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Ray Merola  

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  • Celgene Looks Unstoppable [View article]

    Thank you for the kind words.

    Unquestionably, Gilead is another excellent bio-pharma stock pick. The difference in its PEG v. Celgene is based upon a considerably lower forward EPS growth rate. As I mentioned in the article, here I found variation in Street projections based upon the agency.

    I ended up using the S&P 500 analyst projections whereby ~25 analysts comprise that consensus group. Using GILD's 2014 estimated diluted EPS of $8.00 as the baseline, and the 2017 estimate of $11.56 as the end point, the 3-year AGR is about 15%.

    The same group, using the same process, estimates Celgene's 2014-17 annualized growth rate at 35%. Much higher. Please note, however, for purposes of the table (and the article), I utilized CELG management's estimates in lieu of S&P. Management forecasts are more conservative; hence the 26% AGM found on the aforementioned table.

    In any event, I believe ANY of the Big 4 bio-pharmas can be very good investments. Based largely upon strong management, excellent growth prospects, and an outstanding clinical pipeline, I selected Celgene as the one to beat.

    Sep 15, 2014. 01:33 PM | 2 Likes Like |Link to Comment
  • Celgene Looks Unstoppable [View article]
    Thank you Doyle300

    Indeed, I do not recommend trying to trade Celgene. Let management go about its business, and monitor the results closely.

    For me, it's a stock to own, not to trade.
    Sep 15, 2014. 10:50 AM | 2 Likes Like |Link to Comment
  • Why EOG Resources Has Gone Conservative [View article]
    Appreciate the reply, Casey

    Indeed, I checked and was mistaken on Marcellus and Utica: these are gas plays currently, not noted for liquids.

    I've seen EOG CEO Mark Papa interview about the Niobarra: he is far less sanguine than other production guys. As noted earlier, I place a lot of trust in Mr. Papa.

    I'm hoping the export issue is simply a matter of Washington gumming up the works due to an administrating that's weak on business and the economy. Some changes in 2016 could bring a breath of fresh air to the table, just in time to stem a production tail-off.

    Sep 15, 2014. 10:48 AM | Likes Like |Link to Comment
  • Celgene Looks Unstoppable [View article]

    Using adjusted or operating earnings is fairly standard practice for many firms. However, I agree the adjustments should be reviewed and thought through.

    As noted in the article, one backtest for this is to seek companies whereas profits are earned IN CASH. It is much more difficult to use accounting and adjustments to jury-rig cash versus net income.

    Over the past several years, Celgene's operating earnings and operating cash flow harmonize. I will ensure this relationship persists as part of my investment thesis.

    Your points regarding EPS are well-taken, and may also be reviewed and calculated with appropriate deducts. Celgene management is transparent in their accounting; so it's not difficult to add back adjustments that one believes should be included.

    For me, a greater valuation risk is an unexpected drop-off in earnings growth. When investing in no-dividend, high-growth stocks, it's imperative that management meet or beat forecasts. Here, my view is that Huglin and his staff have shown a propensity to meet Wall Street expectations quarter after quarter. While this isn't a guarantee for the future, it sets the probabilities higher for continued good results.
    Sep 15, 2014. 09:45 AM | 2 Likes Like |Link to Comment
  • Why EOG Resources Has Gone Conservative [View article]

    Correct oil exports are banned, but products are not. Oil condensates are all but the most cursory "refining" process, whereas my earlier comment that the U.S. government is loosening its grip on oil producers.

    The issue with exporting "regular" oil products is they have to get refined here. U.S. refining capacity is growing, but only through expansion of existing facilities. There hasn't been a new, greenfield refinery built since the 1960s.

    The bottleneck would be the refinery. Permitting oil exports helps blast open the gateway for U.S. oil producers.
    Sep 15, 2014. 09:08 AM | 1 Like Like |Link to Comment
  • Bank Of America: A World Without Countrywide [View article]

    What is your opinion as to when BAC can get the Countrywide legacy issues down the hatch? The ownership thesis is compelling when CRES breaks even; I'm trying to figure out when that may happen.
    Sep 15, 2014. 09:03 AM | Likes Like |Link to Comment
  • Bank Of America: A World Without Countrywide [View article]
    Dar al Harb

    Also attributed to Keynes, and appropriate to our situation was this quip:

    "The market can remain irrational longer than you can remain solvent."

    Indeed, BAC should make its turn, and likewise I'm waiting.

    Long BAC.
    Sep 15, 2014. 09:00 AM | 10 Likes Like |Link to Comment
  • Why EOG Resources Has Gone Conservative [View article]
    Good article, Casey.

    I have a great deal of respect for EOG management. Therefore, I take their views seriously. The CEO doesn't mince words, either.

    As noted, there are a couple of caveats. First, the U.S. could change its oil export policies, which may have begun with the permission to exclude condensates from the ban. A change of administration in 2016 could help this along more rapidly. Second, while overall production growth may slow, we may find its the oil majors that take the hit. For instance, Shell and Exxon have culled production after learning the smaller, more nimble E&P operators (like EOG) can out maneuver its bigger brethren.

    Finally, do you know why were the Niobarra, Marcellus and Utica formations not mentioned? Niobarra was on the chart, but it appears EOG believes that area doesn't have much gas in the tank. I believe I've read otherwise. Marcellus and Utica are also dry gas plays, but I thought there was significant liquids there, too. I will have to check this out.

    Sep 15, 2014. 08:33 AM | Likes Like |Link to Comment
  • Celgene Looks Unstoppable [View article]
    Thanks for taking the time to check out the article, Bahamas1. What's your view on the bio-pharm space?
    Sep 15, 2014. 08:08 AM | Likes Like |Link to Comment
  • Celgene Looks Unstoppable [View article]

    Sans some overall market breakdown, I agree the shares are probable to bounce off the 50-day SMA marker. That's been the trend since April. The last 2 down weeks have been on below average volume. If volume accelerates, and the price falls below the 50-day, then I'd think we have something deeper.

    While I'm not a big technician, I am watching the chart to see if the Alibaba IPO siphons money away from some other go-go names like Celgene. In my view, this create an opportunity for longer-term investors. The fundamental story remains intact.
    Sep 15, 2014. 08:06 AM | 1 Like Like |Link to Comment
  • Celgene Looks Unstoppable [View article]

    Thanks for reading.

    When valuing fast growers, "cheap" is a relative term and involves looking beyond current earnings to the out years. What I like about CELG is management's long track record of meeting EPS expectations, and the view that the major bio-pharmas are in a secular growth phase.

    Celgene has a superior product pipeline, too, further bolstering its future.
    Sep 15, 2014. 07:59 AM | 2 Likes Like |Link to Comment
  • Intel Earns Green Light To Double [View article]

    Good, provocative article about Intel. Thank you.

    If the EPS were to reach ~$4 a share through 2017; which I believe could be possible contingent upon mobile and IoT, I suspect the P/E ratio would not rise much above 20x. Such a 2014-2017 scenario indicates roughly a 22% annualized growth rate. Assuming the business looked is that robust (with forward expectations beyond that remaining "strong"), even a 20x multiple could be a stretch since growth runs into the Law of Large Numbers.

    However, premising a step-change ramp up in new products and inroads as noted in your article, even an 17x P/E (equivalent with current), suggests a $68 stock. Another benchmark I'd watch is Price-to-sales. Use whatever forecast for revenues you wish, but I believe a 4x P/S ratio is top end.

    Summing, I see these earnings/multiple scenarios as possible, perhaps not probable. Each requires several things to all go right: explosive growth for newer Intel products thereby driving EPS, acceleration of the macro computing industry, including the core PC business-- which remains a significant source of Intel revenue, and of course market cooperation. A tripped up market crushes the multiple for most any stock. Intel is too big, with too much institutional ownership, to "hide" from such an event.

    As I've noted in past articles, I have recommended Intel investors obtain some clues to the future by watching trends in gross margin, ASPs and the dividend. While I'm somewhat less sanguine about the near-term, I remain quite bullish on the long-term.

    Long INTC.

    Sep 14, 2014. 01:19 PM | 1 Like Like |Link to Comment
  • Why You Should Look Behind Aflac Headline Earnings Figures [View article]

    Thank you for shedding light on the post-nuclear disaster cancer claims. The clarification is most helpful.

    Notably, you mentioned U.S. supplemental insurance demand. Aflac management has talked about this during investor presentations. The company is evaluating the opportunities for newly-insured under the ACA; as well as new products that dovetail with the law.
    Sep 12, 2014. 08:08 AM | 1 Like Like |Link to Comment
  • Update: Still Time To Sell Both AT&T And Verizon As Sprint Steps Up Its Pricing Initiatives [View article]

    Can you provide your figures / details regarding the effect a 5% price cut would have on T financials? What revenues do you project would be lost from what baseline, and how much is corresponding opex reduced? How did you translate this to -4% EBITDA drain?
    Sep 11, 2014. 07:56 AM | 2 Likes Like |Link to Comment
  • Intel Developer Forum 2014: Investment Theories Confirmed [View article]
    Very good article Bruce. I learned a lot.

    Do you have an opinion on when Intel will bring to fruition so many of the IoT devices and applications discussed? Looking out at the stock over the next few years, what might Intel look like in 2017? Do you believe the IoT will "move the needle" by then?

    Would some OTM January 2016 Leaps be in order?
    Sep 10, 2014. 08:17 PM | Likes Like |Link to Comment