The market has reminded us time and again that not paying attention and simply "hoping" for an up move is not a sound strategy.While people can argue buy-and-hold vs. other more active strategies, we believe that the recent volatility has caused enough pain that investors are now paying more attention and searching for more active ideas. So today we offer five ideas from our stable of newsletters. Each newsletter has an array of ideas, but we will select five each week as a teaser to all the other great ideas you can get from all the different newsletters we offer. Action Alerts PLUS: Jim Cramer bought 100 shares of BHP Billiton ( BHP): "I am going to buy 100 shares on weakness around $45.90. The stock has had a nice move since I began building the position, and the pullback is a good opportunity to increase my bet in this name as well as in the materials sector in general. BHP is best-in-class with a diverse resource mix, a strong balance sheet and an experienced management team. I remain bullish on China, and this is a good way to play the recovery in that region. Material prices have stabilized, and I expect prices to gradually work higher as evidence begins to build on the global recovery. BHP is in excellent position to benefit with the turn. After my trade, I will own 1,100 shares of BHP, or 2.19% of the fund." Jim Cramer, 3/27/09, Action Alerts PLUS In the most recent Action Alerts PLUS, Jim had several other picks. Click here to check them out.
Biotech Select: Adam Feuerstein added Amgen ( AMGN) at $46 to the Biotech Select portfolio. Adam said, "The selloff in the biotech group that began with the release of President Obama's health care reform plans has hit Amgen especially hard, with shares down 18% since Feb. 25. Amgen is a bit more vulnerable to health care reform than some of the other large-cap biotech stocks, mainly due to the competitive threat from generic biotech therapies (also known as biogenerics). However, I believe that investor concerns regarding the fate of the biotech group as a whole -- and Amgen in particular -- under 'ObamaCare' are overblown. "At Friday's closing price of $46.38, Amgen is trading at a price-to-earnings (P/E) ratio of 10 times the Street's 2009 earnings estimate and 9 times 2010 earnings. Even acknowledging the multiple contraction across biotech, Amgen's P/E is attractive -- especially as we move toward the middle of the year when investors starting looking out to 2010 for valuation. Later this year, Amgen is scheduled to release important data from phase III studies of its bone-building drug denosumab in various oncology indications. Investors have tended to overlook denosumab's commercial opportunity in cancer because of all the attention paid to the drug's pending approval and launch as an osteoporosis treatment. The cancer data, if positive (and I think it will be), is therefore an important catalyst for the stock.
Insider Insights: Jonathan Moreland added Comtech ( CMTL) at $23.69 as a long: "A 'pause' in new product rollouts to Comtech Telecom's main customer has hardly been received as an event that 'refreshes.' Instead, the announcement during a recent earnings conference call caused the firm's shares to gap down by nearly 40% on March 10. Comtech makes satellite transceivers as well as the larger systems that tie them together to form a mobile communications network. "The firm supplies both commercial and military markets with its wares, but the ongoing hostilities in Iraq and Afghanistan have made the U.S. armed forces Comtech's largest customer of late. The company has two contracts with the military. Its Movement Tracking System assists the military with logistics communications, and the Blue Force Tracking system assists in battle command. Comtech had managed an incredible multiyear string of earnings surprises, and even delivered a positive bottom-line number in its second quarter (ended Jan. 31). But management jolted both analysts and investors with sharply lower revenue guidance for fiscal 2010." --Jonathan Moreland, 3/27/09, Insider Insights Jonathan Moreland's Insider Insights is one of the best-kept secrets around. Check out his other solid picks.
Nails on the Numbers: Lenny "Nails" Dykstra started a position in Gilead ( GILD) recently: "Biotech is one of the few industries in which earnings are not expected to shrink this year. The biotech industry anticipates half-a-percent growth in earnings in 2009. Biopharma giant Gilead Sciences, the maker of Tamiflu, stands out from the crowd with expected earnings growth of 15.7%. It's my pick for today. "Most of Gilead's prescription medications for infectious diseases and hypertension have names that don't exactly roll off the tongue, but they are profitable. Due to its earnings outlook, Gilead hasn't been treated as roughly as most of the stocks I pick. Shares are down 13% year to date and 23% from their August high of $57.63. At its earnings-per-share consensus estimate of $2.93, Gilead trades at a pricey 18.2 times 2009 earnings. But the stock has a terrific price-to-earnings-to-growth (PEG) estimate of 1.2 -- at a time when so many companies have negative PEGs -- and a price-to-book ratio of 9.8. "Gilead's market cap is comparable to Bristol-Myers Squibb ( BMY), whose shares have lost only 10% year to date. Bristol-Myers' forward price-to-earnings (P/E) ratio is more value-oriented at 10.9, but the stock has a comparable PEG ratio of 1.0. Shares in Gilead's much larger competitor GlaxoSmithKline ( GSK) have dropped 19% since the beginning of the year. GlaxoSmithKline trades at 8.5 times 2009 EPS, but its PEG ratio of 1.6 for this year isn't the best growth you'll find for your dollar. With operating cash flow of $2.2 billion, Gilead produced free cash flow of $2.1 billion in 2008, up 24% year over year. Looking at Gilead's liquidity, its current ratio (or its ability to cover current liabilities with current assets) has dropped a bit year over year. But at 3.5, its current ratio is still very high. And Gilead's long-term liabilities-to-equity ratio in December was excellent at 0.28, which is an improvement over the already sound ratio of 0.35 the year before.
Options Alerts: Jud Pyle stated a position in Cummins ( CMI): "The trade:
- "Sell to open 10 June $25 puts (CMIRE) at $3.40 or better.
- "Buy to open 10 June $15 puts (CMIRC) at $0.60 or better.