Stock Radar with Price Targets

Good luck out there,

Mike

Stock Radar with Price Targets

Good luck out there,

Mike

We recognize that China has 2,300 operational combat aircraft, while our democratic partner Taiwan has only 490.

Rob Nabors - White House Director of Legislative Affairs

Macro Overview

Focus On China

• I’m going to Asia for about 2 and a half weeks so you’ll have to bear with me there may not be much commentary from me during this period. I’ll be sure to report back on my own layman’s view of the how I feel the economic sentiment is shifting there.
• In the mean time, let’s take a little look at China and, in particularAmerica’s relationship with the World’s largest contributor to economic growth.
• This week Stephen Roach, now of Yale University, once again wrote an article about America’s Renminbi Fixation. Again, Roachie highlights many points about America’s unhealthy political fixation with China’s currency “manipulation”, but I have written tons about this – click here, for example. Firstly, that Bernanke himself supports currency “manipulation” as a form of monetary management. Any person who thinks that our own Federal Reserve does not manipulate the value of the USD cannot deny that they manipulate the largest securities market in the World.
• But also about how utterly useless it would be in US job creation if China were indeed to de-peg the Renminbi. As Roachie says, the US has a multilateral trade imbalance, not a bilateral imbalance. Something tells me The West is not about to build an economy on the ability to manufacture sneakers to sell to Indonesians or back to the Chinese themselves or whoever, for that matter.
• Protectionism of all sorts is a blunt and dirty tool the effects can be resounding and persistent. If The Western political movement “succeeds” in crippling Chinese imports, we’ll soon the consequences, as Western business loses its fastest growing export market on Chinese protectionist retaliation… and to add insult to injury, the manufacturing that was in China will not come back to The West – it’ll simply accelerate the migration of assembly (that is already occurring) to Indonesia, Malaysia, Vietnam, Philippines etc…
• Here is an excerpt from Roachie’s article:

Finally, China has evolved from the world’s factory to its assembly line. Research shows that no more than 20 percent to 30 percent of Chinese exports to the US reflect value added inside China. Roughly 60 percent of Chinese exports represent shipments of “foreign invested enterprises” –- in effect, Chinese subsidiaries of global multinationals. Think Apple. Globalized production platforms distort bilateral trade data between the US and China, and have little to do with the exchange rate.

Rather than vilifying China as the principal economic threat toAmerica, the relationship should be recast as an opportunity. The largest component of US aggregate demand –- the consumer – is on ice. With households focused on repairing severely damaged balance sheets, inflation-adjusted private consumption has expanded at an anemic 0.5 percent average annual rate over the past four years. Consumer deleveraging is likely to persist for years to come, leaving the US increasingly desperate for new sources of growth.

Exports top the list of possibilities. China is now America’s third largest and most rapidly growing export market. There can be no mistaking its potential to fill some of the void left by US consumers.

Strategic Games: The Key To The Pacific May Lie In The Indian Ocean

• Just to add a little nugget I thought I’d send this article: China – USA: Struggle for Control of the Pacific. An interesting read.
• And also this one at Stratfor: The India-China Rivalry.
• What I find interesting is how both articles mention Myanmar’s strategic position; a country undergoing massive political reform, nestled snugly between China and India with a huge coastline perfect for shipping ports… both industrially strategic and militarily strategic. Just some food for thought, dear reader.

Market Overview

Markets Fighting The Two Usual Forces… Still

• I’m not going to comment much on the markets except to say: nothing has changed in 3 years. Massive injections of monetary easing have done little to stimulate jobs, yet it has succeeded largely in stimulating asset prices – particularly those of large multinational companies. That is those companies that will truly benefit from the lower borrowing costs, not those, smaller companies that actually hire people and move the domestic economy forward.
• So equities are caught between liquidity, great balance sheets, good earning and easy money on one hand… and a fundamentally sick domestic economy on the other. My money’s on the former winning the battle … … for a while.
• As we were on the subject in the Macro Section. My chart of the day is a 5 year chart of Chinese equities (Shanghai Composite).

Chart of the Day

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Stock Radar with Price Targets

Good luck out there,

Mike

It is mind-boggling that we could do this well

Tim Cook – Apple CEO

Macro Overview

Blankfein Comes Out Of His Shell

• Today Blankfein stepped out into the lime-light and gave his first TV interviews (at Bloomberg and CNCB) in two years. He seemed talkative and perky and keen to show the world how “client-friendly” Goldman Sachs are stating that (in response to the inevitable questions about Greg Smith) Goldman “couldn’t have the clients we have if we were anti-client.”
• Is this the new face of Goldman? Who knows… but with the stock down nearly 30% over the last 24 months its been a rocky road by their standards.

Britain’s Economy Has Been Firing Blanks

• UK GDP came out and… it was rubbish. -0.2% QoQ vs an expected +0.1% plunges the UK economy back into recession. The first double-dip recession since the 1970’s.
• As I alluded to yesterday, Cameron is going to feel the heat from a number of sides now as his austerity drive seems to have driven the economy into the ground.
• The concern that most are too afraid to voice is whether this number is a harbinger of growth data to come out of the Eurozone… we wait and see…
• Meanwhile, across the pond, the Fed says that growth will continue but will only pick up gradually. Hey, at least it’s growth!

Market Overview

Apple Slays The Pessimists With China Growth

• I was concerned about the Chinese economic machine. In particular, I’ve been watching the infrastructure plays. Companies like ABB (largest electricity transformer manufacturer) and Caterpillar – both guiding to the downside on poorer than expected growth out of China– how often do you hear that? It seems the Chinese have stopped spending!? Komatsu earnings out tomorrow…
• Well, not on everything… just check out Apple’s investor call for a contrast… and what a difference a day makes! Apple seems to have sold a shed load of iPhones in Asia, specifically China. It seems the Chinese still have a healthy appetite for some things!
• Two thirds of Apple’s iPhones are now sold outside the US – man that is an export machine!
• Still not up to its highs, but 10% sure is a big move for a $600 billion market cap company!
• Chart of the Day – had to be… Apple.

Chart of the Day

Events

Macro Events:

Update:

• UK GDP very poor -0.2% QoQ –Britain back in recession.

Alerts:

• Germany CPI
• Singapore Industrial Production
• South Korea GDP

Corporate Events:

Results:

• ABB [ABBN VX], Amazon [AMZN], Bank of China [3988 HK], Barclays [BARC LN], Bayer [BAYN GR], Bristol-Myers Squibb [BMY], China Petroleum [386 HK], Colgate-Palmolive [CL], Deutsche Bank [DBK GR], Dow Chemical [DOW], Exxon Mobil [XOM], Hyundai Motor [005380 KS], Komatsu [6301 JT], Lockheed Martin [LMT], Nintendo [7974 JO], Petrochina [857 HK], Royal Dutch Shell [RDSA LN], Hynix [000660 KS], Unilever [ULVR LN], UPS [UPS], Volkswagen [VOW GR], Volvo [VOLVB SS],

Dividends:

• Morgan Stanley [MS], Pepsico [PEP],

Reading, Links:

Nothing Significant

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In preparation for the meeting, management submitted to the FDA a detailed briefing package that includes various types of analysis on the BREEZE data, including parametric and non-parametric analysis, a responder analysis, and a meta-analysis that included the combined data from all three programs together. Included in the analysis was persistent efficacy data at week 24 from both BREEZE-1 and BREEZE-3. We remind investors that top-line data from BREEZE-3 was reported last October 2011.

Below we highlight the top-line data from all three programs for the 1800mg dose – at least what has been disclosed by management to date:

Management has submitted an abstract to the North American Menopause Society (NAMS) annual meeting to take place this October 2012. We expect the full data from BREEZE-3 will be presented at that time. We note that data from BREEZE-1 and BREEZE-2 was previously presented at the NAMS meeting in October 2010.

…Long Shot At Approval…

Looking at the data above, even using a p-value of less than 0.05, in three phase 3 trials we see that Serada hit 10 of the required 12 primary endpoints, including all endpoints for both frequency and severity at week 4, but missed the frequency endpoint at week 12 in two of the three trials and failed to demonstrate signs of persistent efficacy at week 24 in either BREEZE-1 or BREEZE-3. We have admittedly not seen management’s analysis of the data. And on yesterday’s conference call, management noted that the FDA suggested that Depomed file the application so they can, “run their own analyses to decide whether this is an approvable package or not.”

At this point, we think approval is a long-shot; but we do not profess to know how the FDA will rule on data we haven’t seen using an analysis we haven’t been told about. Nevertheless, Depomed will spend approximately $5 million this year getting the NDA filing ready. This includes the filing fee (~$1.5M), a milestone to license partner PharmaNova (~$1M), external consulting expenses, manufacturing test batches, and other launch preparations.

…What We Expect…We expect that Depomed will file the NDA on Serada in the fourth quarter 2012, sometime after the BREEZE-3 data has been presented at the NAMS meeting in October 2012. At that time, we should have a better sense of the entire NDA package on Serada. We have increased our R&D expense for 2012 by $5 million, and now model R&D for the full year to be $17.8 million. We have updated our cash forecast, and now model that Depomed will exit 2012 with approximately $95 million on the books.

We expect that the U.S. FDA will hold an Advisory Committee meeting on Serada. If the NDA is filed in November 2012, the PDUFA would be scheduled for September 2013. That would potentially put an advisory panel meeting on the drug sometime over the summer of 2013.

NAMS recently put out updated guidance on the use of hormone therapy (HT) in women suffering from hot flashes. The position statement notes that a combination of estrogen plus progestin therapy (EPT) remains the most effective treatment available for menopausal symptoms, including hot flashes and night sweats that can interrupt sleep and impair quality of life. NAMS believes that the majority of women can take EPT safely, for periods up to three to five years, with little risk of heart attack, stroke, blood clots, or breast cancer. For women with pre-existing risk, an alternative therapy may be more desirable.

We expect that these updated guidelines from NAMS will have a negative impact on the overall market potential for Serada, if approved. We see Serada relegated to a second-line therapy for women where HT is either not effective or not desirable. We see the peak sales opportunity for Serada in the U.S. at roughly $100 million.

We expect that Depomed would like to be involved in the promotion of Serada to high-prescribing OB/GYN’s in the U.S. Management noted that there are about 18,000 of these high-prescribing OBGs. We suspect that effective promotion can be accomplished by a small field force of 40 to 60 representatives. The opportunity to partner Serada for promotion to the primary care network presents upside to the story. We expect that Depomed will look to partner for this expansion following a focused commercialization effort in 2014.

Our model includes $0 revenues from Serada in the future, and we expect that it will stay that way until the FDA makes a decision. At $100 million in peak sales, we see Serada worth approximately +$2 per share to our current modeled valuation ($9 price target).

Gralise Remains On Track

Gralise total prescriptions remain on track, and in-line with our model.

We model sales in the first quarter 2012 of $2.0 million based on total prescriptions of roughly 17K. Assuming the trend continues in the second quarter 2012, we now see Gralise sales at around $3.0 million in the second quarter and at $16.5 million for the full year 2012. Gralise remains the key value driver for Depomed in our view. Additional information can be found in our full REPORT from March 2012.

We’re not saying that saving solves all problems…

…[but], you can’t spend more than you take in. You can’t live your whole life this way. Everybody knows this…

Angela Merkel

Macro Overview

Europe Rotting At The Core?

• Only yesterday, in my article; Is Europe Rotting At The Core?,  I wrote:

• • France’s elections have thrown open the entire Eurozone debate with Far Right, Le Pen winning an astonishing 20% of the vote and whose views on Europe are blatantly anti-EU. It’ll be interesting to see how Sarkozy and Hollande dissect this popularity and implement the amendments into their campaign? Was their support entirely anti-immigration or was a large portion of it a middle finger at Merkel?

• Well it appears, already that this is being played out, without either candidate wasting much time over it.
• Sarkozy’s interpretation of Le Pen’s popularity is directed firmly at the Far Right’s attitude to immigration calling for a Europe which seeks to “defend its borders” and voicing respect for the Nationalist voters who are concerned over immigration – which seems to be directed largely at the Muslim community in the press, from what I can tell.
• By contrast, Hollande appears to be directing his rhetoric firmly at Le Pen’s stance on the European Union (i.e. against it). By reiterating his stance to re-jig (re-neg?) the “Merkozy” fiscal compact and making stronger noises about a “French Flake” on the austerity measures. This has not been missed by Europe’s Iron Lady, who has, begun her defense (of her European policy and perhaps of Sarkozy too?), ironically, before Hollande has even come close to getting his feet under the desk. One thing for sure, Hollande is already feeling the cold calculated strength of Merkel’s iron fist around his neck – hey, at least he knows what he’s letting himself in for, should he ever have to sit across the table from her. But, this is a pivotal point in gauging real French opinion on the cozy Merkozy relationship – opening up a new battle front against the mighty German could either work for Hollande or against him in a big way.
• I think this was in many ways an inevitable route for the candidates to take. Sarkozy daren’t even hint at betraying the German titan and it is hard to see a French socialist embracing anti-immigration issues. Needless to say, this divergence in the dissection of the Far Right vote will prove to be the decisive factor in the French elections of 2012.

Market Overview

Is Bank Of England The First To Get Truly Trapped?

• I’m not going to wait for Apple’s results to hit the tape before sending them out, but it may be the event of the day. As I write this AAPL stock is down over 2%.
• Moving on… YesterdayI wrote:

• Also, I find the trend of the British Pound interesting as it appears to be bucking its normal characteristic. Normally, Cable gets sold off as global economic conditions deteriorate. This time it appears to be trending up into the bad news. One British Pound now buys you 1.61 US Dollars and we are in danger of breaking a new high for the Pound.

• Currency traders are aware that there is nowhere for the BoE to go with even some of the most dovish of Monetary Policy Committee members refraining from voting for more QE “stimulus” as persistent inflation data puts a spanner in the works. Financial News writes in an article today:

The Monetary Policy Committee voted 8-1 this month against increasing purchases of those bonds, known as gilts. Adam Posen, who spent 12 months voting alone for more QE until the MPC swung to his view in October, rowed back from voting for an increase. Even for David Miles, who favoured a £25bn increase, the decision was finely balanced.

• The interest rate differential is a mouth-watering prospect for money traders in a seemingly zero-interest rate world. No noticeable recourse to mortgage rates in the UK… … yet… …
• Tomorrow is a crucial day for the British economy, GDP was down last quarter and is forecast to be a frighteningly low +0.1%. Miss that and confidence will plummet and Cameron will feel the heat of the opposing Labour Party Leader, Ed Miliband … as well as the rating agencies.
• No prizes for guessing Chart of the Day – Cable (Dollar-Sterling) year-to-date.

Chart of the Day

Events

Macro Events:

Update:

• Nothing Significant

Alerts:

• UK GDP

Corporate Events:

Results:

• Boeing [BA], Canon [7751], Caterpillar [CAT], China Life [2628 HK], China Unicom [762 HK], Credit Suisse [CSGN VX], Eli Lilly [LLY], Ericsson [ERICB SS], Fiat [FI IM], GlaxoSmithKline [GSK LN], KDDI [9433 JT], Las Vegas Sands [LVS], Rolls Royce [RR/ LN],SAP [SAP GR], Siemens [SIE GR],

Dividends:

• Hong Kong Exchanges [388 HK], Procter & Gamble [PG], Tesco [TSCO LN], Tyco [TYC],

Reading, Links:

Nothing Significant

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I must admit that although I did expect AAPL to go down, but certainly did not expect its price to drop so quickly. As of 4/23 close, it is down 5.5% since close of 4/13 vs S&P 500 which is down 1.3%.

The following daily chart shows AAPL has a indecisive doji pattern on 4/23 and is also near support.

(click to enlarge)

AAPL will report earnings after market close today (4/24). So one of the most anticipated earnings announcement is less that 12 hours away, and the earnings results may determine the direction of AAPL’s next move. Good luck to every bulls and bears

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I may initiate a volatility based options position in the next 72 hours.

Stock Radar with Price Targets

Good luck out there,

Mike

An extremely powerful dynamic that has huge commercial and cultural implications is at play; namely that technology is enabling trust between strangers. We now live in a global village where we can mimmick the ties that used to happen face-to-face but on a scale and in ways that have never been possible before.

Rachel Botsman

Macro Overview

It’s Life Jim – But Not As We Know It

• Yikes! If the raving bull and Euro-nonchalant Jim O’Neill is getting the jitters then may be we all should! Remember this is the guy who told us he couldn’t understand what all the fuss was about with Greece. Who cares? He said, and I quoted in a comment 3 months ago, dismissing talk of Greece’s importance, afterall:

China creates the equivalent of another new Greek economy every 4 months, so you could write off Greece completely and within 4 months China has created another one…

• Anyway, this is what he said recently about Europe, according to Business Insider:

I find myself wavering a little about the US recovery story. While for now, I’m happy to stick with our above consensus 2.5 pct real GDP forecast for 2012, and I buy into the housing sector recovery and shale gas themes, as I have frequently argued, weekly job claims are not to be ignored. While hoping last week’s would decline again, thereby rendering the March payroll disappointment as “susceptible,” in fact, it rose to 380,000, providing support to those who argue the apparent economic strength of the Winter was artificially helped by the weather.

• Not quite so nonchalant now huh? But, in a sense, he was right. As I alluded to in my Spanish Imposition comment: the economies of Italy and Spain rank 8^th and 12^th in size compared to Greece which ranks in the 30’s (and falling)!
• However, let’s be clear, precedents were set with the Greek workout and conversely, as Mauldin pointed out (see yesterday’s comment) there are consequences to the reactions of authorities (e.g. the ECB’s LTRO) toGreecewhich may infect other Eurozone nations – particularly those already peering into the abyss.
• Spain’s auction went well… (ish)… I mean they sold the bonds they wanted to sell. The market was short going into the auction so it was expected to go quite well and they only had a few bonds to sell. But yields still went up… as did French bonds after the French auction. Which companies are most exposed to this type of action? Well probably the French banks who have exposure to both Spanish and French debts.
• My Chart of the Day is BNP – this is the 25 day price action. It has lost 25% of its value.

Market Overview

EBAY Spike An Insight Into The State Of Consumption?

• It was only a year ago I was writing about “Collaborative Consumption”. If you have not seen Rachel Botsman’s TED speech watch it – it’s a really good one.
• Simplifying things greatly, I believe that the rise of collaborative consumption is born out of two violently converging forces: rise of connectivity and internet renaissance and deterioration of economic conditions for the consumer. Consequently, I think we are about to be amazed at how creative and innovative humans will be at adapting and finding new ways to consume. The World is now one giant garage sale and there are massive efficiencies in consumption to be gained.
• There is also a longer term backdrop to this, in that globalization has meant that consumption economies are practically drowning under a glut of supply.
• Like the first green shoots one a wasteland, Ebay, GroupOn etc are just two examples of many businesses which have arisen from the wastelands of apathetic absolute consumption trends… which begs the question, if Ebay is seeing great benefits from a rise in this sort of internet-based consumption, is this necessarily a good thing for the domestic economy?
• Chart of the Day is Ebay – at a new high and up 200% in 3 years.

Chart of the Day

Events

Macro Events:

Update:

• Nothing Significant – other than to say remember the French Election this weekend!

Alerts:

• Nothing Significant

Corporate Events:

Results:

• General Electric [GE], LVMH [MC FP], Macdonald’s [MCD], Posco [005490 KS],

Dividends:

• Colgate-Palmolive [CL], Volkswagen [VOW GR]

Reading, Links:

Nothing Significant
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