|
To print article, click Print on your browser's File menu.
Go back
Posted 2/25/2004
|
SuperModels Community
Join the discussion in the MSN Money SuperModels Community.
Purchase
Jon Markman's book
"Swing Trading"
at MSN Shopping.
SuperModels
Recent articles:
• 15 drillers to fuel your portfolio, 2/18/2004
• Take stock in the presidents, 2/11/2004
• Sauds royal house of cards, 2/4/2004
More...
| | SuperModels
Mail call: Drug stocks, drilling and Scouter ratings
Readers steer Markman to a generics angle on the prescription-drug bill and teach him a thing or two about natural gas. In return: 12 StockScouter picks for the next six months.
By Jon D. Markman
Every six weeks or so, the author of the SuperModels column answers his mail as readers implore, Hey Modelman!
Hey Modelman: In your column on presidential stocks, you reported that Big Pharma wrote the prescription drug bill. Where did you get that information? I work for "big pharma," and it didn't help us a bit. It helped generics more than us, especially outpatient chemotherapy infusions. Example: Reimbursement for brand-name chemotherapies like Taxotere, a drug that I sell for Aventis (AVE, news, msgs), has declined so much that sales have taken a serious drop. It hasnt helped Eli Lilly (LLY, news, msgs) sell its chemotherapy drug Gemzar, either.
-- M.V., Thousand Oaks, Calif. SuperModels: Maybe theres just a problem in your pitch. The Medicare reform bill doesnt go into effect until 2006. And the fact that Aventis is up a big 40% since the Medicare bill was passed kind of undercuts your point. You raise an interesting issue, though. I hit the Web to look for public companies that make generic chemotherapy drugs. This Cancerquest page at Emory Universitys Web site lists all the generic chemo drugs; this Food and Drug Administration Web page lists generics the government has approved since 2000 month by month; and, this screen shows all the generic drug makers in the MSN Money database. And the winners are . . . ? Hopefully the cancer sufferers who benefit from this three-way intersection of science, capitalism and bargain-hunting. And also perhaps the shareholders of these two companies: SuperGen (SUPG, news, msgs), which has traded down to support recently after announcing positive preliminary results for Dacogen, a candidate to treat the bone-marrow illness myelodysplastic syndrome; and GenVec (GNVC, news, msgs), which has advanced smartly to resistance in the past six months and is the maker of TNFerade, a promising chemotherapy drug candidate aimed at treatment of pancreatic and esophageal cancer, as well as candidates for HIV, SARS and malaria vaccines.
Hey Modelman: In your column about small-cap energy producers, Im surprised you didn't mention FX Energy (FXEN, news, msgs), who just brought in a natural-gas well in Poland -- an area geologists are saying is analogous to the North Sea and the finds in Holland. FX has got Richard Hardman on board, too. He received the Commander of the British Empire honor from Queen Elizabeth as a reward for leading the successful search in the North Sea. Supermodels: FX Energy, which has moved to $10 from $3 in the past year, has a big fan club, not to mention a super-busy message board at Yahoo! Finance, as I received a dozen irate e-mails complaining of its exclusion from my list. The stock has certainly zoomed into gusher mode upon news of the appointment of Hardman and some early success in Poland with its Zaniemysl-3 exploratory well, but it seems a bit early for all but rank speculators, as trailing 12-month sales are still only $2.5 million, putting the stocks price-to-sales multiple at an astronomic 84.2. If thats too rich for your blood but you still want to speculate, consider an acquisitive company such as Plains Exploration & Production (PXP, news, msgs), which is using new engineering techniques to look for energy in offshore and onshore California, Texas and Louisiana. Analysts at the oil-patch research firm Petrie Parkman consider Plains one of the cheapest small-cap energy producers, and they -- along with the credit-rating agency Moodys -- applauded Plains purchase of Nuevo Energy to boost its inventory of low-risk, long-life reserves. Plains Resources (PLX, news, msgs), a spin-off of Plains Exploration, was bought at a premium last week by a private-equity company controlled by Microsoft (MSFT, news, msgs) co-founder Paul Allen.
Hey Modelman: Im an independent who drills for natural gas in Michigan. Can you tell me exactly what gorgeous landscapes are being defiled by filthy rows of steel stinkbugs? (See "15 drillers to fuel your portfolio.") Thats a gratuitous rant against the industry that comes from history books of the early 20th century. These days, when I am allowed to drill in the prettiest scenery here in Northern Michigan, it takes a full permit process by environmental agencies, environmental impact statements, and then I drill using one rig on spaced units far apart and in wooded areas where you couldn't see the drilling rig if you looked hard. And after about three weeks, the rig is taken down and moved out. Does anything we do not have an impact on the environment? . . . And by the way, we dont sink wells . . . we drill holes, which are about a foot wide, and if we hit a target formation that has commercial amounts of hydrocarbons, then they become wells. If not, we call them dry holes and move on.Supermodels: Who knew there was a big oil-and-gas business in Michigan? I stand corrected. According to this Web site, in 2002 Michigan produced 6.1 billion cubic meters of natural gas -- ranking it 12th in the nation. See where your state ranks here.
Hey Modelman: Most of the stocks listed in your top 20 table rated a 9 or 10 in your Jan. 7, 2004, column ("StockScouter likes oil, shipping for 2004") are now listed by StockScouter as an 8 or below -- and several that were 10s are now 5s and 6s in just a month and a half. What is the point of following this model when one day a stock is a 10 and the next month it is a 6?
Supermodels: A StockScouter rating represents a six-month forecast of risk-adjusted performance; it balances current valuation, fundamentals, price performance and ownership trends against expected volatility. The most volatile ingredient in that formula tends to be expected volatility, and since that number stands alone as the denominator in the StockScouter equation, it has a big influence on the rating. StockScouter is built to prefer stocks that are relatively stable with a very modest positive bias -- that is, ones whose prices dont zigzag around much. So a stock typically gets a 10 when the price has been gingerly lifting or has been relatively flat for awhile. When a stock suddenly lifts sharply higher, or dips sharply lower, the expected volatility rises and the StockScouter rating tends to go down.
Compare Tsakos Energy Navigation (TNP, news, msgs), which was a 9 and is now a 10, with Dura Automotive Systems (DRRA, news, msgs), which was a 10 and is now a 6. The thing to keep in mind is that StockScouter stocks are meant to be bought in a group that is held for six months. Despite the variability of the StockScouter rankings, as a group, the 20 listed in that column are up 6% since Jan. 5, versus just 2% for the S&P 500 ($INX). Best so far are Tsakos, +48%, Bassett Furniture (BSET, news, msgs), +29%, and Stelmar Shipping (SJH, news, msgs), +26%. All of those are still 9s and 10s. The 50-stock rebalanced StockScouter portfolio is now up 68% since its launch in June 2001, versus -6% for the S&P 500 Index. Speaking of gas, one of the top StockScouter stocks right now is NuCo2 (NUCO, news, msgs), the nations largest supplier of bulk carbon-dioxide systems for carbonating fountain drinks in restaurants. Using this screen, here are 11 more to consider for the next six months.
| StockScouter Top 12: Mid-February | | Company Name | Rating | Fundamental | Valuation | Technical | Ownership | Feb. 24 Price | | RadioShack (RSH, news, msgs) | 10 | A | A | A | B | $33.78 | | North Fork Bancorp (NFB, news, msgs) | 9 | B | A | A | A | 41.90 | | W.R. Berkley (BER, news, msgs) | 9 | A | B | A | A | 40.25 | | NovaStar Financial (NFI, news, msgs) | 10 | B | A | A | B | 50.70 | | PartnerRe (PRE, news, msgs) | 9 | B | A | B | A | 55.13 | | Perrigo (PRGO, news, msgs) | 10 | B | A | A | B | 18.31 | | KCS Energy (KCS, news, msgs) | 9 | B | B | B | B | 9.86 | | First BanCorp. (FBP, news, msgs) | 10 | B | A | A | B | 41.25 | | NuCo2 (NUCO, news, msgs) | 10 | A | B | A | A | 14.96 | | Virginia Commerce Bancorp (VCBI, news, msgs) | 10 | A | B | B | B | 30.96 | | Lakeland Bancorp (LBAI, news, msgs) | 10 | B | B | B | A | 16.92 | | American Vanguard (AVD, news, msgs) | 9 | B | B | B | B | 34.20 |
|
Fine Print
British newspapers are reporting that the U.S. military has boxed Osama bin Laden into a trap in the northern Pakistani mountains and are getting ready to go in for the kill. As investors, our craven minds instantly shift into whats in it for me mode. My guess: Stocks up, bonds down, gold down, dollar up, oil either down or steady. This would have to be much bigger than capturing Saddam, which led, perhaps not via straight-line causality, to a 560-point rally in the Dow Jones Industrials ($INDU) since mid-December. Could a happy Act 3 in the Osama Drama lead to another big rally? My guess is yes. Put me down for Dow 11,300-plus in the multi-week aftermath, particularly if oil prices come way down. . . . Thanks for all the entries in the presidential stock contest; first announcement of ongoing results next week.
Jon D. Markman is publisher of StockTactics Advisor, an independent weekly investment newsletter, as well as senior strategist and portfolio manager at Pinnacle Investment Advisors. While he cannot provide personalized investment advice or recommendations, he welcomes column critiques and comments at jdm68@lycos.com. At the time of publication, Markman held positions in the following securities mentioned in this column: KCS Energy, First BanCorp.
|
