.

    Problems:

    Target data breach, slowing upgrading by merchants, competition from NFC providers and internet.

    Upgrading the system could avoid some problematic outcomes like the Target data breach, where 40 million credit cards were compromised and information of about 70 million Target customers were stolen.

    VNTV and FITB were involved in processing the payments for Target.

    VNTV can offer a tokenization system allowing the POS to retain the token in place of the card's data making impossible for the thieves to gain access to sensible information. At the moment the card's data are stored and accessible to the hackers.

    The problem is VNTV is not the only company capable of doing that, even Verifone (NYSE:PAY) can offer the same tool.

    I don't see how the management can hope to improve margin in this environment.

    Accordingly to Credit Swiss Report about Future of Payments, even if those US merchants unable to upgrade the POS system with EMV ( a chip placed on the card giving a different code for any transaction), will bear all fraud risk by 10/2015, the merchants are not upgrading, slowing down the refresh cycle linked to NFC technology.

    Additionally, some merchants put in place a consortium rolling out their own mobile wallet, using bar code technology and avoiding at all a POS refresh.

    One company offering NFC technology is On Track Innovation (NASDAQ:OTIV).

    But NFC is not the only threat, there is another potential disruptor company completely bypassing the credit card network and that is Dwolla.

    Dwolla was founded by Ben Milne and uses internet to perform transactions at very low cost (25 cents). This farm is a serious long term threat, not so much for the POS system used by the brick and mortar retailers, but for the e-commerce business.

    All in all why should be so expensive to simply make a payment ?

    The important fact is that the expanding e-commerce does not need credit cards, internet alone is enough.

    Additionally, many mall- retailers are delaying the upgrading because they are in trouble, being pressured by the online retailers, and the total pie shows little growth.

    From 2007 to 2011 the retail sales showed 14.3% anemic growth diluted in 4 years, in the food and beverage sector and in the personal care sector, which are also the less vulnerable to online penetration.

    Almost zero growth in 4 years for the other sectors where e-commerce competition is stronger.

    Here brick and mortar retailers suffered a severe contraction in sales,

    (Circuit City bankruptcy, problems for JC Penny and Sears).

    The payment sapce is quite crowded with many competitors, not just PAY, but even ADS, NCR, Ingenico (a privately held company), Evertec, Bladex, Etc...

    ADS thinks the TAM for this business to be 400 Billion, but at this point it looks very optimistic after the previous considerations.

    While VNTV is buying back shares, the shares count is still increasing, due to stock based compensation, and there is a worrisome amount of insider sales going on.

    Even the former parent company is aggressively selling, so why should we buy ?

    The word whispering in the sector is consolidation, but VNTV is not the best candidate for a takeover, as PAY has lower Cap and lower liabilities, with almost the same amount of sales.

    If Credit Swiss will remove the stock from the buy list if the growth will keep faltering.

    Jan 22 9:15 AM | Link | Comment!
  • Penultimate Meeting: Ideal Moment For Bernanke

    Penultimate Meeting for Bernanke as Fed chairman is the ideal opportunity to start tapering.

    Even if the market will face a 20% correction, Bernanke could always say to have saved the economy at this point and leave the responsibility to his successor for any next move.

    In any case he is the winner.

    The market is not expecting the Fed starting tapering today as well as the majority of experts. They could be wrong and the market could be vulnerable to a sizable correction.

    Buying some puts is a prudent move at this point.

    Dec 18 8:33 AM | Link | Comment!
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