Seeking Alpha

Tony Daltorio's  Instablog

Tony Daltorio
Send Message
Earned a bachelor's degree in physics from the University of Pittsburgh before deciding to switch gears and pursue a career in the financial field. I went on to earn an MBA, also at the University of Pittsburgh. I worked for nearly three decades in the investment business, including nearly two... More
My blog:
Wall Street Mess
View Tony Daltorio's Instablogs on:
  • FluoroPharma Medical To Exploit Profitable Niche

    FluoroPharma Medical, Inc. is a company seeking to develop breakthrough molecular imaging agents for the PET (positron emission tomography) type of 3D medical imaging of the human body to meet critical medical needs.

    The company is not involved with the PET machinery, but instead provides the much-needed imaging agents necessary for PET imaging. These agents are designed to improve patient diagnoses and management by evaluating various forms of cardiac disease at the cellular and molecular level.

    Each year in the U.S., millions of patients undergo molecular imaging studies to detect and evaluate various forms of coronary artery disease (NYSEARCA:CAD). These images are helpful to doctors who treat coronary artery disease and, in particular, help doctors diagnose patients with suspected CAD.

    This is a very large market. In the United States, there are an estimated 12 million PET imaging procedures done per year. However, the vast majority of these scans are for the diagnosis of cancer. Doctors have traditionally opted for cheaper options such as MRI or CT scans with cardiac patients.

    However, that is changing and there is large potential for FluoroPharma as PET scanning becomes more established in the cardiac sector. This market seems to be quickly shifting in favor of increased usage of PET scans for cardiac patients.

    FluoroPharma expects to capitalize on this rapidly growing opportunity in this sector. It will do so through the introduction of its novel imaging agents into a market which is forecast to grow by at least 14% annually over the next five years to nearly a $1 billion market for cardiac patients alone.

    The company's focus at the moment is on four separate cardiac molecular imaging agents, two of which are in clinical stage development and are about to enter Phase II clinical trials. The third pharmaceutical candidate is in an early development stage with clinical testing likely to be several years away and the fourth is still in the discovery phase.

    The two most-advanced candidates are: CardioPET, which allows assessment of coronary artery disease while patients are at rest; and BFPET, which is a novel cardiovascular blood flow imaging agent that concentrates in healthy myocardial cells and enables improved detection of CAD in cases of multi-vessel disease.

    The third candidate is VasoPET, the only PET agent known to selectively target inflamed atheromatous plaque, making it easy for doctors to identify coronary artery plaque. The final candidate - AZPET - includes an approach for directly imaging plague and the compensatory receptor systems in the elderly to help track the progress of treatment of patients with Alzheimer's disease.

    The goal of the company's cardiac products is to improve overall patient care in several ways. The products are expected to provide significantly greater diagnostic accuracy compared to current methods, thereby reducing the number of unnecessary diagnostic and therapeutic procedures.

    The good news for FluoroPharma is that with the exception of one currently marketed branded cardiac PET tracer, which suffers from some well-known problems, the market for such tracers is basically wide open for the company.

    Being one of the main players in a soon-to-be billion dollar market makes FluoroPharma Medical a truly exciting long-term investment.

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

    Tags: Healthcare
    Feb 15 10:28 AM | Link | Comment!
  • Why Enviro Politics Will Send Natural Gas Prices Higher

    It looks as if there may not be a climate bill passed this year by Congress. However, that does not mean that the environmentalists in the United States have lost their fight to cut coal usage.

    Quite the contrary...there will be a far more rapid closing of coal-fired power generation plants in the United States over the next five years than the stock market anticipates.

    That will mean one thing for sharp-eyed investors...higher prices for natural gas and natural gas stocks.


    The Plan to Snuff Out Coal


    Environmentalists and regulators are engaged in a multi-front war on carbon-intensive fuels like coal. If no climate bill is passed, then the opponents of coal will turn to indirect controls under existing laws.

    They will use provisions of the Clean Air Act. In particular, the regulations covering three pollutants – sulfur dioxide, nitrogen oxide and mercury – from coal plants. The legal instrument that will be used is the Maximum Achievable Control Technology provisions of the Clean Air Act.....

    Essentially, these provisions will require coal-fired power plants to reduce their emissions of hazardous pollutants, as defined by the Environmental Protection Agency, to the levels achieved by the best 12 percent of plants in their class.

    Once an industry rule comes down from the EPA, each power plant has three years, with one year of allowed extensions, to bring their emissions levels down to the standard.

    In the case of coal plants, the EPA is under a court order to issue new proposed rules for pollutants including mercury and acid gases by March 2011. The final rules would go into effect in November 2011.

    The new regulations will 'force' utilities to install very expensive scrubbers on the smokestacks of half of all the coal-fired plants that do not have them.

    It will not be economical for utilities to comply with the new rules and install scrubbers on most older plants. So both the utility companies and environmentalists agree that these new rules are likely to lead to a large number of coal-fired plants being closed by 2015.

    The coal plants most at risk of shutdown are smaller generators that are more than 40 years old and without scrubbers. That is 15 to 20 percent of all coal-fired power generation!

    That is fine with the environmentalists who see that as a preferable way to reduce carbon emissions.

    But how do we make up for that loss in electricity power generation? The environmentalists say energy conservation. Good luck with that.....


    Increased Natural Gas Demand


    The common sense answer is that many utilities will turn to natural gas and add natural gas-fired power generation capacity.

    Hugh Wynne, utilities analyst with Bernstein Research, believes the shutting down of these older coal plants will lead to an increase in natural gas demand of 10 percent by 2015.

    So what does this mean for natural gas prices?

    There is an assumption in the marketplace that the United States has a nearly unlimited supply of shale gas at the present price of about $4-$5 per million BTU.

    That assumption is absolutely wrong.....

    Many in the industry argue that without an increase to $8 or $9 per million BTU, the real costs of shale gas cannot be covered.

    Aubrey McClendon, the CEO of Chesapeake Energy (NYSE: CHK), has said that natural gas at the current low prices is not sustainable.

    For example, Chesapeake earns about 4 percent on invested capital while their estimated cost of capital is 8-10 percent. And Chesapeake is one of the stronger players in shale gas.

    Ben Dell, also of Bernstein Research, believes that the full cost of finding, developing and operating shale gas wells, and paying an average return on capital to investors, requires a spot gas price of $7.50 to $8 a thousand cubic feet.

    Mr. Dell points out that the horizontal drilling rigs needed to drill shale gas wells are in relatively short supply. He stated, “We think there will be a 15 percent to 20 percent increase in costs from last year to this year. That includes the cost of drilling and fracking”.

    In addition, gas producers had insulated themselves from gas price weakness over the past year with hedges that are now expiring. New hedges now have to be put on at lower prices.

    So the bottom line is that many gas producers will show declining revenues and increasing costs. Not exactly ideal conditions for producing large amounts of extra natural gas that utilities will be demanding.


    Natural Gas Companies


    The inevitable answer is that natural gas prices will have to rise so that enough is produced to meet the increased demand. This bodes well for US natural gas producing companies.

    One large natural gas producing company in the United States is the aforementioned Chesapeake Energy, which is a leader in natural gas production from shale rock.

    Another large natural gas producer is Southwestern Energy (NYSE: SWN) which produces a lot of natural gas from the prolific Fayetteville shale gas field. It also has one of the lowest production costs in the industry.

    For investors looking for a small-cap play, there is Abraxas Petroleum (NASDAQ: AXAS). It is one of the 10 best-performing oil and gas production stocks year-to-date. It is up 55 percent since the beginning of the year and up more than 230 percent over the past 52 weeks.

    Abraxas has exposure to some of the most prominent shale gas plays in the country: Bakken, Haynesville, Barnett and the Permian Basin, among others.

    As always, investors are urged to do their due diligence before investing into any company.


    Disclosure: No Positions
    Tags: UNG, CHK, SWN, AXAS, Energy
    Jul 24 2:05 PM | Link | Comment!
  • Hi Ho Silver...Away??

    There is another precious metal which is currently almost as popular as gold among precious metals investors. That metal is, of course, silver.

    Silver had a good 2009...gaining 53 per cent in value while coming in with an average price of $14.67 per ounce. That is its second highest annual average price since 1980.

    The shiny metal has also done extremely well over the course of the last two decades. Silver hit its low in February 1991 at a price of $3.51 an ounce. It is now trading at over $18 an ounce...this works out to an annual gain of about 9 per cent. That is a performance many stock investors wish they had over that period.

    The latest World Silver Survey conducted by precious metals consultancy GFMS points to silver prices moving even higher. GFMS forecast that silver prices are likely to hit $20 an ounce this year supported by flat supplies and double-digit growth in industrial consumption and strong investment demand.

    The consultancy said that supplies of silver last year were nearly flat at 889 million ounces. Silver mining output did rise 3.6 per cent to nearly 710 million ounces, but overall supplies were flat due to lower scrap flows and government sales. These sales dropped 86 per cent to just 20.2 million ounces. GFMS said that, although mine production was expected to increase modestly, it expects even further reductions in scrap flows and government sales this year.


    Industrial Demand


    Silver does have a number of commercial and industrial uses. It is used in the electrical and electronics sector, the automotive industry, the solar power industry, photography and jewelry.

    And there are three new uses of silver in industrial applications which are gaining momentum including silver oxide batteries, silver conductive inks used in electronics and silver nano-technologies used in various medical applications.

    The economic slowdown pushed industrial demand for silver last year down by 21 per cent to 352 million ounces...while jewelry demand remained flat at 157 million ounces.

    The sharp drop in industrial consumption in late-2008 through early-2009 hit silver prices, eroding a decade of sustained gains. In December 2008, silver prices fell to $8.42 an ounce.

    However, industrial demand for silver saw a strong pick-up in the latter of 2009, which has continued into 2010. Thus, GFMS is forecasting double-digit growth in commercial demand.

    Much of this rise in industrial demand for silver comes from China. It accounts for about 70 per cent of the world's total industrial usage of silver.

    However, the real story behind silver's recent price rise has been investment demand.


    Investment Demand


    Silver surged last year despite a massive surplus in the silver market of 283.7 million ounces. That surplus mattered little, because investors were there to pick up the slack from other demand sources. Thanks to the financial crisis, there has been an incredible upsurge in demand for silver as a safe haven asset in the form of coins and physically-backed exchange traded funds (ETFs).

    In fact, silver investment currently comprises a quarter of silver demand – a level not seen since the 1970s.

    Net investment in silver surged last year to nearly 137 million ounces, up an incredible 184 per cent from 2008. ETF holdings of silver rose by 132.5 million ounces over the course of 2009 and ending 2009 with holdings in silver of nearly 398 million ounces. Coin demand surged 20.7 per cent to 78.7 million ounces.

    There will be a surplus again this year in the silver market but investors appear more than willing to continue to take up that surplus.


    Silver Investments


    GFMS forecasted that investment demand for silver would remain strong this year for two reasons. It stated that investment demand was expected to be “highly positive given the scope for the sovereign debt crisis to widen and the probability that real interest rates will remain low or negative in all the major currencies for some time.”

    If the GFMS forecast is correct, silver mining companies should benefit greatly.

    Investors can purchase a rather new ETF which holds a portfolio of global silver mining companies. It is the Global X Silver Miners ETF (NYSE: SIL).

    Investors can also opt to buy shares in individual silver mining companies. Some examples of larger companies include: Silver Wheaton (NYSE: SLW), Silver Standard Resources (NASDAQ: SSRI) and Pan American Silver (NASDAQ: PAAS).

    For investors looking for a small cap silver mining company, there is Mag Silver (AMEX: MVG). It is a leading junior silver exploration and development company which has interests in three silver properties in Mexico's Fresnillo Trend. The Fresnillo area is the world's oldest and most prolific silver district.

    The company has 100% interests in two properties in the Fresnillo silver trend – the Cinco de Mayo and Lagartos properties. Mag Silver also owns a 44% interest in the Juanicipio property. Its joint venture partner in developing this property is the world's largest primary silver miner – Fresnillo PLC (Pink Sheets: FNLPF).

    Fresnillo owns about 20 percent of Mag Silver and it has launched an unfriendly takeover “underbid” for Mag Silver in the past. With the price of silver rising, as well as the company's world-class silver deposits, do not be surprised if Fresnillo launches another hostile bid for the company in the near future.

    With continuing worries about sovereign debt likely to remain for the foreseeable future, an investment into silver and those companies who mine it looks to be a wise choice for investors.


    Disclosure: No positions
    Jun 12 2:26 PM | Link | Comment!
Full index of posts »
Latest Followers

Latest Comments

Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.