Pharma
Pharma is short for pharmaceuticals and this has traditionally been an industry that I have shied away from as I’ve tried my best to incorporate a rule that I have learned from Warren Buffett and Peter Lynch awhile ago: Invest In Things That You Know
This is at odds at times with the strategy that I’ve been harnessing over time and that’s being a MACROVALUEQUANT. Often, my screens lead me select a stock that I believe has positive momentum (QUANT) and I further weed out these stocks if they are not trading at a low valuation (VALUE) and support my general view on what industries and sectors should do well in the current global economic environment (MACRO). My screens recently led me to 2 pharma stocks (See Pharma Premium Alerts Post) and I was very reluctant to nibble at the bait.
So far I've been building a position which has been supported by some additional comments that have caused me to give the Pharma sector a second look. The pharma industry is changing as patent expirations continues occur, revenue decreases will weigh on the industry. I am taking a lot from this simple statement because it could represent a shift in the current economics of this industry. I believe the stocks that will benefit from this type of shift are small and mid cap pharma stocks with great drug products. These stocks represent high risk, high reward opportunities for the companies developing the drugs. Also big pharma and drug stocks will likely look to acquire these smaller companies as their revenues decrease due to lost patents or they'll look to establish partnerships that have lucrative milestone-based goals.
Housing Double Dip
I was intrigued by a new investment product that could be marketed as a Home Protection Investment. This product is similar to buying a local investment contract that worth 1 to 3 percent of the value of your home. The investor gets a payout when they go to sell their home. If the local home market index falls the investor makes money through the investment. An important thing to note is its not where you lose money on your home but rather if the market index saw depreciation over that time period you would see a payout.
Netflix
I have been so wrong about this stock that I’m not going to bother to try to be right. I saw Whitney Tilson eat his own words and back off this stock and my mama didn’t raise a fool. They recently signed a deal with Miramax and Viacom and that should continue to buoy the stock. I recently heard an interview with the Netflix CEO and the strategy isn’t compelling…its pretty simple! The key he mentioned is the race to content and the faster they can get content deals done the larger advantage they have over their competitors. It sounds like many other services where being the first mover is of critical importance.
Oil Prices, Sky High
About a week ago oil was pushing everyone to the brink of disbelief. If it had kept going at its recent pace, I’m sure Chicago would have seen $5 a gallon (we’re at $4.60 right now)! The economy is inching higher as the employment numbers continue to improve, HOWEVER the price of gas could be the HAMMER that tips us back down. I’d like to reference numbers provided by Craig Johnson, president of Customer Growth Partners on CNBC (article: Killer Combo of High Gas, Food Prices at Key Tipping Point):
“Of the six US recessions since 1970, all but the "9-11 year 2001 recession" have been linked to—of not triggered by—energy prices that crossed the 6 percent of personal consumption expenditures, he said. (During the shallow 2001 recession, energy prices had risen to about 5 percent of spending, which is higher than the long-term 4 percent share.)”
This was after he noted that gas prices have surpassed 6 percent of spending.
No comments:
Post a Comment