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Thursday, March 28, 2024

Tuesday’s Thoughts

Wow! I hate to be right sometimes, especially this fast – just as oil was moving down to $57 they blew up a pipeline in Iraq. Much as I despise conspiracy theorists, we have to believe there is something up when I can predict a terror attack based on a commodity chart!

You need to keep in mind that a small country like Saudi Arabia (26M people) produces $500M a day in oil at these prices. A $1 drop in price costs somebody $3.6Bn a year in that country alone! You don’t need Columbo on your team to follow the money in this industry…

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GS has a mini scandal to deal in with Japan and has a lot of technical weakness to overcome. A break down below $126 could lead to a great fall down to support at $116 but don’t touch it if it goes up.

We were never sorry that we shorted BSX way back on the 12/5 TOTD and boy are we going to be happy now! GDT just drastically cut outlook “well below” wall street expectations (which were already lowered). It looks to me like “well below” is on the order of half or less in earnings on 20% lower sales. I wonder if JNJ will get the lift they deserve out of this for being smart enough to walk away from this deal?

BMY got a nice approval today on arthritis medication and should get a nice jump but it’s a crowded field and the stock is already up from $21 on anticipation of this so do not get involved at $25 where it will likely open.

Although MRK is on a roll I think the legal issues will be back and I will be looking for a short entry, especially if the stock moves up further. The new cholesterol drug is really just a combination of existing products and does not merit the move in the stock. Las week’s analyst conference gave me no confidence for the future.

I like ABT in the big pharma space as it is trading below 2003 levels even though revenues and earnings are up 25% since then. The company is nicely diversified into medical devices like J&J did and I think they will start turning up on more people’s lists. The company is resting right on the 50 dma of $41 and I am looking for it to break up above that mark. Q3 was a disappointment but I think that was a one off so I will take advantage of the uncertainty coming into the first quarter by picking up the Aug $37.50s for $5 (a $1.80 premium) with a tight 10% stop in case the stock doesn’t break $41.

SBUX may give us an entry point in the next 30 days on a pullback, hopefully well below the 50 dma of $30. I will be watching this one closely for good spot. The company has posted a 20% gain in sales and a 25% gain in earnings yet is trading at the same price it opened the year with! Of course the stock tanked 25% last January so everyone is very nervous this week.

MOT has momentum and we made a great bottom call on that one a couple of weeks back. I would not be surprised to see it test $25 again before turning down. April $20s are just $4.20 (a .70 premium) and could be a great way to play this stock, looking for just 10% as we are with most year end purchases.

AAPL is giving me concern there is a study that shows that in 2005 there were 15 legal downloads per Ipod vs. 25 in 2004. Anyone who has an Ipod knows that, with a 25,000 song capacity, those songs are coming from somewhere! Look for the music industry make a lot of noise this year, even with Elliot Spitzer on the attack. Stay away from all music stocks for sure but nothing can stop the Apple juggernaut which should easily hit it’s pre split price of $80 once again.

Today should be a nice day for SIRI with their 3M subscriber mark being officially confirmed. I think the Amazon numbers (showing XM in the lead) have been misleading as most SIRI tuners are channeled to direct retail for the type of instant gratification that Stern fans crave. The whisper number is a huge 3.2M subscribers which will be tough to meet but when Sirius reported 1M subscribers last year, the stock was at $8.35 so it certainly seems cheap at $7 with 3M subscribers…

In related news, between intense GPS sales, satellite radio and flat screen tv’ – expect BBY to break out soon. They had a definitive bounce off the 200 dma of $43 on Friday and should move back to test $46 soon so I like the Jan $45s for $1.15 but only for a quick ride as the stock had quite a collapse last January.

Everybody is talking about GRMN which is red hot on a huge GPS trend but I think rival COBR, who are just entering the GPS game will be the real story of the next year. Cobra is the biggest radar detector company by a mile and has all the outlets they need to break into GPS in a big way. Sales are up 10% but profits are up 400% which is exactly the kind of company that I love even though it has already doubled since October.

The terms of the TWX/GOOG deal are so favorable to Google that I expect the stock to head back up today. Under the agreement, Google can force TWX to buy them out in 2 years or they can take a larger stake – nice option for GOOG!

DOW is a significant user of natural gas and will benefit from today’s drop. The company faces a lot of resistance in the $45-$46 area but may make a significant move above that mark if Ngas continues to weaken towards $10 or less. The stock is way too cheap at this level based on cost fears but they have weathered it all year and I think Q4 will be a surprise to the upside. That makes the Mar $40s very attractive at $5.50 (a .90 premium) but I think I will wait to see if it does break over $46.

PCU may have gotten a little ahead of itself but is just consolidating for another move. I would like it to test the 50 dma of $62 but I don’t know if I’ll be that lucky. This is a company that is 300% ahead of ’03 in sales and 600% ahead in profits but selling at just 2x the 2003 median of $30 with a p/e of less than 7.

VAR had a great run and a nice pullback and should get a nice run into 1/25 earning so I like the Feb $50s for $2.70 looking for just 10% as anticipation drives up the option prices with a 10% stop in case something bad is announce.

cocktail party conversations with dentists indicate that SCHK is a very real company that should blow through projections this year. They do the instant color x-rays that are taking over the industry and have a lot of other cool tech the dentists covet and they are branching out into bones which is a very logical extension for them. Sales will outpace earnings for a while but this will be a very real company down the road.

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