Here we go again. After laying off Europe's debt troubles and weak overall economic situation for a week or two, the headlines this weekend are again warning investors in the United States that the woes across the pond are likely to weigh down the US markets and have a negative impact on earnings. There's no debating the validity of such headlines, but it's the somewhat erratic nature of the news media that ignores such news one week only to have it become a factor the next.
As we discussed last week, most media outlets refrained from making much of the European situation after an encouraging summit a few weeks ago, but the calamity over there is far from over, or solved, so there is also the chance that sporadic news will flow in to the US markets and spark another round of major selling. Already, the Euro has declined against other major foreign currencies, including the dollar, which is good news for vacationers or business folk looking to see their money go just a little further on the continent of bank vacation spots.
Worrisome news from Europe, still, is just something for investors to keep in the back of their minds, although there may be enough going on in the US to damper any hopes of a summer rally anyway.
Stocks dropped earlier in the month after a weak jobs report and just last week it was revealed that retail sales numbers are continuing to slump, both signs that the US recovery may be in a phase of slowdown and spurring some analysts to predict that another recession is all but upon us. On the upside, comments from Bernanke last week indicated that the Fed is prepared to continue its measures of stimulating encouraging growth - although debates flared in the media circuits about whether or not there is much left for the Fed to do that it hasn't been tried already.
The key data expected to roll in this week will be Friday when the second quarter GDP numbers will roll in. Data are expected by analysts to reveal growth of 1.5% and any disappointment there could send stocks tumbling, maybe more dramatically so than how the markets ended last week.
It's also worth keeping an eye on California. It seems like every other day another city out there in fantasy land is going bust, and the way that state dishes out pensions, handouts and other subsidies at unrealistic rates, many wonder when the state itself is going to go under. You also get the impression many out there, both citizens and politicians alike, are living in denial - there's a whole lotta tough talk about fixing things, but when it goes to a vote, no one stands their ground.
The Libor scandal is still making news. As regulators investigate - and are revealed to have been part of the problem - many of the big Libor banks are discussing a joint settlement. Probably not a bad idea, given the amount of criminal and civil lawsuits that are likely to result from the scandal as the lawyers get their ducks in a row. This tactic will give firms a 'one stop shop' for regulators - and lawyers - and would also allow regulators to beef themselves up with the amount of the combined settlement number, likely to be huge, but still not as much as if each entity was fined on its own.
After seeing the heat that Barclays took - and that bank fully cooperated - no other bank is willing to be next in line to feel the wrath of regulators and see their chances of success get flushed just about as quickly as the New York Mets postseason chances.
Given that the Libor news is not catching anyone by surprise and large payouts are expected, this ordeal is likely already being priced into trading. The quicker it all goes away, however, the better for everyone - but isn't that always the case?
Here's a few stocks and stories to keep an eye on during the coming week...
Earnings are still in full swing this week. The recent trend has the big boys reporting slightly better-than-expected earnings numbers thus far during the period, but nothing significant enough to spark a broad and long-lasting rally. More on earnings numbers a little later. Earnings highlights for the upcoming week will include Apple (AAPL), where investors are banking on another dose of strong numbers, and Amazon (AMZN), who last week it was rumored would jump into the smart phone market.
The Facebook (FB) report, however, could be the key one to watch. Given the hype and hoopla surrounding the IPO that left many investors feeling like victims of insider greed rather than shareholders of a game-changing company, these numbers are going to be much anticipated and have the potential to seriously influence the short to mid term FB trading trends. Numbers not publicly released before the IPO showed declining earnings for the social media behemoth and if that trend continues into the company's first quarterly report as a public company, then shares could be in for another quick round south. More than likely, however, we'll see numbers in line with estimates, which won't have much of a bearing on trading.
It's clear that Facebook does not intend to take its new challenges lightly. Although not much has been heard from officials since the IPO, after all, the new millionaires and billionaires had money vacations to exotic locations to take - can't blame them for that - but a few key acquisitions show that the company is gunning for the mobile market and, as an alliance with Comcast Corp (CMCSA) to provide Olympic coverage, maybe make a play for validity in the news distribution and reporting market. Such a move would position Facebook to compete with Yahoo's (YHOO) distribution network. Yahoo, in its own right, is in the spotlight again. Armed with a new CEO, there's much speculation surrounding this one-time indisputable champion['s potential turnaround
Yum Brands (YUM) reported last week, which sets the tone for the McDonald's (MCD) report this week. YUM missed a bit on profits, due to rising costs in China, but expects the decline to be only temporary. The company predicts a return to double digit growth over there by the next report and YUM continues to look like a decent long term pic, for the IRA or something, by accumulating on the dips.
The upcoming McDonald's report could show a similar trend in China.
Coca-Cola (KO) reported slightly better-than-expected numbers for the quarter last week, announcing growth in emerging markets that offset declines in Europe. Coke is preparing for a move into Myanmar, one of the last bastions where its products are not sold, and expects to realize continued growth in emerging markets. Pepsi (PEP) is slated to report during the coming week.
Google (GOOG) set the standard with another solid report that beat expectations. Analysts had been worried that lower revenue generated from advertiser fees would hamper profits, but the company noted an increase in overall searches that helped to keep the report vibrant. Google's report, among others that beat estimates, helped to keep the markets tame amid the breakdown in other economic news.
Microsoft (MSFT), meanwhile, reported its first loss in two decades, but shares still rallied after the announcement since the company's numbers actually beat estimates. Looking to 'up its game' by introducing new services and technology over the coming quarters, CEO Steve Ballmer made some noise during the prior week in order to offset these expected losses by declaring war on Apple.
The battle cry has been heard, but the war will be fought by the consumer over how much of a dent Microsoft can make in Apple's dominant genres.
Microsoft also moved out of the ratings-losing business by ditching its relationship with NBC and selling its remaining shares in the cable news network, MSNBC. Losing in the ratings aside, Microsoft never looked to mix well with the broadcast business.
Shares were back up to over the thirty dollar mark after the report and closed last week above that mark after declining on Friday. Still a nice long-termer, in my opinion, with buys on the pullbacks.
General Electric (GE), another all-American staple, also slightly beat earnings indicating strength in the US markets for its products and services. Shares jumped to over twenty bucks on the report, but slipped to below that mark to close the week as the broad market dropped.
Both Human Genome Sciences (HGSI) and GlaxoSmithKline (GSK) are set to issue their respective reports, with the highlight there being the recently-announced agreement on a buyout price between the two that ends months of immature haggling. Given the deal is already announced and all but done, investors looking for other gains in the volatile biotech sector can bank their HGSI winning (congrats!) and go looking for another similar play, which leads us right into the next segment.
FDA Approval Plays:
Amarin Corp. (AMRN): As we noted last week, it's 'now time' for Amarin Corp. This is the week that the FDA is set to issue an approval decision for AMR-101, the company's lead drug candidate that treats high triglycerides, and shares have been inching higher for weeks in anticipation of the key date. What makes this play that much more exciting is the buyout and partnership talk that accompanies speculation on the approval.
Approval is all but in the bag, according to general street analysis and investor expectations, and that case was strengthened by the mysterious 'FDA approved' website that popped online for AMR-101 late last week, but it's still a mystery as to whether a buyout or partnership is a done deal or not. Many speculate that relevant parties may just be waiting on a definitive approval announcement before announcing such a deal, but the more conservative investors may not be convinced that such a deal is going to take place.
Amarin shares approached twenty dollars before, shortly after the announcement of very positive Phase III data that sparked the first round of buyout speculation. Shares were quickly cut in half over the next couple of months, however, after the company CEO - whose previous comments led to the initial buyout talk - indicated that Amarin would 'go it alone' and market AMR-101 on its own. A repeat of that scenario would be a 'worst case' - aside from the unlikely event of an all-out FDA denial - for the short term health of the AMRN stock and that fact will have some investors edgy and will likely contribute to the volatility that we'll likely see this week.
By conservative estimates AMRN should approach twenty at points this week leading into the approval day, but any buyout and/or partnership news would take it up higher, in my opinion. Keep in mind the highly volatile nature of the sector and the fact that quite a few stocks tend to drop post-approval. This action results from the day, swing, momentum and catalyst traders all departing their positions with gains and allowing the new longs in - those who were waiting on a definitive revenue generator - to jump in for the long haul. Such drops also respect the fact that just because a drug is approved, it doesn't mean significant revenue is right around the corner. Many expect shares to trade at a market that values potential peak shares of a product right after approval, but there is usually a ramp-up period following an approval to allow for growth. It's during that time that the shorts can take advantage of the lack of sales and weigh the stock down.
If sales don't ever really catch on, take a look at Dendreon (DNDN) and Avanir (AVNR) as examples of how that can play on a company's stock. BioDelivery Sciences (BDSI) is another prime example, dropping to two dollars from eight after sales for its lead product never materialized due to REMS issues. Shares have since rebounded for that play.
Buyout talk could alleviate any post-approval drop, but such as action is still a possibility.
Amarin is going to be a hot stock to watch during the coming week, and it could be a roller-coaster ride.
Horizon Pharma (HZNP): Horizon Pharma is another one that has posted huge gains over the past few months and also has an FDA date pending this week. Shares have more than doubled since early June when investors started taking notice of the pending FDA date for the company's rheumatoid arthritis treatment, Rayos. Horizon also has an osteoarthritis and rheumatoid arthritis drug, Duexis, on the market, although sales for that product have been modest, thus far.
While consensus also has it that Rayos will also receive approval coming up, the product has not necessarily been identified as an 'instant blockbuster' like Amarin's AMR-101. Additionally, speculation also has it that the product is not going to gain swift market share and has even been labeled as a "me, too" drug since it is a controlled-release dosage of something already on the market.
Another factor that comes into play for the stock is that it is not necessarily a buyout candidate or takeover target right now, which could leave it more susceptible to a post-approval drop, as talked about above. Reports have indicated that the company is boosting its own sales force, meaning the plan is to 'go it alone.' Unfortunately those plans don't always work out well for the little guy, as demonstrated by Dendreon, especially when a company is peddling products that doctors aren't quite convinced are better than what's already out there. Big pharma could promote such products and get away with it, not so easy for the new player on the block.
The insider buying and the hedge fund interest makes HZNP still an exciting play, but even post-approval, this one is still going to be a little more speculative than most. Also keep in mind that many hedge funds like to bank those quick profits, so the interest of such funds is nice, if you're getting in when they do. Until last month HZNP was lightly traded and little-known - often times a stock primed for a run, but also one that can be susceptible for a retreat as profits are taken.
On the other hand, analysts remain positive, although it's not a widely-covered company.
For those that already made gains, congrats. There's nothing wrong with sticking around with this one to see the story out, but I always emphasize that it's important to bank some gains with trading shares into any run. It's a lot worse, in my opinion, to watch unrealized bank disappear from a good pick than it is to have secured some gains by selling some shares and still watch a stock rise.
Greed is a dangerous game and a level head must be kept at all times. There's nothing wrong with banking out on a double, even if the stock eventually becomes a triple.
The key is to have an entry and an exit plan, and it's wise to have that plan devised before you even buy a stock - it should be part of routine DD. Long term pick? Catalyst play? Short term price goal? All questions to ask yourself during the DD stages, in my opinion.
Other stocks on our radar...
Implant Sciences (IMSC): Implant Sciences tripled in price in short time and has since retreated a bit, but still has some key catalysts pending that make it one to keep on the radar. Implant's explosive trace detection technology (ETD) has been gaining traction in high-threat international markets and may be poised to receive an approval by the US TSA in August that could launch this small company into the mainstream.
This company has also attracted some top talent from competing firms and has also added new managers and advisers who have previously served at high levels of the federal government, including the TSA itself, all indications that the company is preparing for its next stage of growth and development.
Implant's Quantum Sniffer ETD technology holds some major benefits over the competition that could easily land the company as the go-to vendor of choice as the US and countries around the globe guide additional resources towards airline and homeland defense.
It's been a volatile ride for IMSC as the stock had quite a bit of short interest, but shares closed strong last week. If all goes according to plan, the TSA approval news should just be weeks away.
Sunshine's C-Pulse Heart Assist System is a small device that is implanted in a patient's heart, but because it is implanted outside of the bloodstream it allows quality-of-life conveniences - such as the ability to be disconnected (for showering, for example) - that could quickly make it the market leader in meeting the unmet medical need of Class III and ambulatory Class IV heart failure. Early studies have also shown that C-Pulse may not only be able to steady the effects of heart failure, but perhaps reverse them, as well.
The technology and potential behind this breakthrough product may finally be getting noticed, if recent trading is any indication. Volume exploded along with the price and the company received mainstream attention from the likes of Reuters and FoxBusiness as a result.
With multiple catalysts pending this year, Sunshine Heart is not one to let too far out of sight. When lightly-traded companies such as this one with potentially huge technology start to move - things could materialize very quickly, as evidenced by recent trading.
One to keep monitoring.
Advanced Cell Technology (ACTC): A five percent spike on Friday put this one back above the eight cent mark, but the arguable leader in the advancement of embryonic stem cell therapy is still one to keep on the radar.
Discounted as just another "penny stock" to many, ACT was launched into the spotlight a while back when the FDA made the relatively tiny company only the second to receive an approval to conduct trials based on stem cell research. Geron (GERN) had been the first, but that company has since put its stem cell treatment for spinal cord injuries on hold in order to concentrate resources towards other pipeline candidates, which makes Advanced Cell the arguable leader in a potentially revolutionary medical field.
Advanced Cell Tech is advancing its retinal pigment epithelium (RPE) line through the clinical phase to treat conditions of severe vision loss, to include age-related macular degeneration (dry (AMD) and Starargardt's Macular Dystrophy. Initial results have been promising and the company released news last week that reaffirms the early positive results.
Although many potential investors are probably driven away from ACTC because of its OTCBB "penny" status, that won't be the case for long. With the resolution of a lawsuit having cleared some dead weight form the company's stock, plans were free to move forward to conduct a reverse stock split that could boost the company's stock to levels more attractive to the more conservative investors - and to levels where funds and institutional investors may start to take notice.
It's also been speculated that a move to a larger trading exchange, such as the Nasdaq, will accompany any reverse split, another key move that would allow for a much more solid and committed investor base.
When dealing with the speculative biotech and developing pharma sector, it's often a wise idea, in my opinion, to play with some trading shares while also building a base for the long term. ACTC shares have offered numerous opportunities over the past couple of years to have played some nice trades and the long term potential of the company only grows that much more with each positive update from the clinical trials.
Most stocks drop after reverse splits are conducted, so that's a note to keep in the back of the mind, but this company could end up becoming a transformational game changer, if it's not bought out first.
MRI Interventions (MRIC): Shares of MRI Interventions closed at under three bucks on Friday, a potential nice point to enter for those looking for the company's MRI-augmenting technology to continue making in-roads into the mainstream.
MRI Interventions is taking advantage of the trend towards less-invasive medical procedures - that translates into less expensive, also - and has developed a medical device that enables medical professionals to more-accurately and less-intrusively conduct procedures on the heart and brain that were previously known to be highly-intrusive, more time consuming - and therefore more expensive.
Volume and price started rolling heavily with MRIC earlier this month and late last on some positive updates on the partnership front - Tocagen announced that it would use MRIC's device in conjunction with an ongoing clinical trial - a spark that ignited a price run to five bucks from under two dollars.
Another key point that investors should not miss is MRIC's potential to land big partners, which also serves as additional validation of the technology. A few weeks ago the company revealed that Tocagen came on as a partner and would adopt the ClearPoint technology in association with its ongoing clinical trial for Toca 511 against the most aggressive form of brain cancer, recurrent high grade gliomas including glioblastoma multiforme (GBM). As noted in the press release announcing this new collaboration, ClearPoint will assist medical professionals at selected sites in delivering Toca 511 "into brain tumors under real-time magnetic resonance imaging (MRI) guidance."
With numerous companies also conducting similar trials and procedures, and with the minimally-invasive neurosurgery market already noted to be in the billions, the framework is well in place for MRIC's ClearPoint technology to join the fray and quickly recognize rapid growth, both clinically and commercially.
Already, aside from the Tocagen deal, MRIC has landed some high-profile partnerships.
The company is already partnered with Brainlab, a leader in the image-guided surgery field in the US and Europe, for the advancement of the ClearPoint technology and MRIC landed Siemens AG (SI) as a partner for the development of its ClearTrace system. Additionally, in a deal that came with an up-front payment of $13 million, Boston Scientific Corporation (BSX) signed a deal to incorporate MRIC's technologies into its cardiac pacemakers and neuromodulation products. Should BSX utilize the technology in any of its products, MRIC would be due royalty on any associated revenue.
The collaboration between such a relatively small company - with a potentially huge technology - and much larger companies such as Siemens and Boston Scientific, highlights MRIC as a buyout candidate and not just a licensing and technology partner. The company has built itself a solid patent portfolio that may still be worth more in itself than the MRIC market cap, but may still be considered a deal to a larger medical device company with a market cap in the billions.
News coverage, developments and rising investor interest may have created the perfect storm for MRI Interventions. As the surgical trend is to look for less-invasive - and therefore less expensive - means to conduct critical surgeries, MRIC is primed to become a leader in the field and could quickly attract the interest and trading volume to spark a share price run, as we've already seen demonstrated over the past couple of weeks.
There's really no such thing as a 'pure buyout play', but it's likely, in my opinion, that if an larger entity such as Boston Scientific embraces the technology, this company will be sucked up in an acquisition.
Teletouch Communications (TLLE): Teletouch continues to trade somewhat under the radar, but is still one to watch as the company transitions its business model primarily to that of distribution. Teletouch recently settled litigation with AT&T (T) filled the company's war chest with a settlement sum of $18 million and also led to a new multi-year agreement between the two companies that should keep the partnership in tact for years to come. Following the settlement, Teletouch quickly redirected its primary business model to the sale and distribution of telecom-related hardware.
Multiple new distribution agreements were quickly announced shortly thereafter, a key indication that this company may be positioned for serious growth, and the hiring of Timmy Monico, a thirty year veteran of the industry, as Vice President of Sales for its distribution unit, PCI Wholesale, further validates the company's new business plan.
The Monico addition could be a coup for Teletouch. Monico previously served as the Vice President of Sales for CellStar USA, and successfully built a sales network that generated revenues of more than three-quarters of a billion dollars for that company, according to Tuesday's press release. Heading up Teletouch's PCI Wholesale’s distribution division, it would only take a fraction of those numbers for Monico to make a dent in the TLLE market cap, which currently stands at just under $20 million.
Lpath, Inc (LPTN): Shares of Lpath have moved over eighty cents with trials about to re-start, potentially within weeks. LPTN was trading comfortably over a dollar before the hald of trials earlier in the year, due to reasons not associated with the company's products or potential, and the current prices could soon be looked back upon as a nice buying opportunity for those with an eye for the mid to long term. This company has become the recognized leader in lipid-based therapeutics and quickly caught the eye of Pfizer (PFE), with whom Lpath has already landed a significant partnership. Based on potential, the current prices could be a bargain.
Still worth watching.
Disclosure: Long IMSC, AMRN, LPTN.
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