AverageJeremy

Almost in the top ten?

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It's hard to believe that I'm still doing as well as I am with mainly biotech stocks. I didn't think that they would steadily climb as fast as they have. I guess that I should discuss the reasoning behind one of my picks this week. I am going to talk about Onyx Pharmaceuticals this week.

This stock (ONXX) has been a pleasant suprise gaining over 50% in just one month. Onyx is a small-molecule drug company based in California. They have a deal worked out with the big pharma company Bayer to manufacture and market Onyx's new cancer drug, Nexavar, for an even split of sales in the U.S. Nexavar is FDA-approved for use on kidney cancer and Onyx is currently completing trials of Nexavar on liver cancer and awaiting approval from the FDA. A recent article on fdanews.com stated, "Based on positive clinical trial results, Bayer Healthcare and Onyx Pharmaceuticals halted a Phase III study testing kidney cancer treatment Nexavar in patients with advanced hepatocellular carcinoma (HCC), or primary liver cancer, to allow all subjects in the study to receive treatment with the product, the companies announced Aug. 27." This news has help push the stock to a new 52-week high. Nexavar brought in more than $300 million just from the U.S. last year and that number is expected to double this year. It is also estimated that once Nexavar reaches market saturation it will bring in at least $1 billion dollars. That means that because of the deal that Bayer has with Onyx, Bayer will only see half of that amount. I believe that Bayer will eventually buyout Onyx to end the profit-sharing agreement to gain all profits from the sale of Nexavar.

I will continue to hold this stock for the next several months to see if a buyout occurs. I believe in long term investments, even in a short term contest such as this one. I am continually looking for quality stocks at bargain prices. My main goal is to not lose money and grow the money that I have invested by beating market returns.

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Another week, another move up

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With all of the credit crunch nonsense still giving the media something to talk about the market continues to have some quality stocks at bargain prices that have been outperforming the market. One of those stocks I recently purchased should perform quite well over the next several years. That stock is Thomson (TMS) and they are currently working with Nokia on developing a new technology for cell phones called femtocell. BusinessWeek ran an article about this technology back in July. Here is a link to the article for anyone interested in learning more about femtocell. http://biz.yahoo.com/bizwk/070731/jul2007tc20070730802787.html?.v=1 The gist of the article is that femtocell technology acts as an in-home wireless access point that uses a high-speed Internet connection to convey a call from a cell phone to the carrier's switching station. This technology also conserves on cell phone battery life. Some estimates have phones using femtocell having batteries that last up to 200 times longer. This technology could also increase a wireless providers network capacity by up to 1500 times. TMS is a maker of broadband modems and is currently collaborating with Nokia Siemens Networks to create a 3G femtocell home access solution. "With expectations of femtocell units to number from 10-12 million units by 2010, TMS's position as a market leader in modems and digital technology, and its early adoption of femtocell technology make it the best and safest investment in this emerging market" according to Ann Sosnowski of Taipan Financial News. I expect this stock to be a stable gainer until next year when femtocell is introduced to the mass markets of the world. At that point, this stock could be worth 3 or 4 times it's current value by 2010. (Full disclosure: I personally own shares of TMS.)

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My two cents about the Fed and other things....

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Well, I guess since everyone else has stated their opinion about the Fed rate cut I might as well state what I think as well. I certainly did not expect the Fed to cut the rate at all, let alone 50 basis points. I am concerned that the Fed has now thrown the baby out with the bath water with this move. Inflation is already above the Fed's 1% to 2% comfort zone for the year and the dollar is extremely weak and by lowering the Fed rate we are not helping matters for the long term. I think that Representative Ron Paul asked a very valid question when he asked "My question is going to be around the subject of how can it ever be morally justifiable to deliberately depreciate the value of our currency?" He was asking Mr. Bernanke about moral hazard. I would like to thank Paul for asking this question for the hundreds of millions of pensioners, savers, poor, fixed income beneficiaries, laborers, gasoline, bread, milk, and egg-buyers who weren't able to ask Mr. Bernanke why he - like every Fed chairman before him since 1913 - screwed them for the benefit of the top 5% of the population of this country. This country could certainly use more politicians like him to ask these difficult questions. There was an excellent article on MSN the other day by Jon Markman about the possibility of an epic bear market. I highly recommend reading it. He gives us some great insight on where the market may be headed soon with his interview of Satyajit Das, a credit-derivitive insider. Go to http://articles.moneycentral.msn.com/Investing/SuperModels/AreWeHeadedForAnEpicBearMarket.aspx.

Well, enough of my ramblings about the Fed and the rate cut heard round the world. It's time for me to discuss another of my stock picks and why I chose it. This week I am going to talk about Isis Pharmaceuticals (ISIS). There are several reasons that I picked this stock. Isis develops "antisense" drugs for cancer, diabetes and heart disease, along with drugs for allergies and HIV symptoms. Isis is another buyout canidate that I chose based on Pfizer's need for a quick fix to make up for the loss of their new cholesterol drug Torcetrapid.

Isis has strong intellectual property patents on its technology, which uses small, artificially created DNA strands to bind with and eliminate the RNA encoding that cause disease. Isis was
the first company to bring an antisense, the microbiology term used for the RNA-binding
strands, drug to the market (in a partnership with Novartis). The company's Vitravene is FDA approved and treats blindness in AIDS patients.

Isis has a large number of drugs in its pipeline, with a diabetes drug, one for ulcers, a second for
multiple sclerosis and a cancer drug all in Phase II testing right now. And of course, there's the
company's cholesterol drug, which is also in human trials. Pfizer could be looking to Isis'
cholesterol candidate to replace the time and cost it spent on its failed Torcetrapid. It would be
the fastest solution for the pharmaceutical giant.

I don't really have a target sell price but if a buyout of the stock happens I would expect an excellent return on my investment in the next 6 to 18 months. Right now the stock has gained close to 50% in 7 weeks. As always I keep a 20% to 30% stop loss on all of my stocks depending on the amount of actual losses and the risk I'm willing to take that the stock will rebound. I try to keep stocks for the long haul unless they look to have too many problems keeping the stock from performing well. That is why I recently sold my shares of Qualcomm (QCOM). Qualcomm is a solid company that makes chips for cell phones and other electronic devices but due to their legal woes I felt it was best to cut ties with the company until they can get beyond the numerous patent infringement lawsuits they are currently involved in.

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