Seeking Alpha

cmvillacorta's  Instablog

cmvillacorta
Send Message
A self taught investor, Chad V. brings a well rounded business analytics perspective from his vast educational and professional experience. His business acumen has evolved through successful endeavors in the Pharmaceutical, Real Estate, Aerospace and Technology Sectors.
My blog:
Precis Investments
View cmvillacorta's Instablogs on:
  • Fight To Safety, Or Buy The Dips?
    Bank of America/Merrill Lynch released their Hedge Fund Monitor report titled, "HFs positive in April", May 3, 2010.
    Overall, HFs still remain cautious on US equitites, further selling the NDX. At the same time they added to their very net long position in metals. They also continue to be very short the Euro/long the USD and pulled back somewhat on their curve steepening trade.

    Long/short HFs kept their market exposure last week at ~25% net long~ well below the historical average of 35-40%. Additionally, they switched to high quality stocks from low quality while moving into growth relative to value. At the same time Equity Market Neutral stayed very net long equities, but also began to favor high quality stocks. We also estimate Macro HFs moved into a net short with respect to US equities last week while continuing to buy the Emerging markets.
    Some other notable HF moves from the report include, 
    HFs modestly added to their net long position in gold last week.

    Large specs reduced some of their crowded long in crude oil last week.
    This activity was telegraphed last week with market experts recommending value stocks that are typically defensive in nature, like health care and consumer staples. Big pharma names like Merck and Pfizer gave investors approximately a 2% pop today while the overall market dropped over 2%. Oil also dropped 4%, in a reversal of recent activity in this space. A majority of the news released was bearish, leading investors to wonder if this is a start of a correction. The market has been completely bewildering, with the Dow increasing and decreasing in triple digit increments. The VIX, which acts as a barometer for volatility for the S&P 500 has increased over 18% today, to a closing of 23.84. Some feel higher levels of volatility could signal a negative outlook for stocks. So if you cannot stomach too much risk and cannot sleep at night with high levels of volatility, you might want to consult with your broker/advisor.

    Although the negativity appeared to dominate the headlines, there are those who are a little more optimistic like Jim Cramer of Mad Money.
    The shorts and panicked sellers have a “buffett of horribles” to choose from, Cramer said Tuesday, to try to knock down this market. But that’s no reason to sell and run.
    Whether it’s Europe’s debt problems, a government-induced slowdown in China or falling oil prices, the bears have harped on any negativity they could find to hurt stocks. They’ve been jumping all over financial regulation, the failed car bombing in New York’s Times Square and the Australian mining tax, too.
    But while Cramer admitted that Europe would continue to weigh on investors, and they’ll have to let it play out, he still thinks there are plenty of opportunities in this market.



    We have reached a level of so much uncertainty in so many different areas, that it makes it difficult to confidently decide what to do with equities in this environment. Do we follow hedge funds and reduce our equity exposure after the big drop we just experienced? Or do we consider this an opportunity to buy the stocks we regret not getting into during the preceding bull run?


    Do not rely solely on the opinions of this blog or any other site when making an investment decision. Any investment could result in the risk of loss of capital. Please consider seeking professional advice before initiating your investment ideas. 

    Disclosures: Long BAC, Long C, Long F, Long DNDN, Long GLW, Long SPF, Long BP, Long NKE, Long HD
    May 05 1:36 AM | Link | Comment!
  • DNDN: Provenge Gains FDA Approval
    According to CNBC's Fast Money 4/29/2010,

    A first-of-a-kind prostate cancer treatment from Dendreon [DNDN  50.18    10.56  (+26.65%)   ] that uses the body's immune system to fight the disease received federal approval Thursday.

    Doctors have been trying to develop such a therapy for decades, but it’s Dendreon’s drug – called Provenge – that was first to win approval. "I suspect within five to ten years immunotherapies will be a big part of cancer therapy in general," said Dr. Phil Kantoff, a professor of Harvard Medical School who helped run the studies of Provenge.
    Currently doctors treat cancer by surgically removing tumors, attacking them with chemotherapy drugs or blasting them with radiation. Provenge offers an important fourth approach by directing the body's natural defense mechanisms against the disease.
    The drug is intended to treat prostate cancer that has spread elsewhere in the body and is not responding to hormone therapy.
    Medical specialists hailed the approval as an important milestone, but stressed it will serve as an addition to current practice, not a replacement. "This is just one step in a new pathway for treating patients," said Dr. Simon Hall, chairman of urology at Mt. Sinai Hospital "We have to make them realize this isn't a cure, it's very variable."
    The news is out and the stock is up to $51.79, up well over 35% from my recommendation on April 13. The question now for whoever followed the suggestion is, what do we do now? It would definitely be prudent to take some profits on an unbelievable short-term gain. However, digging deeper into the growth prospects, that stock looks quite attractive for the long term to keep a smaller long position. The revenue estimates are setting up Provenge to be a blockbuster with sales up to $1-2 billion/year within 2-3 years. There is also a high probability of a buyout which should send shares even higher. There are many big pharma names out there sitting on a pile of cash, such as Pfizer. These big pharma names need to fill their product portfolio with blockbuster novel treatments like Provenge, because they will be hitting a wall of patent expirations soon.

    An obvious potential threat would be future competition. According to Reuters:
    Other companies are exploring the field. GlaxoSmithKline (GSK.L) is studying a lung cancer vaccine while Bristol-Myers Squibb (BMY.N) is testing a melanoma vaccine.
    Danish biotech Bavarian Nordic A/S (BAVA.CO) is about to start late-stage testing of a rival prostate cancer vaccine called Prostvac that does not need to be tailored to the individual patient.

    Another setback could be lack of supply or production delays.
    Christopher Raymond, an analyst with Robert Baird & Co, said the company told investors in a conference call there will be only enough Provenge within the next 12 months to treat 2,000 patients, all from a factory in New Jersey that is operating at 25 percent capacity.
    Dendreon said three plants will be running by mid-2011, which Raymond said should be able to supply 4,400 patients in 2011, and about 8,000 patients in 2012.

    I'm considering a major threat could be managed care organizations and Medicare not including Provenge on their drug formulary lists because of the high $93,000 cost per treatment. However, most treatments for Cancer and HIV disease states typically don't have too much of a problem getting on formulary. That is just purely my speculative opinion from experience in the industry.

    I have no idea how to calculate a target price because there is no multiple history due to the company operating at a loss. But I'll try to do a very high level and probably inaccurate calculation. What we do know is:

    2010 Revenue Estimates= $79.42 million
    Current EPS= $-2.04 on Shares outstanding=  134.14 million

    If DNDN can get to $1 Billion in revenues by 2011, that would be a 1259% increase. Most Biotech companies operate on 30-45% operating margins. So if total revenues were $1 billion, Net income could essentially come out to $300,000,000 on a conservative 30% operating margin. Making an approximate EPS of $2.23. That's a $4.27/share shift. What does that mean? I have no idea since we don't know what multiple investors will pay. But the prospects for top line revenue growth are tremendous. So please evaluate all aspects carefully and don't be too greedy.


    Do not rely solely on the opinions of this blog or any other site when making an investment decision. Any investment could result in the risk of loss of capital. Please consider seeking professional advice before initiating your investment ideas.

    Disclosure: Long DNDN
    Tags: DNDN
    Apr 30 3:13 AM | Link | Comment!
  • Hedge Funds Are Adding To Their Long Positions In Crude
    According to B of A/ Merrill Lynch's, "Hedge Fund Monitor Report" dated April 26, 2010:

    Overall, Hedge Funds remain cautions on US equities, further selling the S&P 500 and pairing back on the NDX. At the same time, despite some selling last week, they remain very net long metals and energy. They also continue to be very short the Euro and are keeping to their curve steepening trade.

    These data points were considered significant Hedge Fund moves across all asset classes. Hedge funds as of last week were cautious of the overall market and were looking for protection on the downside. It's like they saw yesterday's 200+ point decline before it even happened. The focus has been with smaller cap stocks, or higher beta plays, but now they are fleeing to safety and rotating into oil.

    The oil data point actually caught my interest, stating that hedge funds were adding to their crowded longs in oil. This is because I had a great conversation last week with a fellow investor from Stanford (A. Ho) who focuses on sectors that he thinks will do well in a 3-6 month time frame. He recommended taking a look at stocks that move with higher oil prices. His higher oil thesis is right in line with the hedge funds. I'll be sure to discuss the other sectors he is fond of in the near future, since he has had a hot hand as of late.

    The stocks we discussed are Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX) & ConocoPhillips (NYSE:COP) which should benefit with higher oil prices. Their valuation look extremely attractive at these levels as well. CVX is the cheapest on a current multiple valuation basis and XOM has the best PEG of an impressive .75 (We always try to look for a PEG of under 2). Other companies he suggested taking a look at are MRO, CLR, TLM & DIG. I have yet to conduct thorough analysis on these, but it's definitely worth taking a look.

    Jim Cramer has been recommending oil drillers as of late because he just recently stated that oil should be going to $100/barrel. More specifically Weatherford Int. (NYSE:WFT). He also recommended Occidental Petroleum as an oil play as well.


    Do not rely solely on the opinions of this blog or any other site when making an investment decision. Any investment could result in the risk of loss of capital. Please consider seeking professional advice before initiating your investment ideas.
    Tags: XOM, CVX, COP, MRO, CLR, TLM, DIG, Oil
    Apr 29 3:37 AM | Link | Comment!
Full index of posts »
Latest Followers
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.