Who is printing money? A look at the balance sheet of biotechnology company ....... Celgene

Dow Jones 10,850.36 (UP) week ending 03-26-2010

Biotechnology companies have a similar cost structure to oil companies that drill oil wells. Oil companies make large capital investments in drilling equipment and they often hit dry wells. But sometimes, occasionally, they hit a gusher. Biotechnology companies have a similar investment scenario. They spend a sizable amount of capital investment up front for research and development and Phase One, Two and Three testing for the viability of a new medicine. Many times these ventures are partial or total failures. However, they go through this exercise in the hopes of developing that one big blockbuster drug. When that happens it can mean years of solid revenue stream and company growth with lots of dollars falling right down to the balance sheet bottom-line.

In the case of Celgene (Symbol CELG, $62.43) that gusher and blockbuster goes by the name of Revlimid. According to Celgene's website,"REVLIMID® (lenalidomide) in combination with dexamethasone can slow the progression of multiple myeloma. REVLIMID® is an oral medication that can stop or slow the growth of cancerous myeloma cells within the bone marrow."
Celgene did 2.69 billion in sales in 2009 powered by the blockbuster REVLIMID at an unbelievable gross margin of 93.55%. Now that is printing money! Net margins run at 28.88%. The quarterly balance sheet shows a quick ratio of assets to liabilities as being 7.7 to 1. Celgene has no long term debt. The stock is only up 13.78% year to date, so it really hasn't taken off yet this year. You can still get in and buy the stock here. I tried to investigate the patent situation on the drug REVLIMID® and it appears to have 12 patents which range from expiring the end of 2010 all the way out to 2026. So further homework should be done in this area to discern the implications to sales revenue, because I am certainly a novice on this subject. The PE on the stock is currently 27.4. However, the 5 year revenue growth rate for Celgene has been running at 51.63%. So it is fairly common for a stock to have a higher PE that is growing at that fast a rate with those high profit margins. I don't know the impact of what Celgene's competitors may be offering to patients to compete against this drug, so I cannot factor that into the value of the price of the stock.


So Celgene could add a nice growth component to your portfolio. It does not offer a dividend, but instead puts that money back into R&D for future products. (This is good thinking to sustain the rapid growth.)

Hope you have good spring weather for gardening which is my other hobby.

Please feel free to leave comments on this blog about other stocks that print money! This is just my opinion and one idea offered on the subject. There are lots of others.

Freewilly

St. Patrick's Day week .... you knew I had to write about Beer stocks!

Dow Jones 10,741.98 (UP) week ending 03-19-2010


Warren Buffett loves to buy beverage stocks because they are usually pretty consistent companies for growth and earnings and they also generate a lot of cash. Coca-Cola, Buffett's largest beverage stock holding, does not make a brewed beer so will not be involved in this discussion. Since beer comes in flavors, I am going to give you a Small cap, a Mid cap, and a Large cap selection of beer stocks. Mid cap stocks are generally companies with capitalizations of 1 to 10 Billion dollars. The Small and Large caps fall on either side of that. Get it?

I will start with the Small cap stock The Boston Beer Company Inc., (Symbol SAM , $48.88), with the stock symbol named after its famous Samuel Adams Boston Lager beer. Samuel Adams of course is one of the original Tea Party members in Boston and his cousin, our second president, was the unwavering and eloquent John Adams. The Boston Beer Company did 415 million dollars in sales in 2009 and revenues have grown upward the most consistently over a five year period of any of the beer stocks I investigated. The 12 month Total return on the stock is 134.3%, so this was the best performer that I found that was still trading at a fair purchase price.

The next beer stock, which is a Mid cap stock with 3 billion in sales in 2009 and 4.77 billion in sales in 2008 is a "buy one get one free". Molson Coors Brewing Company CL B, (Symbol TAP, $43.36),
This stock gives you ownership of the whole Molson line of beers along with the Coors and the popular Coors Light lines of beer. The stock has a low PE of only 12 and offers a 2.21% dividend to add to your investment return. The 12 month total return on the stock was 29.3%. The earnings for the last quarter was 78.95% higher than the same quarter last year. Annual sales have trended up from 2005 to 2007 then have trended down since then, so you want to keep an eye on quarterly revenue numbers. Molson Coors Brewing Company boast 350 combined years of brewing heritage and offers some of the world's most popular beers with a respected product portfolio that includes nearly 40 distinct beer brands. Molson's Coors key to success is to get these brands to penetrate and expand into more global markets.

The last stock, the Large cap stock, is Diageo PLC ADS (Symbol DEO, $66.06), the owner of Guinness Draught beer and other international brands did 15.334 billion in sales last year. The London based company trades as an American Depositary Receipt on the New York Stock Exchange. An American Depositary Receipt (or ADR) represents ownership in the shares of a non-U.S. company that trades in U.S. financial markets. Diageo's earnings per share for 2010 is projected at $4.62 per share and for 2011, $5.05 per share. 12 month Total Return for the stock was 52.9%, which is excellent for this large of a company. The annual dividend is 2.77% and the PE on the stock is 14.30. Diageo also has many famous non-beer lines including José Cuervo, Captain Morgan, Tanqueray, Johnnie Walker, Baileys, Smirnoff and J & B Scotch. So this well diversified company looks pretty good.

So, Sláinte! "To Your Health!" in this St.Patty's week and raise your pint to beer stocks!

Freewilly

March Madness approaches.....time to put together a Fab 5 team of tech stocks

Dow Jones 10,624.69 (UP) week ending 03/12/2010


Ah yes, March Madness is arriving again here in the USA. 65 games of the never ending sound of squeaking sneakers on the hardwood courts! I thought it would be fun to put together my own team or Fab 5 of tech stocks for this week. The Fab 5 of course is the famous University of Michigan team with the starting team of Chris Webber, Jalen Rose, Jimmy King, Juwan Howard, and Ray Jackson. (Picture credit Flickr at Yahoo). This team, assembled as freshmen, were considered one of the most talented college teams ever. A mental mistake, calling a time-out when they had none left, cost them one championship. A mental mistake with your portfolio could cost you your wallet.

So here is my team of tech stocks with speed and fast growth that could take you to the Final Four of stock picks.

Guard - Mindspeed Technologies Inc. (Symbol MSPD , $8.34)
Guard - Clearwire Corp. (Symbol CLWR , $8.28)
Center - Apple Inc. (Symbol AAPL , $226.81)
Forward - InterDigital Inc (Symbol IDCC , $27.65)
Forward - Marvell Technology Group Ltd. (Symbol MRVL, $20.21))

Sixth Man off the bench - Atheros Communications Inc. - (Symbol ATHR, $37.22)

Some of these names you have seen before on my blog. The guards are aggressive growth portfolio picks. All these stocks are poised for rapid growth. Tech stocks are high beta stocks so they can move up and down very quickly. You need to be on your toes and keep track of when earnings reports are coming out. As always all my picks are just my opinion and should not be taken as information given by a professional financial advisor. Also the stock market at times may be fully valued in regards to PE and earnings, so you always want to look for an entry price point that affords you a margin of safety on your buy.

So good luck with your Final Four Bracket Pools. If you don't win money there,
try your skill with picking in the stock market.

Freewilly

Is Ford Motor stock still a good buy here?

Dow Jones 10,566.20 (Up) Week Ending 03-05-2010


I got together with my Wilson cousins and their husbands and my brother and his wife over the weekend. My cousin Ellen and her husband Paul have amazingly built from parts laid out in their driveway not one, but 2 Model "A" Ford automobiles. Henry Ford would be proud.(Henry pictured below smiling)


Paul, a lifelong builder and driver of race cars, does this all without the aide of an overall schematic of how the whole thing goes together. I should also mention that they are both in their seventies and Paul goes to kidney dialysis 3 times a week. Now that is dedication to doing what you love. Thank you very much for a lovely dinner and delicious cheesecake. Let's see now if we can make you some money to buy some of those Model "A" Ford parts.

Now a look at Ford Motor Company (Symbol F , $13.00 per share). Here is what I know. There are a bunch of people out there who own this stock at 6 bucks a share because it sat at that price for what seemed like forever in 2009. Then the price moved to 8 dollars a share for quite awhile. So there are a lot of investors that could easily take profits here. I can also tell you that there is a kind of cohesion (like with water) at work in the stock market. This cohesion creates a behavior whereas when a stock is going down people will hold on to it for dear life hoping it will go back up. The same is true on the upside move. When a stock is way up the tendency is to hold on because it feels good to have a winner and you don't want to miss out on more of the upside movement of the stock. So I think there may be a little profit taking at $13.00, but not a stampede to the exits. Another thing I can tell you about automobile companies, as an amateur historian of the stock market. When auto companies start losing money they can rapidly lose grand amounts of it. But when they are running right and starting to make money with the gigantic sales revenue streams that they have, (Ford even in a bad year did 118 Billion in sales in 2009), then earnings can expand more rapidly then in any other industry and just explode to the upside. This is what has happened in the past. It is the reason GM and Ford were able to offer all those great pensions and medical benefits when things were going right in earlier days.

Ford earnings for 2010 will be around .90 cents per share. In 2011, earnings are projected at $1.37 to $1.40 per share. A stock with those earnings should trade even with a PE as low as 8, at a range of between $18.00 to $24.00 a share. If you purchase Ford on Monday and hold on to it for two years, even at the most conservative estimates you should have a minimum of a 15% annual return over the two years and it could be very much higher. Ford's current 12 month total return is 394%, so there is quite a bit of potential here.



So get your investment car in gear, (Paul told me the 1928 Model "A" has a 3 speed), and make some money to build your own dream car.

Freewilly