The stock market is in the midst of a strong rally that has been the recipient of strong monetary policy (the stimulus of 85 billion a month in a combination of mortgage backed securities and treasury purchases) from the Federal Reserve. In recent articles I attempted to outline the effect that a QE program would have on specific asset classes such as SPY - S&P 500, $WTIC - oil, JJC - copper, JJG - soft food commodities, and GLD - gold. From this I wanted to create some expectancy based on prior QE returns and potential returns under the current QE3 program, to see just how long the stimulus programs would endure with their effect on asset inflation.

Below are the various QE programs and the returns exhibited, prior to announcement (front running), and at the time of the announcement to end of the program, or in the case

The last time we addressed a potential QE3 announcement was here on July 22nd. We provided returns on various asset classes and how they were performing year to date up to the last fed meeting and announcement. The whole point was to determine if there would be a QE3 announcement based on the year to date asset class returns of the following, SPY - S&P 500, $WTIC - oil, JJC - copper, JJG - soft commodities, and GLD - gold.

As expected there was no QE3 announcement made, as returns have been strong. The Federal Reserve meets again on September 12-13 and will provide us with more QE3 information, if not earlier during the Jackson Hole meeting on August 31st. This article will not focus on whether or not the Fed will initiate a QE3 program ever, but rather if a program will be initiated at the September meeting

Back in September of 2011 the Fed chairman Ben Bernanke announced Operation Twist, which I wrote about here. Wednesday the Fed announced a continuation of the same program and that interest rates will remain low through 2014. The continuation program of selling shorter term treasuries and buying longer dated treasuries are an attempt to keep bond yields low. The program will run until the end of 2012 and will total 267 billion.

The initial program was estimated at 400 billion, which is set to expire. Similar to the original Operation Twist, the Fed's balance sheet will not expand as it did during the release of QE1 and QE2 (quantitative easing). How did bonds react after the announcement of the continuation of this stimulus package? Below is the 10 year bond TLT.

click to enlarge

This move by the Fed looks like it was telegraphed and expected weeks early as

The Facebook (FB) IPO on May 18, presents a rare chance to own an ultimate consumer stock, a company that almost everyone has heard of or is actively using as a social media gateway to the world.

FB is estimated to grow revenues in the range of 36% for 2012, which is lower then what they achieved in the Q1 year over year of 45%. The law of large numbers is starting to hit their growth rate as they have achieved over one billion dollars in revenue in each of the last two quarters.

People are making comparisons to other companies that generate revenues from advertising. The name that is frequently mentioned is Google (GOOG) as a comparison company. My goal in researching FB was to compare their growth rate at the time they achieved 1 billion in quarterly revenue against GOOG's growth rate when they started achieving 1 billion

The last time I wrote about Ancestry.com (ACOM) was after its third quarter 2011 release (see here). Ancestry.com released its first quarter 2012 earnings results on Wednesday April 25th. The company beat on top and bottom line vs. analyst expectations. I wanted to dig a bit deeper into the numbers to see how the company's growth is compared to the past. First, let's have a look at sequential revenue growth from 12 quarters back. Keep in mind, I am looking at revenue growth from quarter to quarter.

2010 Sequential Revenue Growth:

7.2% 15.6% 6.5% 4.3% = 33.8%

2011 Sequential Revenue Growth:

10.0% 11.3% 1.8% 1.1% = 32.8%

2012 Sequential Revenue Growth:

4.1% 6.9% est. 2.6% est. 2.1% est. = 16.3%

As shown above, ACOM is expecting a slowing of sequential revenue growth after the 2nd quarter release. This should be viewed as seasonality, as the first and second quarter

Corporate earning releases are past history, and at times will have little effect fundamentally moving forward.

Celgene's latest earnings release fits into this category well. Although the company missed on several product fronts in the first quarter, they stated that there was positive momentum heading into the second quarter. The first quarter miss was due to three items of note, US Revlimid sales weakness was due to a Medicare coverage gap expense. Second, draw down of inventory levels outside of the US occurred, and third, SG&A expenses increased to 25.6% of revenues up from 23.6% of revenues in the fourth quarter and breaking three sequential quarters of decline. All could be considered one time events.

More importantly the company reiterated prior 2012 guidance, and other positives included, gross margins of 94%, and increased EPS year over year by 30% for the quarter. Both rather impressive.

So why did the stock

Celgene Corporation (CELG), a biopharmaceutical company, discovers, develops, and commercializes various therapies to treat cancer and immune-inflammatory related diseases, primarily in the United States and Europe.

CELG has a PEG (price earnings growth) ratio of 0.42, and a forward P/E ratio of 11.58. I project the stock will hit $100.00 per share in 2012 or rise approximately 28% from current prices.

Let's take a look at Celgene's earnings growth history, PEG valuation within their sector, an estimated price earnings (P/E) stock price, potential catalyst to drive the stock and technical analysis. CELG has a recent history of guiding conservative, then topping their own estimates comfortably.

Earnings Growth Guidance vs. Actual

• In 2009 the company estimated non-GAAP earnings per share growth increase of 35%; the company achieved actual EPS growth of 33% year over year.
• In 2010 the company forecast non-GAAP earnings per share growth increase of 25%; the

Ancestry.com (ACOM) posted 3rd quarter results after the bell. Revenue was in line and earnings per share exceeded analyst estimates by .05 cents to .40 versus the .35 estimate. The company achieved bottom line by recording a very low G&A of just 9.5% of revenue, and a lower tax rate, ( the lowest in the last two years).

I previously wrote about ACOM's 2nd quarter results at ACOM Results. My biggest concern for the stock in the near term was the sequential drop off in subscriber growth rate, which I posted below.

2010

14.00%, 8.00%, 5.00%, 1.30%.

2011

15.77%, 3.52%, 1.67%, 1.17%

The current guidance for sequential subscriber growth rates now looks like this.

2011

15.77%, 3.52%, 1.73%, -.65%

These subscriber numbers are not surprising, and actually I expected a marginal drop off due to a very challenging environment.

VALUATION

Attractive at these price levels. I just reviewed Netflix

So what is "Operation Twist"? Basically the Fed will buy $400B worth of longer dated bonds and fund the purchase by selling an equal amount of bonds with the maturity of 3 years or less to fund that purchase. This will all be done prior to June 2012. The feds balance sheet will not expand as it did during the release of QE1 and QE2 (quantitative easing). Bonds in the range of 6 to 30 years will be purchased, and an equal amount of bonds 3 years and under will be sold, all in the hopes of stimulating the housing market.

How did bonds react after the announcement of this stimulus package. Below is the 10-year bond TLT.

(Click chart to enlarge)

Ancestry.com (ACOM) posted second quarter results after the close Thursday. They posted a modest top and bottom beat for the quarter, and guided modestly higher for the third quarter and year end revenues. If there was a red flag with the results, it would have to be the slower rate of subscriber growth estimated by the company through year end. I'll touch later on that. Also, average cost per subscriber increased 10% sequentially to $81.73 from $74.04. Churn increased to 4.6%, which is similar to the second quarter churn increase in 2010, and that was expected.

Comparing sequential (q to q) subscriber growth rate of 2010 against 2011 you get these numbers:

2010: 14.00%, 8.00%, 5.00%, 1.30%.
2011: 15.77%, 3.52%, 1.67%, 1.17%

Notice the sequential drop off from a year earlier, there lies the issue with Thursday's selloff. Granted the first quarter had a huge increase of 15.77%.

ACOM (Ancestry.com) reported fourth quarter earnings and gave guidance after the close today. The report was better than I expected on several fronts and the stock was higher in after hours.

• Sequential subscriber numbers are estimated to increased by 10.75% in the first quarter of 2011 vs. recent quarter.
• Churn rate was 3.9% vs. prior September quarter of 4.0%.
• First quarter guidance was above estimates 86M to 88M vs. analyst guidance of 81M.
• ACOM expects 2011 total revenue at 372M vs. analyst estimates of 357M.
• The company expects 2011 full year subscribers to total 1.7M

I first wrote about Delcath Systems (DCTH) on August 21 (Delcath Systems: A Great Buy At These Prices) and estimated a $38.10 price if FDA approval is granted and full commercialization is utilized.

Tuesday at 4:30 p.m. DCTH held a brief conference call to update investors on achievements in the 3rd quarter and expectations for the future.

The main catalyst behind the stock gaining +6.26% yesterday was the 10Q released Tuesday morning stating that in addition to the phase III results that will be submitted to the FDA in this 4th quarter, they will also be submitting a recently completed phase II four arm trial.

From the 10Q:

Phase II clinical trial of the Delcath system for chemosaturation therapy with melphalan in patients with primary and metastatic liver cancer, stratified into four arms: neuroendocrine tumors (carcinoid and islet cell tumors), hepatocellular carcinoma (primary liver cancer), ocular

Unconfirmed takeover rumors emerged on Thursday regarding Bristol-Myers (BMY) and Delcath Systems (DCTH). The general rumor that is being spread is that BMY will acquire DCTH for $15.00 a share. The stock surged 11.88% higher on the rumor.

In my original article, Delcath Systems: A Great Buy at These Prices, I estimated a potential target price for DCTH, if approved by the FDA, at approximately $37.00 per share.

Based on everything that I have learned about the company, I would give a 20% chance that this rumor

Delcath Systems (DCTH) is not only a great story but also a very good stock to own at these prices. Their closed loop mega dosing system will revolutionize internal medicine.

This article will cover three main topics.

1. Delcath technology
2. Delcath management team
3. Share price target after FDA approval

The Technology:

Delcaths PHP technology (percutaneous hepatic perfusion) allows the doctors to more directly deliver powerful cancer fighting drugs directly to an isolated body part. In this case that body part is the liver. A long known problem with cancer drugs is that they damage other parts of a patient’s body, for example, chemotherapy drugs can only be given so many times to a patient in his or her lifetime before it damages their hearts. This can cause problems for patients who don’t respond well to treatment and need more doses, because eventually they may reach their maximum lifetime dosage and no