ILMN and AB

The portfolio got a boost from ILMN on Thursday but then gave it back on Friday with AB.

Illumina was being held back by litigation with Affymetrix over various patents that Affymetrix said Illumina violated. They were about to start phase II of their trial when last Thursday they settled all litigation for a lump sum payment of just $90 mill. EVERYONE had assumed Illumina was going to have to pay on going royalties of close to 10% of sales. This was a huge victory for ILMN and that is why the stock popped around 15% higher. They have strong positions in the 3 main areas of genetic analysis with the key being their market leading share of next generation sequencing. ILMN appears to be an expensive stock -- I would peg them as being around 35 to 40 times 08 estimated free cash flow. The growth rate is also big -- probably in the 25-30% range for the next several years. I would probably wait on a pullback before buying now -- my original shares were bought at $32 with more bought at $56.

AB lowered Q4 numbers by 30 cents after hours on Thursday. The biggest issue is that their hedge funds are no longer earning any performance fees for 2007. The unknown at this point is how bad their results are -- how high are the high watermarks for those funds vs. current values (have to regain the lost value to reach a new high watermark before eligible to earn performance fees again). If the high watermarks are much higher than current values, then we need to assume no performance fees for 2008 and maybe beyond. This is a minor negative -- can't assume they are going to outperform all the time. it does impact asset growth and performance fees but just on one part of the business. Stock has a high yield, great management, lots of resources and plenty of opportunities on the global front.

I haved owned AB since 2001 through a lot of bad times and good times -- no reason to sell now.