- A biotech rocket takes off… and it’s not too late to hitch a ride
- Two reasons the Dow has sunk back below 18,000
- Bad breadth: Warning sign for the broad market?
- A brilliant housing-sector play moves into a new phase
- Deep-fried Mars bars and “the good of the community”… doubling down on what doesn’t work in the private sector… is it really so dumb to turn down a “10-ounce silver bar” for $10?… and more!
“There’s plenty of gas left in the tank with our trade,” says FDA Trader editor Ray Blanco.
Last Friday, Ray joined us to talk about a “one-two punch” cancer cure. Like many drugs, it attacks VEGF — a molecule that can help diseased cells multiply. Unlike many drugs, it also attacks MET — another molecule that’s even more dangerous, because it can help diseased cells spread from one part of the body to another.
It’s already approved for one kind of cancer. And it’s in Phase 3 trials for another — one that kills 134,000 people in a typical year. “If the results are good,” says Ray, “the company will have good reason to believe the drug can work on still other types of cancers — everything ranging from lung and prostate to breast and thyroid cancer.”
Little did we suspect Ray would be proven right within 72 hours.
Yesterday, the company working on this drug announced partial results from the trial. “The drug reduced the risk of disease progression or death by 42% when compared with an existing drug.”
Not quite a cancer cure — but a meaningful difference for sure.
And enough to propel the stock 44% in a day.
Don’t feel bad if you missed out. The company remains a buyout target. “You still have a good shot at a triple-digit profit from today’s price,” Ray tells us.
A quick refresher from Friday: The company also has a skin-cancer treatment in the works. The treatment is most effective when combined with an existing drug produced by a Big Pharma company — which has put up much of the money for the small company’s trials.
The FDA is set to make a decision by Nov. 11. Everything to date looks promising… and for the Big Pharma firm, the economics are such that a buyout makes a lot of sense. Biotech buyouts during 2014 resulted in one-day gains of 63%… 69%… and 229%.
A similar performance is entirely possible with the buyout possibility here: “The potential for the company’s pipeline,” Ray says, “suggests a steep premium from today’s price.”
But as we’ve already seen, you don’t want to wait till the “magic date” of Nov. 11 to take maximum advantage. Learn more about this opportunity — and the power of magic dates in general — when you follow this link.
It’s a bad day for blue chips, a “meh” day for everyone else. The S&P 500 and the Nasdaq are both down about a quarter percent as we write. The small-cap Russell 2000 is slightly in the green.
But the Dow? Yuck. It’s down nearly 1%, back below 18,000 — dragged down by IBM and United Technologies. “Big Blue” is down more than 5% this morning after reporting a drop in revenue for the 13th consecutive quarter.
United Technologies is slumping even worse, down more than 7.5%. It delivered an earnings “beat” this morning, but revised its outlook for the rest of the year lower.
Traders don’t know what to make of the company now that it plans to unload Sikorsky Aircraft — a move we discussed at the top of yesterday’s 5. UTX is less of a defense firm now and more a patchwork of unrelated businesses including elevators and HVAC systems.
“Absent Sikorsky,” says our defense-sector expert Byron King, “the largest ‘defense’ element of United Tech is its Pratt & Whitney engine business. Among other things, P&W supplies the F135 engine to the F-35 Joint Strike Fighter program… My prediction is that F135 engine problems will get expensive for P&W and, by extension, United Tech.”
“Fewer and fewer stocks are generating most of the market’s gains,” warns Greg Guenthner of our trading desk. He says 2015 is shaping up to be a year populated by a few “haves”… and many more “have-nots.”
The term the pros use is “breadth.” There’s not a lot of it. “The percentage of stocks above their respective 50-day moving averages has trended lower most of the year,” says Greg. “Take a look for yourself.
“As it stands right now,” Greg goes on, “only about half the stocks on the S&P 500 are above their 50-day moving averages. That means nearly 50% of the 500 biggest and best companies on the market aren’t locked in strong uptrends.”
Things are so out of whack right now that on Friday, the S&P 500 was up on the day — even though 363 of those 500 stocks were down on the day. Nothing like that’s happened since 1998.
“This crazy divergence doesn’t mean you should cut and run,” Greg advises, “but it does illustrate one thing: When dealing with a bull that’s getting a little long in the tooth, being selective is vital.”
Greg’s still keen on biotech. And we’ve already shown you the best way to be selective with those stocks.
Gold is holding onto the $1,100 level for the moment. At last check, the bid was $1,107, around where it was 24 hours ago.
Elsewhere in the commodity complex, crude dipped below $50 overnight but has since recovered to $50.54.
One of the “titans of finance” is shifting strategies — and our Zach Scheidt calls it “one of the biggest income opportunities of the decade.”
Six months ago, Zach sang the praises of Blackstone Group (BX) in our virtual pages. “Blackstone spent $9 billion during the financial crisis,” he reminds us, “to buy about 50,000 distressed houses in key real estate markets across the U.S.
“They bought most of these homes from banks or mortgage companies after the homeowners defaulted on their mortgages. Blackstone was able to buy these foreclosed homes at dirt-cheap prices, and has since rented them out. The monthly rental payments give Blackstone a lucrative amount of regular income” — which it has passed along to shareholders in the form of a hefty yield.
Last week brought word that Blackstone will unload some 1,300 of those homes in the Atlanta area. “Blackstone sees an opportunity to sell these homes for a healthy profit,” Zach explains. “These sales should help boost Blackstone’s third-quarter earnings. But more importantly, the sale of 1,300 homes is a signal that Blackstone is ready to start capitalizing on its savvy investment decision to buy homes when the housing market tanked.”
The company has signaled plans to sell another 1,200 homes before year-end. In addition, Blackstone might well spin off the division that owns these rental homes — another boon for shareholders. “The deal could happen anytime.” And while you wait, BX sports an impressive 9.1% yield.
[Ed. note: In addition, Zach remains keen on Americans “piggybacking” Canada’s version of Social Security — which unlike the U.S. version is professionally managed, runs a surplus and is growing its reserves. You can collect “benefits” of $400 a month and sometimes far more… and you can start at any age. Details here.]
Busybody bureaucrats out of control, Scottish edition: The “birthplace of the world-famous deep-fried Mars bar” can no longer advertise itself as such.
Legend has it a fish-and-chips place called the Haven came up with the — umm — delicacy during the mid-1990s. “Thousands of people come from all over the world to get a Mars bar and get their picture taken below the banner,” says Lorraine Watson, who bought the place and renamed it in early 2013.
Fish and chips and deep-fried Mars bars…
But not if the Aberdeenshire Council gets its way. Said a letter it sent to Ms. Watson: “What needs to be done: Remove banner. We would like you, for the greater good of the wider community, to consider doing this work.”
Watson is beside herself. “I can’t see what the council’s problem is. It’s actually bringing tourism to the town. I certainly won’t be doing it.”
Asked for comment by The Scotsman newspaper, a spokesman replied, “An action plan has been created in conjunction with the Stonehaven Town Partnership, community council, Stonehaven Business Association and the Horizon Group. As part of the action plan, we have asked some owners in the area to consider making alterations to their properties.”
The spokesman said the council is open to “discussions” with owners who object to the “action plans.” We’ll keep you posted…
“Your biases are showing,” a reader writes after we noted the TSA is doubling down on its failed security procedures and we remarked, “Only in government do you solve a problem by doing more of what’s proven not to work.”
“You should have a look at the entertainment industry,” our reader goes on, “and the way it responds to new technology. From the phonograph and the player piano to the VCR (which the head of the MPAA compared to a serial killer in testimony under oath) to the Internet, the MP3 player and YouTube, for over a century, they’ve been trying to sue or regulate any disruptive technology out of existence, only to fail and then, a few years down the road, figure out how to monetize this thing that was supposedly going to destroy them all.
“And that’s not even getting into their support for DRM, ‘anti-copying’ software that anyone with the slightest hint of a clue about how computers work can tell you can never actually work. And it never has, but that hasn’t stopped them from pushing it.”
The 5: You’ll get no argument from us. Many an industry has turned to government for protection from upstart competitors.
“Regarding the reader who witnessed a salesman hawking a silver ingot on the street,” reads one of several emails on the topic: “Who, in their right mind, is going to trust a street vendor to have a legitimate silver bar?
“Anyone amazed at people not buying something of supposed value on the street is simply naive and has obviously never seen all the phony Rolexes, Louis Vuitton bags, etc. for sale from street vendors.”
“If a complete stranger offered to sell you a $100 bill for $10,” another reader writes, “would you jump at such a great deal, or would you assume it must be counterfeit and that you were about to be cheated out of $10? I certainly would not have bought the silver bar without some means of assaying it.”
The 5: An excellent point. And the cost of assaying the bar would eat up a significant portion of the difference between the $10 price of the 10-ounce silver bar and its $150 value.
“Love you guys,” writes our final correspondent, “but as a novice who has not recovered from the crush of 2008-2011, I wish you would consider letting those of us who are living paycheck to paycheck pay you out of the profits from Black Ops.
“It’s like dangling a carrot in front of a horse: No matter how fast he runs, he’ll never catch it. Very stressful!”
The 5: We’re not quite sure we follow you, but we think you’re saying the subscription price of Byron King’s Military-Tech Alert is too rich for your blood.
Fair enough. It’s a premium service for which we charge a premium price. But if you have a little bit of money you want to put to work in the defense sector, you can buy an ETF like iShares U.S. Aerospace & Defense (ITA). It’s doubled since our executive publisher Addison Wiggin first suggested it in late 2011… and the companies in that fund still stand to collect billions from Uncle Sam in the years to come.
After a while, you should be able to afford the subscription price to get into Byron’s higher-risk-but-higher-reward plays. Let us know how it works out.
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. The saying goes the only sure things in life are death and taxes.
But taxes don’t apply to these six investment opportunities. Which makes them so famous among the elite.
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