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  • Freeport-McMoRan: Management Needs To Make A Decisive Move Soon [View article]

    It sounds like you are a former shareholder who has caught part of the drop from the $60 in late 2010. If so FCX will likely have too many conflicting emotions to consider investing. I have been there.

    In my view it was good to raise cash now rather than later. Positive cash flow in any fashion is welcomed during troubled times.

    Why would I not buy great Copper mines that produce Copper at a cash cost of $1.50?

    Why would I not buy billions of barrels of Oil produced annually at $19 barrel?

    Why would I not buy a company that has hit 10 of 10 huge wells and has 154 more prime drilling locations waiting keeping the $19 cost in mind?

    I recommend listening to earnings calls and reading financials on FCX. Facts can be empowering!
    Aug 19, 2015. 08:11 PM | Likes Like |Link to Comment
  • Freeport-McMoRan: Management Needs To Make A Decisive Move Soon [View article]

    I think FCX has great assets and I can make a great long term return. So I invest in stages rather than trying to capture an exact bottom.

    My view of FCX is shaped on historical trading patterns which may not hold true. With Hedge Funds, Activist investors, SWFs etc we may find that a FCX doesnt drop to 10c on the dollar or has better financing alternatives in a world sloshing with loose money.

    My assessment right or wrong is that FCX is stronger than many others and will survive even a horrible commodities bust. I base that on research reports and financial statements rather than newspaper accounts and opinion articles like the one above.

    Those who are only willing to invest at the last penny of the theoretical low often find they either miss it completely or buy and cant stand the losses when their low wasnt the low after all. Greed kills Oil and Commodities speculators where a longer term investment approach can capture great returns.
    Aug 19, 2015. 05:16 PM | 1 Like Like |Link to Comment
  • Two big tests on tap for BofA's Moynihan [View news story]
    a few thoughts on BAC

    I sold about 50% of my position last week. I just dont see the upside vs credit risk over the next several months.

    Moynahan has done a decent job but he shouldnt hold both the CEO and Chmn title. In fact BAC really needs a charismatic new leader who can reshape how people view BAC. Six years after the crisis people still view BAC in that context.
    Aug 19, 2015. 12:13 PM | 10 Likes Like |Link to Comment
  • Freeport-McMoRan: Management Needs To Make A Decisive Move Soon [View article]
    So yesterday I bought an initial 10% position in FCX at $9.90 and I fully expect that value to drop in the next months.

    The author is repeating an often repeated story and multi year view. My view is that FCX has tough times ahead and it will survive these tough times but it will not be easy.

    So why do I think this? The EV of FCX is $34.73 bil and the market Cap is $10.19 bil. So shares are trading at about 29% of estimated value. I also very much like the quality of FCX assets which are very high quality. The billion dollar investments in their 10 new Oil wells are at an inopportune time but will produce Oil at $18-$19 a barrel as an example.

    For a long term investor I believe FCX can provide excellent returns. It will likely require some pain through the rest of 2015 and possibly longer. I am not expecting a dividend and suspect I will have a 50%+ position by the end of the year.

    It would not bother me to purchase more at 20c on the EV dollar or even less. Should that happen it will likely be due to even more dreadful news.
    Aug 19, 2015. 11:13 AM | 1 Like Like |Link to Comment
  • Are You Paying Too Much For Merck? [View article]
    I am not a big fan of MRK because they havent grown in years.

    That said 2016 is setting up to be a better year and MRKs pipeline seems stronger than it has in the past. Perhaps a 15.62 2016 PE is a fair valuation.

    Absent a market correction I would consider $57 a good valuation. If a correction came I probably would not want to invest in MRK as much as better alternatives that had dropped.

    If MRK is a little high at the moment is because some other areas look riskier such as Oil, Commodities, Emerging, Industrial, MLPs, Banking.

    I would submit that over the next year you might find that MRK will treat you much better than many alternatives. Keytruda growth, an HCV cure that could take 10% share of the market and a stronger pipeline are reasons.

    MRK could perform well in good or bad markets over the next year and in that view may be a good value as it is.
    Aug 19, 2015. 09:48 AM | 5 Likes Like |Link to Comment
  • The Too-Big-To-Fail Banks: Canaries Of The Credit Cycle [View article]
    So I look at the same question from a different view.

    Banks have been outstanding to me. However I see lots of potential problems lurking. Oil, Metals, Mining, MLPs, Currency fluctuations, Country stresses and the normal buildup of credit issues over now a 6 year period.

    I just dont see a particular need to have full exposure to credit issues. My guess is some level of problem clearance needs to occur and Oil companies would be front and center. ZIRP and loose credit conditions seem to have occurred simultaneously.

    So while I dont see a huge calamity someone else can take that risk through October. My guess is more than a few investors will share this same thought pattern before the end of 2015.

    I am underweight banking and credits.
    Aug 18, 2015. 10:54 PM | Likes Like |Link to Comment
  • The Small-Cap Biotech Sector In Focus [View article]
    I have a question or two for Bret or anyone who might like to offer their thoughts.

    What are some promising drug approvals for the next year? I am a fan of PCSK9 but what else might be a big hit?

    Also does the 21st Century Cures Act that is kicking around Congress have any big advantages for biotech?
    Aug 18, 2015. 10:34 PM | Likes Like |Link to Comment
  • A Review Of Gilead's Pipeline (Part 1) [View article]
    Ok so let me try to answer that.

    I would try to get some outstanding pipeline candidates in an acquisition for less than $10 billion. I would try to partner with some smaller biotechs and build internal research as well.

    Perhaps trying to maintain a 20% long term growth rate would be the goal that determines the exact amount needed. Or perhaps what it takes to get a 15 forward PE like the rest of the industry.

    Looking at competitors R&D

    MRK - $7.3 bil + acquisitions est $10 bil annual avg fwd PE 15.66

    CELG - $2.9 bil + acq/ptnr est $10 bil annual avg fwd PE 21.88

    PFE - $8.6 bil + acq est $10+ bil annual avg fwd PE 15.11

    AMGN $4.3 bil + acq/ptnr est $5+ bil annual avg fwd PE 15.64

    GILD $$3.1 bil + $500MM est $3.6 bil annual avg fwd PE 10.01
    Aug 18, 2015. 04:21 PM | 1 Like Like |Link to Comment
  • A Review Of Gilead's Pipeline (Part 1) [View article]
    Thanks CSYJ

    That is exactly what I am saying. FCF should be $18 billion in 2015.

    Expecting GILDs $3 billion R&D budget to grow a $30+ billion revenue company is unlikely.
    Aug 18, 2015. 01:55 PM | Likes Like |Link to Comment
  • AbbVie: The Riskiest Dividend Aristocrat [View article]
    I am not a ABBV fan, but I did want to add a little different perspective.

    If ABBV paid 5% more than JNJ was willing to offer does that make it a bad deal? My point is that highly sophisticated valuation guidance goes into these decisions and investing in Imbruvica was a lot lower risk than most other alternatives. ABBV had reached a point where doing nothing was not an option and their shares are up 25% this year.

    While you might only consider a dividend to be a true return ABBV shares have already returned 8 years of KO dividend return this year in price appreciation.

    It has double digit growth in revenue this year where KO has a 3% decline in revenue that looks to be long term but share returns are about 2% this year with dividend, JNJ is down about 2% after dividend and WMT is down about 18%.

    For some investors the little extra risk in ABBV is worth getting a positive return.
    Aug 18, 2015. 01:31 PM | 4 Likes Like |Link to Comment
  • We Believe In Emerging Market Valuations [View article]
    Since you make money selling emerging markets I am sure you do believe in them.

    Perhaps a specific investment thesis on a specific country would be more persuasive to investors.
    Aug 18, 2015. 12:30 PM | 2 Likes Like |Link to Comment
  • Are We Approaching An Investable Bottom In The Shares Of Caterpillar? [View article]
    Interesting article!

    I generally agree and would just add a few things I consider

    - Huge over investment in commodities over the past 6 years and it still hasnt changed

    - I suspect a capitulation in markets possibly after 3Q earnings hit for Oil/Minerals

    - My thesis is that Oil drilling and Mine development continues and we havent reached the capacity reduction stage.

    CAT is a fine cyclical company with plenty of negative news ahead. Its customers will likely reach a point where they stop adding capacity and focus on survival only.

    In 2009 CAT dropped down below $25 per share. So $50 isnt an unthinkable level to consider and dividends can disappear. I am not predicting that drop just thinking that if the same trends continue that started 8 months ago plenty of downside exists.

    Once the industry bottoms and some companies fold and supply matches demand CAT will be a good investment. So far we arent even close!
    Aug 18, 2015. 12:16 PM | 1 Like Like |Link to Comment
  • Decent Fundamentals Can Help Freeport-McMoRan Bottom [View article]
    So is FCX a good buy?

    As a long term investor I would say yes and as a short term investor I would say no.

    So I scraped a few shares up below $10 this morning. I like FCX's assets. I like the Oil they will produce at $18-19 brl cost. I like the Copper they will produce at $1.90 long term. I like management and their disciplined approach so I am apparently in a small minority.

    What I dont like is what I see shaping up in commodities short term and perhaps even intermediate term. I dont know how low Oil will go but strongly feel it certainly must be lower. A price that would create a balance of supply with demand could be very low.

    Metals are probably in better shape than Oil but that isnt saying much. My guess is FCX may have to delay the mines it is bringing on line both because of capital constraints and customer need.

    I am beginning to invest in stages now because I feel I can get a 300% return in 5 years. Between Hedge Funds, Private Equity, Activists and Industry Mergers activity FCX could get taken out.

    FCX trades at 28% of enterprise value, it has great assets and shares likely will go lower. Still things can change quickly and the fundamental value of FCX assets is much higher.
    Aug 18, 2015. 10:20 AM | 4 Likes Like |Link to Comment
  • A Review Of Gilead's Pipeline (Part 1) [View article]
    Thanks for another excellent article!

    Perhaps we differ on the pipeline status and a couple of reasons for that exist. When I look at the pipeline I see two pieces the HIV and HCV franchises which are well managed is the first. GILD appears to be doing a great job as it has for many years of managing its existing franchises to strangle competitors with better and more timely innovation.

    At the same time competitors are also catching up. So MRK will take some share in 2016 by pursuing a strategy to get a return on its investment. That means that they will do what it takes to get at least 10% market share. ABBV with Viekira Pak will also take whatever action is needed to stay relevant in the market. BMY and JNJ down the line as well.

    It is the expansion pipeline that is concerning to investors and is holding back the share price. I would advocate that GILD spend on the order of 50% of FCF on building its pipeline or diversifying its product line. Otherwise the pipeline that looked good for a $10 billion revenue GILD looks weak for a $30 billion revenue powerhouse company.

    Whether those of us who are long GILD like the pipeline isnt really the question. The investment community as a whole has serious doubts about GILD forward growth and is assigning it perhaps a 10 PE on 2015 results. Lets be clear that valuation arrives because of an expected decline in GILD prospects looking forward.

    I believe GILD will make an acquisition in the next 6 months because it is clear that the best use of FCF is to build for the future as well as the return of capital to shareholders.
    Aug 18, 2015. 09:13 AM | 8 Likes Like |Link to Comment
  • Can Any Upstream MLP Withstand $60 Oil Through 2019? Part 2 - EV Energy Partners [View article]
    So let me ask some questions and extrapolate a little further.

    Does anyone think that a huge over investment in energy has taken place that will not soon go away? Perhaps $100s of billions worldwide or more.

    If MLPs and other large entities like hedge funds experience problems shouldnt that hit banks and financial institutions with an arctic blast?

    I am not really suggesting a banking collapse as I dont think that would occur. It is just that we could face a $25 Oil price that would cause investors to consider such a possibility.

    My guess is that Oil will drop to $30 a barrel in a crash but reach $60 within perhaps 2-3 years. Exports from the US will be allowed to help get a higher Oil price realized. Probably relaxed loan covenants in some manner but I wouldnt bet my money on that.

    3Q results could be very interesting and it is hard to see energy shares higher in October. Even in October MLPs may seem much riskier at much lower prices.
    Aug 17, 2015. 06:51 PM | 2 Likes Like |Link to Comment