We are in one of those periods where the sellers are exhausted and the news isn't so bad for a few weeks -- otherwise known as an oversold market. I still see that double bottom pattern in the market but I also know the financials can't be done yet because housing is still falling, unemployment is just starting its rise and banks/servicers have been slow to deal with foreclosures or delinquencies.
I still didn't do the Moody's sale yet but I'm hoping to get a decent price on some calls -- I figure the May options have lots of premium in them so why not get some cash and if the stock gets called away it will be at a value that I am comfortable with selling.
Big issue for me is what to do about ILMN -- its been a rocket from $32 to high $70's. The PE is way up there but then again they have had strong upside to estimates in the past several quarters and they are in the midst of a powerful product cycle in next gen sequencing. I am betting the stock will continue to rise into the next earnings report -- I may try to sell shares or some calls prior to the report to help lock in some gains. Often times a stock soars prior to the report and then fizzles after as all the good news was in the stock prior to the news so its a buy the rumor sell the news kind of thing. BLUD actually managed to go up 10% the day before and the day after the report -- pretty impressive.
I didn't get the chance to finish reading a report on CME on Friday but it was kind of interesting -- talked about how open interest levels (futures contracts that have been opened -- i.e. first part of trade executed) are stagnating and that the correlation with volume is very high -- will likely see trading volumes flatten out here. Estimates are for $20 in 2008 and nearly $25 in 2009 -- so at $500 the stock is 25x 08 and 20x 09. Of course slowing volume means those 09 estimates are too high. lots of other reasons to expect rising volume -- volatility, tech improvements leading to faster response times, smaller tick sizes on some treasury contracts, NYMEX deal providing synergies, etc. I might trim my holdings in CME if I manage to guess when the rally ends. I think the stock will continue to get hurt during any financials sell off. If I sell a third prior to the next decline, maybe I can buy more shares on the cheap.
Report out on Cree last week suggesting two things -- that the transition of general lumination to LED is going to take longer than expected to get started but that the opportunity is so large that even a delayed cycle is big enough to drive Cree's results. The technology is advancing and there are expected to be high barriers to entry and lower cap ex requirements than in the past and all kinds of other good news on this story. I think there will likely be another chance to buy it in the low 20's on a disappointing delay. we shall see.
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Kyle, as to ILMN: I guess we share the same feelings about ILMN: "It's great, but it's expensive". I, for one, would not want to miss it in my portfolio. But making it a large position at current quotations (i.e 75+)? Nope. I tend to be rather risk-averse, but so what. I feel much more comfortable when I put my money in proven leader, such as TECH, or QGEN. alternatively, I love to put money into a company suffering the "bump in the road"- syndrome (such as ANGO). I also bought some EVVV recently, even though I don't like their past purchase of Foxhollow. I also bought some shares in the regional retailer DUCK (no, WMT is not an imminent threat there, the balance sheet is decent and they will survive), or in the fashion retailer WTSLA (what went wrong went wrong). It might be wiser to stick with leaders, such as ISRG, ILMN, AGN. But, alas, In have this Samaritan vein.....
BTW, I think that your "secular" approach to investing makes eminent sense. The most important issue is: how do you allocate our capital, i.e where do you place your LARGE bets. I (as you and some others) may write about ILMN, EVVV, or some fancy biotech companies, because we own a couple of share and like some aspects of these companies. The 1 million dollar question is, however: where do we place our LARGE bets? It's Nestlé, Techne, Contango, Qiagen, Invitrogen, Synthes, etc.
All very solid, eminently profitable companies with stellar leadership, trading at reasonable valutations...
regards
Dr John
PS: already sold BLUD again; probalby my mistake. Bought some SGP, after the fall (at 14.4), meaning, that, without planning, I am having more and more large cap pharmaceuticals in portfolio (AMGN, WYE,SGP,and, of course, Roche). Is this the beginning of a trend? At the end of the day, these coimpanies might be CHEAP right now...??!! Lots to dislike with the larbge cap pharmaceuticals... but that's probably why there are picks in this sector....
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