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Sammy Pollack's  Instablog

Sammy Pollack
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I have been an independent investor and trader in the Forex, Stock Market, and Commodity markets for 10 years. I also serve as the managing director of a charitable fund. Follow me on Twitter @spollack10
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  • My Take On Cramer's Pharma Stocks
    Johnson & Johnson (NYSE:JNJ)

    Reasons Cramer likes JNJ

    • Patent expirations are done
    • Strong pipeline
    • Not relying on one blockbuster drug
    • 3.5% dividend
    • Has raised dividend for 49 straight years
    My Thoughts on JNJ

    JNJ's recent troubles with recalls are concerning. Most recently, on January 27, JNJ announced a recall on Aveeno Baby Lotion. This recall adds to the long list of recent JNJ recalls including DePuy ASR devices, Tylenol, Risperdal, Prezista, Topamax, and many more. These recalls have had a real impact on earnings. In the most recent quarter, JNJ was forced to take a 3 billion dollar charge related to previous recalls. Despite the recall problems, JNJ remains a strong company. JNJ has over 12.5 billion in net cash. JNJ's dividend payout ratio is 65%, this means JNJ can easily continue to pay the dividend going forward. In the short term, JNJ remains a difficult buy because of the recall issues. However, over the long term JNJ is a good buy. CEO William C. Weldon said in an interview, "Our objective is to get back to beyond where we were, but that's not going to happen next week or next month it's going to take a lot of work but we're committed to doing that."
    (NASDAQ:CNBC)

    JNJ's chart is relatively bullish. JNJ is trading above both the 200 day moving average (orange) and the 50 day moving average (green.) However, JNJ has not broken out to new highs like many other pharma stocks have.

    Sanofi (NYSE:SNY)

    Reasons Cramer likes SNY

    • Three biggest drugs are going generic, but this is already priced in.
    • Investing in high growth prospects such as vaccines, diabetes, and genetics.
    • 4.8% Dividend
    My Thoughts on SNY

    SNY pays a high dividend, but odds of a dividend increase are relatively low. SNY has a payout ratio of 76%. This ratio is relatively high, thus SNY will have difficulty raising the dividend. SNY also has over 17.5 billion in net debt that could weigh on the company if things get tough. Another concern with SNY is that it does a lot of business in Europe. With the European economy entering a slowdown, business is likely to slow somewhat for the drug industry. Additioanlly, government austerity could effect healthcare coverage throughtout Europe. For this reason SNY is not my favorite pharma stock on Cramer's list.

    SNY's chart is neutral. SNY is above both the 200 day moving average( orange) and the 50 day moving average (green.) However, the 50 day moving average is below the 200 day moving average. SNY has also failed to make new highs while many other drug stocks have been making new highs.

    Merck (NYSE:MRK)

    Reasons Cramer likes MRK

    • Merck's new experimental cholesterol drug Anacetrapib.
    • Recently released blockbusters for HIV and diabetes
    • 4.3% dividend yield
    My Thoughts on MRK

    MRK remains in a strong position to pay the dividend. MRK pays out just 43% of its free cash flow for the dividend. While positive news may lie ahead with Anacetrapib, investors can predict what the ultimate outcome will be. While the drug is in phase III development, things can still go wrong with Anacetrapib. The failure of this potential blockbuster drug would certainly be a negative for MRK. However, MRK trades at just 10 times forward earnings so a positive surprise has not been factored in.

    MRK's chart is very bullish. MRK is trading above the 50 day moving average (green) which is above the 200 day moving average (orange.) This set up indicates strong momentum is building behind MRK. The stock is also trading at a new high which further proves the charts strength. For traders looking to play pharma MRK is the best short term trade.

    Pfizer Inc (PFE

    Reasons Cramer likes PFE

    • Partnerhsip with Bristol-Meyers (NYSE:BMY) to develop Eliquis (phase III).
    • 4.10% dividend
    My Thoughts on PFE

    PFE's dividend looks sustainable as the payout ratio is 69% of earnings. PFE is a cheap stock trading at just 9 times forward earnings. This PE ratio makes PFE the cheapest pharma stock mentioned by Cramer. Another reason I like PFE is the strong pipeline. PFE has 95 drugs in the pipeline including 22 in phase III.

    (cnbc)

    PFE's chart is very bullish. PFE is trading above the 50 day moving average (green) which is above the 200 day moving average (orange.) This indicates PFE has strong momentum. The bullish technicals are further supported by the fact that PFE is at a new high.

    Biogen Idec Inc (NASDAQ:BIIB)

    Reasons Cramer likes BIIB

    • Excellent pipeline
    • Exposure to multiple sclerosis
    My Thought on BIIB

    BIIB certainly has a strong pipeline, but the company is risky. BIIB's two multiple sclerosis drugs currently on the market account for 60% of BIIB's total business. The various issues that can occur with relatively new drugs mean that if something goes wrong for BIIB the stock will get killed. With a market cap of 29 billion, BIIB is not a small company. However, 29 billion is just small enough that a major drug company could buy BIIB. BIIB is the high-risk high-reward stock on Cramer's list.

    (cnbc)

    BIIB's chart is very bullish. BIIB is trading above the 50 day moving average (green) which is trading above the 200 day moving average (orange.) This indicates that BIIB has strong momentum. BIIB is also trading at a new high which further indicates BIIB is doing well on a technical basis.

    Conclusion

    Investors looking for a long-term buy should consider JNJ as it muddles through a difficult period in the short term. Short-term traders looking to ride the momentum wave in pharma stocks should buy MRK or PFE. Speculators should look at BIIB as it offers both the most risk and reward. Investors could also consider the healthcare ETF (NYSEARCA:XLV)

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Feb 01 8:43 PM | Link | Comment!
  • Bill Fleckenstein Still Bullish Gold
    Noted hedge fund manager Bill Fleckenstein is one high profile investor that everyone should follow. Fleckenstein has made many good calls over the years, but there are two which were especially memorable. Firstly, Fleckenstein was short the market going into the 2008 crash. Secondly, Fleckenstein has been bullish on Gold for much of its rally to record levels. Fleckenstein closed his short only hedge fund at end of 2008 to open a fund that would pursue a more balanced approach for 2009. This decision ended up signaling the low for the stock market was near. 

    What is Fleckenstein doing now?

    Money Printing

    "As I have said many times, central banks the world over mean to print however much money it takes to avoid anything remotely approaching a declining cost of living, with only the Europeans being unwilling to stand up and say that is exactly what their goal is. Thus, the long-term outcome is not in doubt, although the short-term twists and turns are, as always."

    So for Europe, the saga continues. Will the eurozone crack up before the European Central Bank panics, or will the ECB panic first (even more than it already has)? We will just have to see, but in the end, all roads lead to money printing, debased currencies and inflation until the printing press is taken away.
    " (MSN Money)

    Click here to read the full piece.

    Bullish Gold Miners

    "Another way to value miners is to calculate what the gold in the ground sells for versus ingots above ground. For example, in the case of Newmont Mining (NYSE:NEM) , its 100 million ounces would cost you $350 an ounce if you acquired the whole company. Adding the $550 per ounce that it costs to yank the gold out of the ground means that, at roughly $900 an ounce, the gold with the dirt still on it is a lot cheaper than coins or bars selling for around $1,700 an ounce.

    To my mind, the change in behavior since July of the miners I own -- Newmont Mining, Yamana Gold (NYSE:AUY)and Goldcorp (NYSE:GG) -- shows that the shift toward expectations of higher gold prices has finally begun.

    That is a psychological sea change. Analysts who have held their future price assumptions for gold prices in the $900 to $1,000 range have just started to bump them up. That can have a dramatic impact. In an Aug. 22 report, the gold stock analyst at Citicorp raised his long-term gold price assumption to $1,050 from $950 and over the next four years to an average of $1,437.50 from $1,156. As a consequence, he upped his target price for Newmont from $55 to $80 per share. That same report contained a table showing that with a long-term gold price assumption of $1,850, his target for Newmont would be $200.

    I believe that the concept of a future with higher gold prices is an idea whose time has come." (MSN Money)

    Click here for the full article

    Investment Ideas
     

    • Buy Gold Miner ETFs (NYSEARCA:GDX) (NYSEARCA:GDXJ)
    • Buy Gold ETFs (NYSEARCA:GLD) (NYSEARCA:IAU)
    • Buy Leveraged Miners ETF (NYSEARCA:NUGT) (only for the shortest term traders because of issues with leveraged ETFs discussed here)
    • Buy Gold Miners (NEM) (NYSE:ABX) (GG) (NYSE:GFI) (NYSE:AEM) (NYSEMKT:NG) (NASDAQ:RGLD) (NASDAQ:GOLD) (NYSE:EGO)
    • Buy Silver. If Fleckenstein is right about "money printing" then silver has more upside than gold as discussed here.


    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jan 10 9:35 AM | Link | 1 Comment
  • Harvard & Yale Endowments Are Bullish On This Sector.
    Both the Harvard & Yale endowment funds have the bulk of their holdings invested in foreign funds and companies. Considering that the managers of the Harvard & Yale school endowments are among the smartest around, should you follow them out of the U.S? 

    Harvard Top 10 Holdings
    • I Shares MSCI Brazil (NYSEARCA:EWZ) 26.8% of portfolio
    • Taiwan Semiconductor (NYSE:TSM) 5.5% of portfolio
    • Pebblebrook Hotel Trust (NYSE:PEB) 4.3% of portfolio
    • I Shares MSCI South Korea (NYSEARCA:EWY) 4.2% of portfolio
    • Market Vectors Russia (NYSEARCA:RSX) 4.1% of portfolio
    • I shares MSCI Chile (NYSEARCA:ECH) 3.2% of portfolio
    • I Shares China 25 Index (NYSEARCA:FXI) 2.7% of portfolio
    • America Movil (NYSE:AMX) 2.1% of portfolio
    • I Path MSCI India (NYSEARCA:INP) 1.85% of portfolio
    • I Shares MSCI Taiwan Index (NYSEARCA:EWT) 1.8% of portfolio
    click here to see the full portfolio

    Yale Holdings (fund only holds 8 positions)
    • I Shares MSCI Emerging Market Index (NYSEARCA:EEM) 73.3% of portfolio
    • I Shares MSCI EAFA (Europe, Australia, and far east markets) Index (NYSEARCA:EFA) 10.1% of portfolio
    • Berkshire Hathaway (NYSE:BRK.A) 6.3% of portfolio
    • SPDR S&P 500 (NYSEARCA:SPY) 2.8% of portfolio
    • Franklin Resources (NYSE:BEN) 2.65% of portfolio
    • Approach Resources (NASDAQ:AREX) 2.2% of portfolio
    • Higher One Inc (NYSE:ONE) 1.85% of portfolio
    • Wolverine World Wide (NYSE:WWW) 0.9% of portfolio
    click here to see the full portfolio

    The heavy weighting toward foreign markets is apparent in both portfolios. In the case of Yale, the fund chooses to put 73.3% of its funds into the EEM. This means that Yale is betting big on emerging markets. Similarly, Harvard also seems to be betting big on emerging markets. Harvard's largest holding is the Brazil ETF (EWZ) at 26.8%. The majority of Harvard's other large holdings also are emerging market plays. 

    Should You Follow Them Abroad
    The answer depends largely on what your investment goals are. For example, if you an investor who needs to generate income than this strategy is not for you. These holdings do not have significant dividends. Similarly, if you cannot afford to take significant loses then this strategy is not for you. Foreign markets tend to be more volatile than the U.S. markets. If you are a short term investor, then this strategy is not for you. Recently, U.S. markets have been performing much better than foreign markets. Emerging markets have not been doing well of late. 

    If you are a long term investor who can tolerate some risk, then this strategy is for you. Ultimately, China, Brazil, Russia, Korea, and other emerging economies will be the growth leaders going forward. However, there likely remains many challenges ahead that will test the resolve of committed long term investors.


    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jan 07 3:46 PM | Link | Comment!
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