Posts tagged CRTX
With little macro data out today, the big news in the market is that HP CEO Mark Hurd resigned due to a sexual harrassment discrimination suit that seemed to involve less sex than Bill Clinton’s bedroom (that is when Hillary is sleeping there). Apparently Hurd hid business expenses when taking out a MILF/GMILF named Jodie Fisher who has starred in such films as “Intimate Obsession,” “Body of Influence 2” and “Steamy Cleveland Nights” (and only one of those three is made up). Basically, Hurd hired Fisher to run some BS PR events and then took her to dinner afterwards because apparently he is either a big fan of the skinema and wanted to talk to her about her acting influences, or he is a lonely married guy who just happens not to know how to spend the $33MM he made last year (hint Mr. Hurd, if you’re going to wine and dine a lady, how about finding someone younger than 50 who is not going to sue you for inappropriate touching?).
Anyway, Fisher claims that at no point did Hurd try to put his ink cartridge in her printer (though her statement came after she reached a monetary settlement with him, so buyer beware) and HP found he did not break any of the company’s sexual harassment rules, but he did violate their ethics standard by paying Ms. Fisher $20k for no “legitimate reason” (unless wanting to get some stank on your hanglow is a legitimate reason) and then lying about it on his expense report.
This of course raises the question, if he didn’t break HP’s sexual harassment rules, why the fuck would he have to pay Ms. Fisher any type of settlement? Either HP’s sexual harassment rules are laxer than Heidi Fleiss’, or we are getting only the half of the story about which no one cares. Honestly, the story seems fishier than Portia Di Rossi‘s breath in the morning but whatever happened, it’s likely more of a blow for HP than it was for Mark Hurd (rim shot please). Hurd will get a ~$35MM exit package which is the biggest package since Whitezilla hit the scene and now HP will have to find a way to replace the guy who turned them around from a crappy company that sold shitty printers and computers to a good company that sold more shitty printers and computers. Without his leadership, it is unclear if HP can keep their strategy afloat and the company sold off 10% on Friday after the news.
That said, there is a dearth of macro news today as the market awaits the Fed’s statement tomorrow where investors will hang on every word by Ben Bernanke as if he were Amber Lancaster and the word was “enter.” The consensus is that the Fed will change very little in their approach to the economy although a growing segment thinks the Fed may undertake more quantitative easing to help spur the economy from it’s current malaise (or whatever is slightly worse than malaise, like death or Kathy Griffin‘s face). The “hot idea” is that the Fed may buy more mortgage backed securities or Treasuries in order to get more liquidity in to the markets while the “hotter idea” is a Maria Bartiromo-Amanda Drury threesome. Money McBags would not be shocked by the Fed doing something to try to stimulate the markets (whether it’s growing their balance sheet or showing the market Heather Vandeven films, he’s not sure) as we are at another inflection point where macro data is lagging the market’s run and eventually the decoupling will re-couple so unless the macro data can be turned around, the market will likely come back.
In other market news, HP wasn’t the only one to announce executive changes as the CEO of Sara Lee is stepping down after suffering a stroke which the company vociferously denies had anything to do with her eating too many Jimmy Dean sausages or Sara Lee Brownie Bites, and AAPL has axed the guy responsible for fucking up the antenna on the iPhone4 (“ax” of course from the vernacular meaning to cut or chop as opposed to the slang, meaning to ask in an illiterate way).
As for stocks, RIMM did a job on the market today as Saudi Arabia announced they may have a way to send blackberry messages through their servers before the messages go to Canada which would relieve some of the country’s security concerns (though not harboring terrorists would probably relieve those concerns a bit more). MCD fattened investors wallets today as they announced their same store sales for the month were up 7% and up 5.7% in the US thanks to people not being able to afford good food. It was their biggest month in over a year driven by frappes and smoothies during the hot July summer as well as “coronary artery giveaway” week. Money McBags remains a fan of MCD, even if he won’t eat their food, because companies with solid global brand equity that sell cheap aspirational products are only going to keep growing.
In earnings news, Chrysler drove to a loss of $172MM which was slightly better than the loss in Q1 and slightly worse than being a respectable company with products people want to buy. That said, revenue was up 8% sequentially and the company earned an operating profit but many of those sales were driven by fleet sales where they sell their crappy cars to rental agencies for cheap prices in order to make up for their 15% slump in sales to the retail market. Also in earnings news TSN had a good Q led by higher pork prices (which should also augur well for revenue at the Mustang Ranch). Increased prices of beef and pork allowed the company better margins and they nearly doubled their profits from a year ago yet Goldman initiated the company with a conviction sell rating today citing an oversupply of chicken leading to decreasing prices and the fact that GS needs to have at least one company on their conviction sell list to even moderately be perceived as not just pumping up stocks.
In small cap news, EBIX put up another huge quarter growing profits 51% on 44% revenue growth and some great sleight of hand. Money McBags has written about this company many times and it remains an enigma wrapped in a riddle and covered with feces because it is either one of the most undervalued stocks in the market or a complete fraud. It’s harder to explain the company’s business model than it is to explain boolean algebra to Mickey Rourke (and not any Mickey Rourke, but a lobotomized Mickey Rourke) and they have a history of changing auditors while acquiring businesses globally that makes their tax rate more in flux and harder to believe than Mischa Barton‘s acting career. The fact is, Money McBags simply has no ability to forecast this company and no way to feel confident in their numbers but he did find it interesting that in their earnings release CEO Robin “Making it” Raina said they have no interest in starting a dividend. This is interesting to Money McBags because the company has ~$28MM in cash and ~$16MM in FCF last Q, so by not wanting to dividend cash back, the company is sort of verifying Money McBags’ thesis that in order to keep growing, they are going to need to remain aggressive with acquisitions (or that the company is a total fraud and doesn’t actually have the cash to pay a dividend). Either way, Money McBags isn’t going anywhere near this company as it is either a 2 to 3 bagger or a negative 1 bagger from here, but if you want to make money, a long options straddle position in this stock isn’t a bad idea (though nowhere near as good as a long straddle position in Sofia Vergara‘s stock).
In other small cap earnings news, CRTX was up big after their quarter and last week Money McBags mentioned their bizarre deal to license one of their drugs which is the opposite of their business strategy, but whatever. The company had $28.5MM in revenue which was up 14% from last year but margins were down from ~88% to ~71% as a result of shifting to more sales of lower margin products like Curosurf. They also announced they are going to be discontinuing their non-strategic products at the end of 2010 which accounted for ~$10MM in revenue this Q which means strategic product sales grew only ~4% sequentially, so hopefully their strategy involves handing out free pictures of Shanna Marie Mclaughlin with Factive/Curosurf/Zyflo to get the topline moving.
The company also announced that they are going to be developing a generic for Tussionex to further penetrate the cough cold space (though the best way to penetrate the cough cold space would probably be to take it out for a nice dinner and tell it you want to put it in movies). Anyway, they earned ~$.10 per share non-GAAP have $46MM in cash and a $173MM market cap with their “strategic” portfolio at ~$18MM per Q run rate which means they are trading at ~2.5x sales which is well below competitors at closer to 4x. That said, the company has little operating history and is basically buying their way in to the respiratory space while discontinuing all of their previous and now non-strategic drugs so there is a reason they trade below compeitiors. They did just build out a hospital sales force which is encouraging but the top line results for that sales force are not in yet and their earnings releases certainly don’t make following this company easier for investors.
If Money McBags were running CRTX, the first thing he would do is see if they had any free samples, the second thing he would do is hire Jodie Fisher to set up some personal PR events, and the third thing he would do is put a fucking table in the earnings release showing how each drug performed. For fucksake, will you tickle my balls a little bit here, even if its just for a nanosecond. Perhaps they broke the individual sales out on the conference call (Money McBags has yet to be able to listen to it) but he would love to see a clear concise table of their sales by drug so he could better understand the drivers of the $18MM in strategic revenue as well as the growth rates around that portfolio to understand if there is actual growth here or if it is all acquisitions. Either way, this is a name that could have nice appreciation from here if you can get comfortable with their portfolio and management (and their management’s decision to sell controlling interest of the company to Italian company Chiesi about a year ago in order to acquire Curosurf). It’s a name more speculative than two week old chinese food or whatever is in Jamie Lee Curtis’ pants, but some good research here (and Money McBags has given you a head start) could yield nice returns.
The rally is on again as Germany says they will back Greece, earnings are crushing estimates, and Bernanke is going to continue to stimulate the economy like he’s the delightful young actress Jessica Pare (moderately safe for work) and the economy is Money McBags. Bernanke spoke to the House Financial Services Committee today and he tried his best to use small words so the elected officials could understand him. Bernanke reiterated that “The economy continues to require the support of accommodative monetary policies” and cited the high unemployment numbers, the weak housing market, and the decline of Paul Reubens‘ career. He did say that the Fed has a plan to tighten monetary policy and he will do so at the appropriate time even if it causes Alan Greenspan to roll over in his grave. More importantly, new claims for unemployment fell by 14k to 442k which was 8k below economists’ forecasts (forecasts called for it to be overcast with a chance for showers and instead it was sunny and thus caused the showers to be golden to the delight of urolagniacs everywhere). 11.1MM people are still claming unemployment which is only slightly fewer than the number of people in Ohio or the number of pornstars claiming to have seen Tiger’s wood, so it is still a big fucking number. Economists think that if the new claims for unmeployment can drop to 425k, that could signal job growth, of course most of these same economists also thought that home prices could go up forever, that steady state unemployment could be achieved, and that Adam Smith actually had an invisible hand, so be careful to whom you listen (and as an aside, if Money McBags had an invisible hand it would be firmly attached to Bar Refaeli at all times).
In international news, Germany’s Chancelor Angela Merkel told the EU and Greece that Germany would support aid to Greece if the IMF were to be involved and if the Greeks finally cleaned up the Parthenon (I mean seriously, it’s been around for 2,500 years. Can someone in Greece do like 1 days work and just dust around the edges a bit?). France is backing the German plan which marks the first time these two countries have worked together since their ill-fated Broadway run in the musical Les Miserables Time We Had On Das Boot: A Love Story. Not only did Greece get positive news, but Dubai is putting up to $9.5B in to Dubai World and it’s failing real estate business to make sure that the illusion of grandeur can continue. Dubai World creditors will be paid back in 5 to 8 years or just in time for the next bubble.
The big news of the day has been in the US stock markets where earnings have continued to impress like Beethoven on “Take your kid to work day” or Salma Hayek at a treasure chest convention. Best Buy easily beat their numbers posting a profit of $1.82 per share vs. analyst guesses of $1.79. They also gave full year guidance of $3.45 to $3.60 per share which is well above the $3.36 consensus analyst guess. Same store sales rose by 7% after the company cut prices on flat panel TVs and started offering free taint massages for any purchases over $2,500. Best Buy also announced further international expansion, continued stock buybacks, and Olivia Munn to be in charge of the Geek Squad’s free “modem adujstment” promotion. In other stock news Qualcomm is off to the races after they raised their expectations for the second time. They now think Q2 earnings will be between $.56 and $.58 per share which is higher than analyst guesses of $.53 and higher than previous guidance of $.49 to $.53. They cited better licensing revenues and the addition of crack cocaine directly into their Snapdragon chipset. Both QCOM and BBY are up 7%+ on the day as investors run to chase good news like Alabamans chase leprechauns.
In small cap news, Money McBags ditched his RICK shares and it really hurt him to do so. The easy money had been made, though in positive news for those still holding RICK, Money McBags will be putting a portion of his >50% profits back in to Rick’s business through the purchase of many Jack and Cokes without the Coke while watching the fine classically trained dancers. In other small cap news, you might be able to make a momentum trade on CRTX. Money McBags wrote about CRTX after their Q in the first week of March and they seem to have picked up some steam since then. They are up 7% today on no news and slightly higher than average volume, but they have been steadily rising for the past couple of weeks. The company still has a ton of risk as their top selling drugs are in decline, they gave away controlling interest of the company to Italian pharma company Chiesi last year in order to help their balance sheet and acquire new drugs, and their operating record is thinner than Keira Knightley. If you believe their projections though, they are trading at only ~1.5x sales and that is way too low for a real company to be valued (of course this may not be a real company like, Nohjay Nimpson may not be a real name, oh wait, scratch that). So if you’re feeling lucky, this is a total momentum trade with absolutely no news behind it other than valuation seems relatively cheap and thus your downside should be limited (that is if the company’s proections are accurate).
3/4/10 Midafternoon Report: Market to Greece: “Your bonds are the one that I want,” just hope they don’t leave “Tears on My Pillow”
The market is bouncing around today as initial jobless claims were out and they fell by 29k to 469k, almost exactly the 470k number that economists estimated proving the old adage that “even a broken economist is almost right once a decade.” While the drop is positive, it didn’t drop by as much as claims rose in the past two weeks which we were told was the result of “weather,” an “administrative backlog,” and “more people getting laid off than expected, stupid.” Also, pending sales of existing homes fell by 7.6% in January as an extension of the government tax credit for first time home buyers failed to spur sales (and Money McBags went through this before, but any first time buyer thinking about purchasing a house rushed to buy before the tax credit ran out last year and thus extending the tax credit now is like if California had reinstated same sex marriage a month after repealing it. Anyone who wanted to get gay married had already done so, thus the remaining opportunity set was thinner than an aneroxic with food allergies.). All of the data will continue to be lumpy as unemployment still remains higher than River Phoenix at the Viper Room and more stagnant than the writing here at When Genius Prevailed (but give Money McBags a break, 1k words of dick jokes and market analysis a day is more draining than being slowly exsanguinated by baby leeches and more draining (and infinitely less fun) than a 12 hour hummer, but Money McBags digresses). In other macro news factory orders were up 1.7% last month and were slightly below estimates but still positive and driven once again by aircraft sales as people have to fly around the globe for job interviews.
In international news, Greece offered up 5 billion of euro denominated bonds or as antiquities dealers will call them in a mere 2 years, worthless relics. Greece claimed there was actually demand for another 2B euros worth of the bonds, and seeing as how they need to raise 20B euros, their decision to not offer the extra 2B fits right in with their previous budget management. If I need $20, why would I sell you $5 worth of my shit when I could sell you $7 worth of it, I mean it doesn’t take Euclid to fucking figure out the math here (and yes Money McBags understands the interest payments, etc., but we’re talking about a country that needs money like Lindsay Lohan needs a case of Valtrex and a hot shower.)? Meanwhile traders are seeking out the next Greece in Europe claiming that it is only logical another country would be close to collapse as for every Bear Stears there is a Lehman Brothers, for every American Home Mortgage there is a New Century Mortgage, and for every Disney World there is a Kingdom of the Little People. Greek workers remain on strike as they are apparently protesting that the government overpaid them for the past several years. Really a brilliant strategy, right up there with fully clothed strip clubs (and yes I am talking about you Manhattan) and the Segway.
In stock news, retail sales climbed in February from Heidi Montag‘s singing bad to Heidi Montag‘s acting bad (and that is a slight uptick if it isn’t clear). Same store sales were up 4% beating analyst estimates by 1% or so, but that rise was off of a 4.7% drop last year we so shouldn’t lose perspective, like an MC Esher painting. Most interestingly e-commerce sales were up 16% which should bode well for companies like ARTG, AMZN, and Vivid Video. Large cap stocks moving up today include Disney, Coke, and Boeing, all receiving analyst upgrades. Disney was upgraded by Bank of America-Merrill Lynch in anticipation of a strong advertising market, a strong film docket, and unemployment coming down thus making it easier for people to throw away money on a crappy amusement parks just so their kids can get an overpriced picture with a minimum wage worker dressed as Cinderella. A UBS analyst upgraded KO based on the sell-off after they purchased their bottler and after reading When Genius Prevailed on 2/25/10 while UBS also upgraded Boeing because apparently airlines want more planes sooner than later.
In small cap news, RICK continues to drop and is making Money McBags feel emptier than he does after making it rain for an hour at his local Rick’s Cabaret. Kind readers, you all know Money McBags has been in RICK with you for this stimulating ride, and you all know of his $16 price target (which it bounced up to before collapsing like Taryn Thomas’s anus after one too many cavity searches. And yes, read the wikipedia page, it really did), but we all have to remember that when momentum stocks go bad, they really go bad. Given that, and the fact that Money McBags thought their quarter was worse than a Dan Brown novel and their acquisition of VCGH could be a bit of a clusterfuck (and not in the literal sense, which would be good, but in the “oh shit, we paid what for that?” sense), Money McBags may be bailing on this momentarily and happily taking his profits. He will likely sit it out for a day or two, but if it pops up above $15 again, that will likely be his selling floor. In other small cap news, CRTX annonuced their earnings last night and put together a decent Q while maintaining their guidance. Money McBags broke down CRTX a bit in December as a potential big upside company that needed to show some results. Well this Q could be the start of those results as numbers were generally in-line with Curosurf coming in at $8MM in revenues for the 3 months which is a good sign. While their reporting still seems to be a bit lacking (I mean for fucksake, would it kill you to put a table comparing sales of each product and maybe not lump in Spectracef sales with Factive sales since no one gives a fuck about Spectracef?) and their sales of Factive were probably a bit on the low end since they combined with Spectracef for $3.6MM in revenue and Factive should have been around $3MM by itself, this company continues to trade at around 1x estimated sales. The company maintained their guidance of $115MM but their leading drugs continue to face headwinds so they need to be able to show strong sales of Factive and Curosurf. Money McBags has not had a chance to listen to the call, but the quarter didn’t contain any obvious misses and the company is cheap. If you have some gambling money that you’re itching to put into play, this is the kind of company it may be worth doing some work on because if they can maintain a $100MM+ revenue run rate, they should easily trade at 2x-3x that. Plus they have a nice cash balance remaining to continue their acquisition strategy. Not the best company in the world, but cheap with upside.
Before we get to the better than expected December sales numbers for most retailers, we need to address the macroeconomy (So hello macroeconomy, would you like some viagra for your slow growth?). Today’s initial claims for unemployment came out and were slightly better than expectations (and all sources tend to agree about this, unlike yesterday’s free for all where there was less agreement by news sources about expectations than there is typically agreement by Bjork’s stylists). There were 434k newly filed claims, up only 1k from last week, so that is a slightly positive sign (though not as positive as this sign). However, analysts/economists/reporters/Bea Arthur are overlooking the fact that those who are unemployed are remaining unemployed for longer as claims for extended unemployment benefits climbed by 165k to 5.44MM (and I can understand how Bea Arthur overlooked this fact since she is not an economist, and dead, but the the others overlooking this puzzles me a bit). Anyway, the data has continued to show that those with jobs should become less worried and those without jobs should become more screwed as the chasm between the haves and have nots gets wider than Jessica Simpson’s cleavage.
In other macro new today, China is raising a key interest rates as they move closer to admitting that inflation may be a problem (which is a bit like the first mate of the Titanic telling Edward Smith that the upcoming icebergs may case some slight turbulence). The dollar is bouncing up a bit on this news as gold and commodities tick down.
In stock news today, retail sales came out for the most part stronger than expectations and retailers, led by Sears, Macy’s, The Limited Brands, and BJ’s Wholesale Club, upped their earnings estimates. BJ’s said they would have had double the 2.7% growth if not for the snowstorms in the Northeast and the computer viruses people got when inadvertently going to BJ.com (instead of the actual company website BJS.com) and learning it wasn’t really the place to buy footlong packs of Tums (though it was the place to see many other things that were a foot long). Sears is having a huge day as KMart showed a 5.3% increase in sales thanks to toys and home goods and they raised Q4 estimaes to $3.36, much higher than analyst estimates of $2.75. Eddie Lampert hopes this can stave off the 2 year Blue Light Special on his SHLD shares.
It wasn’t all champagne and hummers for the retail sector though as specialty retailer HOTT showed a 10% drop in same store sales as their market strategy may be reaching it’s twilight (for those of you who don’t follow HOTT, the last line is punny because they rely on sales of crappy t-shirts from that movie Twilight to drive business. Hit me up in the comments section if anything else needs explaining).
And in small cap news, CRTX came out today with revenue estimates for 2010 of $115MM, almost exactly what Money McBags said a few short days ago. In fact, Money said “this company could easily do $115MM of revenue in 2010 (maybe $130MM at the top end).” This new guidance looks like that $115MM may not be so easy as sales of their legacy generic drugs are likely falling faster than expectations, but the analyst on the street had $148MM in revene for 2010, so just remember who loves you (and I would toot my own here, but that job is being reserved for the lovely Olivia Munn). Either way, Money McBags’ intial analysis holds. The stock is ridiculously cheap for a drug company, but you have to be a bit wary that they can grow given the decline of their legacy drugs and the yet to be proven future of the drugs they purchased. The stock could easily double from here since it is trading at less than 1.5x sales, but we’re going to sit this one out until we get some more data.
Data came out today showing a rise in consumer confidence for the second consecutive month, despite consumers rating their current situation as the worst since February 1983 (and to give you an idea about how long ago February 1983 was, Tennessee Williams was alive for most of the month, Case had yet to mix his chocolate with Shiller’s peanut butter, Beat It was released as a single (and Michael Jackson was still black, and alive), and Hilary Scott was born and thus had yet to expertly fellate her first johnson). That’s right, in the same report today, the consumer’s expectations of wages and jobs fell to 26 year lows while consumer confidence rose. So it all makes perfect sense. Consumer confidence is rising, while falling to new lows at the same fucking time. Somewhere Kafka is happily sitting up in his grave and applauding while Zeno Cosini has his last cigarette.
Speaking of Case-Shiller, home prices in 20 cities rose for the 5th consecutive month, or they were flat, depending which news source you read of the exact same fucking data. And seriously, for you reporters out here, you’re not reporting on the existential feeling of Antoine de Saint Exupery or the exact location of a quantum particle (and for the record, under my balls would be an acceptable enough guess) so how hard is it get the one number fact correct? Luckily, a third news source clears up any confusion by stating that home prices were up, but when adjusted for seasonality, they were flat. Who knew that one needed to hire someone from NAFA (where I am told they party until their valuation allowances reverse) just to read a simple news story.
In stock news, a Money McBags favorite, RICK continues rise (and it is from more than the table dance) while a Money McBags watchlist company, CRTX, gets some momentum. CRTX is a roll-up drug maker/supplier focused on the respiratory market who went public through a reverse merger last year. Since that time they have acquired the rights to a number of drugs while revamping their sales force and selling controlling interest in themselves to Italian pharma company Chiesi (in return for the rights to market one of Chiesi’s drugs in the US and a lifetime supply of parmesan cheese). While trying to piece this company together, CRTX has seen their top selling drugs face increasing competition from generics (which they admit is happening and say is not unplanned, hence the acquisition of other drugs) and has disappointed the street (though only one analyst covers them and that analyst has been consistently too high, thus tripping quant funds’ models when numbers come in low). The point is, this company could easily do $115MM of revenue in 2010 (maybe $130MM at the top end) and has a current market cap of around $145MM. Drug companies at a minimum should tade at 2x earnings, and more likely 3x to 4x. So if this company can just execute and fend off lost drug sales through their new drugs (Curosurf and Factive) while purchasing another underutilized drug or two, the stock could easily double from here. It definitely bears watching, as does the majestic Gracie Glam.