It has turned out to be my mantra over the past several weeks: big surprises lead to big gains.

Last Thursday, my colleague, Laura Cadden, and I got into a discussion of Human Genome Sciences (NASDAQ:HGSI) and its investment potential.

Knowing that I started in the industry by tracking and trading unique volume patterns, she came to me after noticing a strong up-tick in trading activity last week.

At a company that normally trades just shy of eight million shares each day, a sudden surge to the fifty-million level is going to get attention.

As the group’s in-house genomics expert, Laura knew the company was closing in on a pivotal announcement concerning its lupus drug Benlysta.

After sizing up the charts, reviewing the company’s massive debt and calculating the risk/reward structure, we decided to pass on the move. Why chase a stock (it was already up by 600% from recent lows), especially one filled with risk.

We were wrong.

Shares of the company soared yesterday when Human Genome announced the results of Benlysta’s first Phase III trial.

Judging by the 325% surge in share price, the market was just as wrong as we were. Share price doesn’t soar on news that is widely expected.

Surprise! We’re still in business

Human Genome says 51.7% of the patients taking 1 mg of Benlysta experienced improvement. The folks taking 10 mg experienced an improvement rate of 57.6%. Of the patients receiving a placebo, 43.6% noticed improvement

While statisticians are right to doubt the significance of a study this close with just 865 patients, the market appears to believe the company’s next major hurdle, a second Benlysta Phase III trial, will be equally successful and the drug will hit the market right on schedule towards the end of 2010.

Unfortunately, lupus is not an easy drug to beat. If it were, there would not be a half-century lack of new drugs targeting the disease.

Many lupus sufferers tend to relapse after showing signs of significant improvement. If this is the case with Benlysta, it will show in the November trial results.

If bad news breaks, shares will give back even more than they made over the past two days.

Really, the action has nothing to do with the nearly billion-dollar revenue stream the drug’s eventual approval could bring Human Genome. Instead, investors are aiming for a price target they believe GlaxoSmithKline (NYSE:GSK) would be willing to pay to make the company its own.

Glaxo has a 50% stake in the drug. After telling analysts it is open to “bolt-on” acquisitions, the market is almost positive the company would be willing to pay a hefty premium to make its stake whole.

The key variable is the November trial. After yesterday’s announcement, the Street appears to believe approval is a sure thing. But careful investors know the FDA process is filled with some very large, very expensive hurdles.

If the above-mentioned statistics narrow their range by even the slightest of margins, the statistical data could fall into debate, pushing Benlysta’s approval back indefinitely.

Another surprise could be just around the corner.

If you missed your shot at the triple-digit profits like the rest of us, don’t start chasing Human Genome’s shares trying to get in on the action.

As uncertainty creates volatility over the next few months, you will have plenty of opportunities to get your hands on the shares at prices much cheaper than today.

Just as we picked up on unusual trading volume last week, savvy investors will keep an eye on the bottom of the chart, watching for big trades as word leaks out about possible trouble.

Remember, shares of the company were as low as $0.48 in March. Today’s investors are just one press release away from seeing that level once again.

Source: Human Genome Sciences: Big Surprise Leads to Big Gain

You probably saw innumerable stories as to how the World Health Organization was warning first that this might be an epidemic, and then, that it was indeed a pandemic.

But most all of those deaths were overseas. And we’ve all read dire headlines like this before: “Ebola Hot Zone Breakout… Vietnamese Bird Flu Flies Around World… SARS in Singapore… Invulnerable strains of Staphylococcus on Gym Mats… Incurable TB on Airplanes…”

In the end, nothing ever seems to come from it all, except a lot of expensive grants, decades-long studies, and indecipherable papers claiming to statistically prove that next time around we are screwed.

The “Next Time” Is Now

It’s so easy to get numb to it. Unfortunately, I have to tell you that the “next time” really is here. And while I can’t tell you if this is genuinely a plague, I can assure you that we are looking at something of considerably greater impact than a mere bad cold.

Right now, it’s summer in England. The average daytime high is 80°. Most summers, pallid Londoners worry more about sunburn than influenza, which usually sequesters itself to the cold soggy days of winter.

But not this summer. This time, it’s different….

Spreading Like a Plague

In this year of the Swine Flu Pandemic, the rate of illness in London has quadrupled. Proven H1N1 cases have hit 1,794. But those are simply the incidents that have been forensically established.

The Royal College of General Practitioners has just reported that the incidence of “flu-like symptoms” (the euphemism for “it’s swine flu, but we can’t prove it because we have run out of test kits) has now risen to 80 of out of every 1,000 citizens in the city.

To give you a sense of scale, of just how fast this disease is spreading, last week, the figure was 20 out of every 1,000. Heck, last winter during the peak of the regular flu season it was only 60 cases out of 1,000.

When the Bankers Get Worried About the Flu…

H1N1 is spreading like, well, like a forest fire, really. And this is still just the beginning. The World Bank now reports (that’s right: the World Bank is getting involved now – an important clue we will come back to) that it expects transmission to accelerate over the next few weeks as the flu season commences in South America. And as the Bank calculates global impact, it is now factoring in a doubling of influenza mortality rates.

In its Pandemic assessment, the WHO reported that H1N1 has penetrated over 100 countries. But what you probably really want to know is what’s going on right here at home (for those of you in the States).

Here in the U.S., official H1N1 cases have surpassed the 1 million mark, with 127 official deaths. These are once again forensically proven cases – the actual figure may be substantially higher. The median age of those fatalities is 37.

And once again, this is all taking place during influenza’s weakest moment, when ambient temperatures and humidity make it difficult for airborne droplets of the virus to persist. Come winter’s dry, cold air, the rate of transmission is expected to increase tenfold.

How You Can Prepare…

This is not some tale out of history or the plot from some overheated medical novel. These facts are not conjecture or supposition.

This is happening, right here, right now. And there is little or nothing we can do to stop it.

On a personal level, you can tend any nagging health issues now, so as to be in good health prior to infection. Seventy-five percent of recorded fatalities have occurred when the victim has some underlying condition like obesity, pregnancy, asthma, diabetes or immune system problems.

You can do your best to avoid contact with obviously sick people. And to be blunt, you can stay home if and when you get sick, so the rest of us stand a better chance of getting through all this.

… And How You Can Profit.

On an investing level, I draw you back to the World Bank’s concerns. The Bank has just approved “fast-track” status of $500 million to help countries finance emergency operations to prevent and control outbreaks. This is on top of an existing $500 million credit line set up in January 2006 to minimize the threat posed to people by the highly pathogenic avian influenza virus H5N1.

And here in the States, the CDC is planning a massive immunization campaign that could include as many as 600 million doses of the H1N1 vaccine. There are five manufacturers of flu vaccine currently serving the U.S. market. Of the bunch, only GlaxoSmithKline (GSK:NYSE) also produces the post-infection anti-viral treatment Relenza.

GSK shares have already risen some 28% since last March. Come this winter, I anticipate that GSK will rise from its current price of $34.88 to just below $50. Select call options could be expected to rise as much as 236% over the same period.

And, as I have mentioned more than once over the past few months, that will pay for a lot of chicken soup and Tylenol.

Source: The Hot Zone Is Here

It’s commonly held that when Frederick Remington cavilled to William Randolph Hearst that conditions in Cuba were not bad enough to warrant hostilities, Hearst told Remington to shut up and draw: “You furnish the pictures and I’ll furnish the war.”

The truth is, as always, somewhat more complex. Yes, a good tale of death and destruction will hold the public’s interest for a while. But it has to be something they can easily wrap their minds around. And it has to go somewhere if it’s going to have legs.

Just Because It’s Boring…

An example: For a week or so, the H1N1 Virus – a.k.a. Swine Flu – was the talk of the town. Old folks in Asia and Europe were dying, elementary schools in NYC were closing, men in white isolation suits were rushing about doing things that looked important, and the international authorities were bandying about scary words like “Level 5 Epidemic.”

All that hubbub got our attention but good – for a minute or two anyway.

But then it turned out that all we were talking about was yet another iteration of the flu. No piles of corpses on wagons. No quarantine posters on front doors warning off visitors and salesmen. Heck, all some people got were bad chest colds.

And those doctors: Who can really understand all the gobbledygook about reservoirs, global transmission paths and such? “What kind of plague is this?” people wondered. “Ah fergeddaboudit. I just wanna hear about ex-Chrysler dealers burning cars they can’t sell.”

… Doesn’t Mean It’s Going Away!

Now just because a subject isn’t holding the public’s interest at the moment doesn’t mean that it isn’t important. In fact, while the public at large may be “over” Swine Flu right now, there is every indication that it will reclaim center stage come this winter.

Just last week, the World Health Organization’s Director General, Margaret Chan, announced that H1N1 had attained official “Pandemic Status,” warning that the virus was spreading quickly around the globe, with some 30,000 reported cases in 74 countries.

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The authorities now tell us that this was simply H1N1’s initial wave, the first round of what might very well be a long, bruising fight. Now that it is entrenched worldwide, H1N1 is simply waiting for winter in the northern hemisphere to unload its real roundhouse punch.

And this will not be “a mere head cold.” Nor will it strike mostly the old, young, sick or poor. The WHO now reports 144 H1N1 deaths, with most of those fatalities striking adults between the ages of 30 and 50 – the prime productive figures in most economies.

Not the Plague, but Not a Mere Head Cold Either

Now please understand that I am not, repeat NOT, suggesting that this will be some kind of return of the Black Plague or such. You do not need to buy a ranch in Montana and secure it with barbed wire or anything that extreme.

What I am saying is whether we like it or not, whether we ignore it now or not, swine flu IS coming, and it WILL have an impact.

It’s that old “wisdom gap” again. Once again, we know everything we need to, but most folks are simply not paying but so much attention.

How to Cash In on the Wisdom Gap

As I have said many times in the past, wisdom gaps are the source of virtually all really good investment gains. And this time around is no different.

Back in April, we advised WaveStrength Options Weekly readers to buy call options against the British drug company GlaxoSmithKline PLC (GSK:NYSE).

GSK already manufactures the anti-viral drug Relenza, an effective post-infective treatment for H1N1, as well as most of the other flu viruses expected to attack the northern hemisphere come November. It is also one of the prime contractors developing an H1N1-specific antiviral vaccine, which should be available to doctors, hospitals and clinics by late fall.

Short-Term Gains…

The options we advised saw gains of as much as 109% last Friday when the WHO announced H1N1’s upgrade to pandemic status. But this is only the beginning of the mid-term ramp up for this well-placed drug maker.

As I sit to write, the GSK January 2011 35 Call Option contract can be purchased for $550. By mid-winter, when the flu is actually here and can no longer be ignored, GSK shares could be expected to match their 2008 highs at $59.98. That rise would push the sell price on these calls to $1,692, for gains in excess of 300%.

Now that ought to pay for your tissues and cough syrup this winter – and then some.

But all this is mere short-term speculation – a hedge against the potential impact flu will have this year. And while GSK is certainly a major soldier in this year’s battle, it is also a field general of sorts in the war to come.

… And a Long-Term Plan

GSK is forming a joint venture with China’s Shenzhen Neptunus Interlong Bio-Technique Co. to develop and manufacture influenza vaccines for China, Hong Kong and Macau, including vaccines for seasonal, pre-pandemic and pandemic influenza.

GSK will take a 40% stake in the joint venture and will contribute cash and assets equivalent to 21 million British pounds. Shenzhen Neptunus will take a 60% stake in the joint venture and will contribute cash and assets equivalent to 31 million British pounds. While it may take a couple of years for these vaccines to hit the market, the venture could assure GSK’s position at the table for decades to come.

Keep in mind that GSK was a $76 stock as recently as 1999. Forward planning like this could easily see a simple investment in GSK shares double in value over the next 12 to 24 months.

Source: The Invisible Plague

This is not what a timid, cautious market needs as it works to heel from the wounds of a wicked leveraged correction. Fortunately, as with most media-hyped fears, the swine flu “pandemic” will be short lived.

In the meantime, traders will have their hands full picking the speculative winners from the losers. So far, the stocks investing are trading the most are no big surprise.

Just as they do every time the word flu creeps into a headline, shares of Novavax (NASDAQ:NVAX) are soaring today. Investors lucky enough to be holding shares last week, are now sitting on shares worth 150% more than they were trading for on Friday. Options traders are making plans for retirement as their positions soar multifold.

But even after this morning’s surge, shares have to more than triple in value to reach the peak levels of the bird-flu scare in 2006. You can view that as more upside potential, or look at it the way I do and realize the gains will not be long-lived.

Investing fever

Novavax, while it does not sell any cure-all pills or a vaccine to prevent the spread of the swine flu, does have the biotechnology to quickly uncover the recipe for a new vaccine. By grabbing shares of the tiny $100 million ($50 million last week) company, you are speculating the flu will grow to pandemic proportions and large doses of vaccines will be needed.

If that never happens, the future cash flows investors were betting on will dissolve and share price will natural drop back to last week’s levels.

If you are not willing to flat-out gamble on the situation, you will likely want to turn to companies like Gilead Sciences (NASDAQ:GILD), the creator of Tamiflu or Switzerland’s Roche, who is currently paying a royalty to Gilead for the right to sell Tamiflu. Or you can invest in GlaxoSmithKline (NYSE:GSK) and its Tamiflu competitor, Relenza.

Over the weekend, global health officials gave permission to tap into reserve stockpiles of Tamiflu and start using up to three million treatments as needed. Hopefully, the world will not need the entire amount as it could take Roche up to eight months to scale up its current production and put large amounts new packages of the flu-fighting tablets on the market.

Overall, Roche is expected to earn somewhere in the neighborhood of $400 million if it is called to restock current piles of Tamiflu. That means about $70 million in royalties could flow to Gilead, not a windfall by any stretch of the imagination for a $40 billion company.

If you do not already own shares of any of these companies, today is not the day to be doing it. Novavax could be a winning play if you time your moves exactly right, but the other handful of companies getting attention from the news will likely give up their gains as quickly as they came.

Until the headlines and the 24-hour news networks start talking about massive amounts of casualties and not a few folks with a high fever and weaker-than-normal stomach flu, this story is pure speculation and is not for traders that cannot tolerate ultra-high risk.

If you really want to make some money on the situation, buy a couple of pigs on the cheap. You’ll be able to fatten them up and sell them for a premium when this whole thing blows over.

Source: Swine flu: Investing in a Sick Pig

European stocks ended higher on Friday, as buoyant pharmaceutical shares eclipsed a drop in cyclical mining and industrial sectors hit by renewed economic fears, while energy shares tumbled along with oil.

The FTSEurofirst 300 index of top European shares closed 1.1 percent higher at 862.07 points.

Although it gained 13 percent during the week, the index dropped 7 percent in November, recording a ninth month of losses in what has been a torrid 2008 for equities worldwide.

Pharma stocks made strong gains on Friday, with GlaxoSmithKline up 5.1 percent and Sanofi-Aventis up 4.5 percent. Novartis , whose CEO said the company could increase its dividend and also resume share buybacks once it has reduced its debt, gained 4.4 percent.

The sector rallied after the publication of a long-anticipated EU report on generic competition. Although Competition Commissioner Neelie Kroes said preliminary results showed competition in the pharmaceuticals industry “does not work as well as it should”, traders said the absence of specific penalties in the report brought some relief to pharma stocks.

Energy firms such as Total and BP dropped 0.7-2.6 percent as oil prices sank below $52 a barrel on signs OPEC would defer cutting production when it meets this weekend in Cairo.

Industrials were also among the biggest losers, with Siemens down 3.8 percent and Alstom down 6 percent.

Despite the market’s recovery during the week, analysts remain wary about a potential “Christmas rally” this year.

“The volatility is not about to come down immediately. The economic newsflow is just too horrible. It’s too early to call for a straight market rally at this point,” said Arthur van Slooten, strategist at Societe Generale, in Paris.

“With deflation fears, risky assets have been pricing in the worst. But it doesn’t mean that all of a sudden, from now on you have a straight way up. We know that the newsflow will be terrible, but we need at least some sort of indication that the bottom is maybe in sight,” he said.

“Next year’s first quarter will really look awful in terms of macro data and with analyst further downgrading their estimates and companies finally becoming realistic in their own guidance. That in itself could provide us with a sound basis to build from there.”

Miners took a beating on Friday, adding to recent sharp losses. Anglo American shed 2.4 percent and Xstrata dropped 3 percent.

Prices for copper, a key industrial metal, slipped as tumbling industrial production data from Japan highlighted bleak prospects for demand in an oversupplied market, while prices for aluminium also fell, hit by the rising fears about the health of the embattled auto sector.

“There is little doubt that the outlook for metals demand is grim for at least the next few quarters and prices have fallen to levels that reflect market expectations for further stock increases,” Barclays Capital said in a note.

Automakers lost ground, with Volkswagen down 5 percent, BMW off 3.4 percent and Renault down 4.8 percent.

“Going into the weekend, one can’t help but worry that we are only a heartbeat away from the next scare story,” said Chris Hossain, senior sales manager at ODL Securities.

“The markets appear to have been buoyed by the feeling that the U.S. will be bailing out the auto industry, but one has to wonder how much more the global governments can continue to support troubled industries,” he added.

Around Europe, Germany’s DAX index eked out a gain of 0.1 percent, UK’s FTSE 100 index rose 1.5 percent and France’s CAC 40 added 0.4 percent.

By Blaise Robinson
PARIS, Nov 28 (Reuters)

• Japan’s wholesale inflation remained near a 27-year high in August, the government said yesterday (Wednesday), as the index for domestic corporate goods prices rose 7.2% from a year ago. The index measured a revised 7.3% increase in July.

• The Defense Department has deferred its decision on a $35 billion tanker contract to the next administration, further delaying the heated competition between The Boeing Co. (BA) and Northrop Grumman Corp. (NOC). Defense Secretary Robert Gates said yesterday (Wednesday) that he decided to cancel the current round of bidding because the complexity of the project and the friction between the two companies, The Associated Press reported.

• Citigroup Inc. (C) has taken a $450 million pretax hit so far this quarter due to its exposure to the troubled mortgage finance companies Fannie Mae (FNM) and Freddie Mac (FRE), the company said in a filing with the Security Exchange Commission. Citigroup said its total exposure to preferred shares of Fannie and Freddie is now about $50 million, down from about $1 billion on June 30, 2008.

• Consumer price inflation in China fell for the fourth consecutive month in August, Beijing said yesterday (Wednesday). Consumer inflation was 4.9% last month, down from 6.3% in July, However, factory price inflation edged up to 10.1% in August.

• ImClone Systems Inc. (IMCL) received a $6.1 billion takeover offer yesterday (Wednesday), ImClone Chairman Carl Icahn announced. He refused to disclose the interested party, saying only that a “large pharmaceutical company” outbid Bristol Myers Squibb Co.’s (BMY) unsolicited offer, Bloomberg News reported.

• Bank of America Corp. (BAC) yesterday (Wednesday) announced it would buy back $4.5 billion of illiquid auction-rate securities in order to settle an investigation by Massachusetts’ state regulators. The repurchase will affect approximately 5,500 Bank of America retail customers nationwide, Reuters reported.

• France’s Sanofi-Aventis SA (ADR: SNY) announced yesterday (Wednesday) that it had appointed Chris Viehbacher, former head of GlaxoSmithKline PLC’s (ADR: GSK) North American drugs business, to replace Chief Executive Officer Gérard Le Fur as of Dec. 1. The management change at Sanofi-Aventis stems from conflicts with Chairman Jean-François Dehecq, the International Herald Tribune reported.

• Royal Dutch Shell PLC (ADR: RDS.A, RDS.B) yesterday (Wednesday) announced it was evacuating personnel from its Gulf of Mexico oil platforms as Hurricane Ike makes its way towards the Texas coast. Ike is expected to hit land early Saturday after passing through the Gulf of Mexico, home to most U.S. oil refineries, the AFP reported.

Source: Global Investing Roundups Thursday, September 11th, 2008

Floyd Brown says one way of doing this is to rethink the “boring” image of dividend-paying stocks. These stocks can offer great returns and a steady cash flow.

Floyd says there are five pharmaceutical companies offering outstanding dividend yields in a growing sector. And with most negative sentiment already priced into the stocks, downside risk is limited…

This from Investment U:

Fat dividends have attracted me recently to the largest pharmaceutical companies. Ten years ago, these firms were the darlings of growth investors. When Bill Clinton’s plan to reform and socialize medicine was defeated in the early 1990s, the shares of these firms rocketed higher.

However, near the end of the decade shares of many of these stocks stalled and, as a group, their prices have remained stable. But in the following decade, regular increases in the dividends and earnings of the shares have compressed the price-to-earnings and dramatically boosted the dividend yields.

When you approach dividend-paying stocks or companies, gauging their strength is sometimes difficult. Here is one way to know if they are actually going to pump up your returns:

• A common misconception is that a high dividend yield is the most important measure.
• But a yield that is higher than that of other stocks in a sector could actually be a sign of weakness.
• If the firm is in trouble, they could be preparing to cut, or in some cases, cease to pay a dividend.

A high yield preceded major downturns in financial stocks that had gotten in trouble with subprime and other bad loans. The dividends were slashed to improve the liquidity and cash position of the businesses.

The Dividend PayOut Ratio – An Important Indicator

The important indicator for you to watch is not just dividend yield, but the dividend payout ratio. This is the percentage of earnings directed to paying stock dividends, and it shows us if a company can maintain a level or growing annual payment.

For example, Pfizer (NYSE:PFE) currently has a 6.6% yield. With a stock price of $19.11, the firm must pay a dividend of $1.28 to maintain that yield. Last year, Pfizer earned $1.33, and it has a payout ratio of 92% of earnings.

Pfizer generates more than enough profit to continue to pay the dividend, but if the company should stumble more – and make less than $1.28 next year – it would not have the earnings to cover dividends. Then the firm would have to dip into reserves or borrow money to pay the dividend. In such a case, the dividend would be at risk.

The best dividend paying stocks are those that hold the yield steady as they grow. In this case, the dividends are growing year after year, and you benefit from both the capital gains and the cash.

The Top 5 Dividend-Paying Stocks

For decades, buying shares of such franchise players as Coca-Cola (NYSE:KO), Johnson & Johnson, Altria (NYSE:MO) and General Electric (NYSE:GE) have been great dividend-paying stock plays.

In the current market, I like pharmaceutical stocks because the largest have become virtual cash machines. The dividends offer a protection against dramatic drops in share price. In addition to Pfizer…

• Johnson & Johnson (NYSE:JNJ) yields 2.6%
• Novartis (NYSE:NVS) yields 2.6%
• Glaxosmithkline (NYSE:GSK) yields 4.4%
• And Eli Lilly (NYSE:LLY) yields 4.0%.

All these are outstanding yields for growing firms. Pfizer grew revenue 9.4% last quarter. JNJ grew 8.7%, Novartis grew 14.7%, Glaxo grew 3.5% and Lilly grew 11.20% in the last quarter.

While a number of these drug firms have been under pressure from market perceptions of slow growth, shallow pipelines of new drugs and patent expirations, these negatives are already priced into the shares. 

Investing in dividend stocks is not a sexy investment strategy, but it can be one of the most profitable. By following the “show me the money” mantra, these cash machines can start improving your portfolio and deliver outstanding returns.

Source: 5 Pharmaceutical ‘Cash Machines’

The Class A shares closed Friday at $116,650 each, down from their 52-week high of $151,650 (the Class B shares represent 1/30th of the Class A shares).

However, Money Morning’s Horacio Marquez says Berkshire’s share price is merely a reflection of the slowdown in the US economy. And with shares now at bargain prices, it’s a perfect opportunity to take a stake in one of the best investment portfolios on the planet…

More from Horacio…

Berkshire Hathaway Inc. with Warren Buffett at the helm has one of the greatest financial combinations investors have ever seen. The shares of the once-wheezing-textile-maker-turned-investment-vehicle doubled over the past ten years while the broad Standard &Poor’s 500 Index returned only 18% during the same period.

In the process, Buffett became the richest man on the planet, with a net worth of about $62 billion, Forbes magazine reported back in March. Since then, however, Berkshire Hathaway’s shares have plunged 23% – the “Class A” shares closed Friday at $116,650 each, down from their 52-week high of $151,650 (the “Class B” shares represent 1/30th of the Class A shares).

And Berkshire Hathaway recently reported a slight drop in its year-to-year earnings due to some weaknesses in its operating businesses, as well as some market losses in long-term derivative positions that ultimately will almost surely be very profitable.

But the long-term track record of Buffett is indisputable. His fame is such that many make a living of playing the ‘WWWBN Game’ – What Will Warren Buy Next.

Some analysts argue that Buffett has lost his magic touch. We dismiss this out of hand. His most-recent decisions to add into railroads, to buy shares in leading steelmaker Posco Ltd. (NYSE ADR:PKX) and 19 other South Korean companies, buying the leading Israeli industrial company and taking profits in his China holdings just before that market lost half its value all were brilliant moves.

]]> http://www.contrarianprofits.com/articles/buy-sell-or-hold-berkshire-hathaway-inc/4879/feed 0 http://www.contrarianprofits.com/articles/myostatin-inhibitors-will-break-pharmaceutical/4271 http://www.contrarianprofits.com/articles/myostatin-inhibitors-will-break-pharmaceutical/4271#comments Fri, 01 Aug 2008 13:32:48 +0000 Patrick Cox http://www.contrarianprofits.com/articles/myostatin-inhibitors-will-break-pharmaceutical/4271 I’d like to tell you about a couple of important new breakthroughs that have just shown up on the radar. Both have enormous potential, in terms of both your health and your portfolio.

I came across the first while looking through lists of new medical patents. The Mayo Foundation for Medical Education and Research has been awarded rights to a stem cell-screening system. Specifically, the patent addresses a means of isolating substances that inhibit PAPP-A, a plasma protein. The reason for the search is that animals lacking PAPP-A have life spans up to a third longer than normal.

The patent is interesting for a couple of reasons. The most obvious is the prospect that a compound might extend human life spans significantly. It…

]]> I’d like to tell you about a couple of important new breakthroughs that have just shown up on the radar. Both have enormous potential, in terms of both your health and your portfolio.

I came across the first while looking through lists of new medical patents. The Mayo Foundation for Medical Education and Research has been awarded rights to a stem cell-screening system. Specifically, the patent addresses a means of isolating substances that inhibit PAPP-A, a plasma protein. The reason for the search is that animals lacking PAPP-A have life spans up to a third longer than normal.

The patent is interesting for a couple of reasons. The most obvious is the prospect that a compound might extend human life spans significantly. It also, however, highlights the growing value of stem cells for scientific uses. A lot of money is going to be made selling stem cells before they deliver breakthrough therapies to the market. Then the dam will truly break. If PAPP-A inhibitors that lack major side effects can be found, life expectancies may increase by 20 years overnight. Even if such a drug were held by a Big Pharma company with diverse product lines, the profits would likely be transformational.

As the wealthiest generation in history ages, the demand for true longevity therapies will increase dramatically. As of now, however, the FDA doesn’t even recognize aging as a treatable problem. I suppose this is natural, since the ability to extend life spans therapeutically has become a reality only in the last few years. Still, the FDA needs to change its institutional prejudice against life extension therapies.

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The Secret Behind “Black Market” Opportunities

If you wanted to sell newspapers, would you cover the big-name, popular stocks like Citigroup, Microsoft and General Motors…who hand over fortunes for advertising space and trade massively on Wall Street every day…

Or would you cover the “Black Market” shares only a few very plugged-in and savvy investors seem to know about and understand? It’s a pretty obvious answer. The press prefers the big names and the big spenders.

But the truth is, by doing this, the press is forcing you to miss out on some of the biggest potential gains…while forcing you into some of the most dangerous, overbought positions in the bigger-name shares.

Click here to get informed of what the newspapers won’t tell you.

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This prejudice is obvious in Glaxo’s efforts to bring its resveratrol compounds to market. Animal tests have shown significant life-extending abilities in resveratrol. Glaxo (LON:GSK) was convinced to the tune of $720 million, the price it paid for basic patents. Because slowing the aging process is not viewed as a legitimate therapeutic activity, approval for resveratrol as a diabetes treatment is being sought in the U.S. The company acknowledges tacitly, however, that the real market will be “off label” life extension.

The same issues are involved with myostatin inhibitors, the second of today’s breakthroughs. Myostatins are your body’s mechanism for preventing the growth of too much muscle. In the past, when malnutrition — instead of obesity — was the problem, they served a valuable function. When you put on muscle mass, your caloric needs go up. The ability to store fat is reduced, which increases the risk of starvation.

Myostatin inhibitors allow the body to build muscle easily. In animals, myostatin inhibitors increase the production of lean meat. The rare human with reduced myostatin activity has more muscle mass and strength. They also have very little body fat.

Obviously, a lot of people would like to bring myostatin inhibitors to market. The U.S. military is testing them now as a way to aid and accelerate the healing of wounded soldiers. Nobody is talking about it publicly, but they would also produce soldiers (and athletes) with significantly increased strength, speed, agility and endurance. Naturally, opposition to these drugs is growing.

This is what already happened with anabolic steroids. When Congress was in the process of lumping steroids in the same legal basket as heroin and cocaine, nearly all the experts protested, including, incidentally, the American Medial Association and the National Institute on Drug Abuse. AMA analysts forcefully argued that steroids could be an important tool to fight the symptoms of aging.

Almost 20 years later, I still talk to researchers who are angry over the Anabolic Steroid Control Act of 1990. The reason is that the benefits of increased muscle mass for older people are really quite remarkable. Lack of muscle strength leads to weakened bones and joints, which, in turn, work to make simple falls the leading cause of injury death in people 65 and older, according to the National Safety Council. Experts warned — accurately — during the hearings that making steroids Schedule III drugs would drastically reduce their medical use.

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Beyond the mechanical benefits that come from increased strength and flexibility, there are also important physiological benefits. Many of these come from the decreased body fat content that is typical of people with more lean muscle mass.

The reason that Congress ignored the experts, by the way, is sports. Ben Johnson had just been stripped of his Seoul Olympics medals, and Congress seemed to think that it was more important to prevent “juicing” than to facilitate the treatment of age-related muscle loss and wasting.

Myostatin inhibitors could actually be more effective at building muscle than steroids. They would also be more useful. For one, steroids pose specific “masculinizing” problems for women that myostatin inhibitors do not. Even for men, they seem to have fewer side effects. Clearly, the sports industry is going to lobby to keep them off the market.

Incidentally, I watched Antonio Margarito beat the heck out of a far superior boxer, Miguel Cotto, on pay-per-view this Saturday. I don’t, however, put the so-called integrity of sports above the well-being of the aging and aged.

The company that holds the patents for myostatin inhibitors is MetaMorphix Inc. It’s privately owned, but somebody is going to sell these inhibitors eventually. I believe strongly that baby boomers, when they understand what is at stake, will prevent these drugs from being treated like anabolic steroids. I also believe that myostatin inhibitors are going to break pharmaceutical profit records. I’ll keep you in the loop as this story develops.

Until next time, here’s to transformational profits.

Patrick Cox

Source: Myostatin Inhibitors Will Break Pharmaceutical

]]> http://www.contrarianprofits.com/articles/myostatin-inhibitors-will-break-pharmaceutical/4271/feed 0 http://www.contrarianprofits.com/articles/warren-buffett-the-%e2%80%9coracle-of-omaha%e2%80%9d-tells-german-audiences-that-the-us-economy-is-in-a-deep-recession/2500 http://www.contrarianprofits.com/articles/warren-buffett-the-%e2%80%9coracle-of-omaha%e2%80%9d-tells-german-audiences-that-the-us-economy-is-in-a-deep-recession/2500#comments Tue, 27 May 2008 13:00:16 +0000 William Patalon III http://www.contrarianprofits.com/articles/warren-buffett-the-%e2%80%9coracle-of-omaha%e2%80%9d-tells-german-audiences-that-the-us-economy-is-in-a-deep-recession/2500 The United States is already in a recession and it will be longer as well as deeper than many people expect, U.S. investment guru Warren Buffett said in an interview published Saturday in the German magazine Der Spiegel.

The United States is “already in recession … perhaps not in the sense that economists would define it [with two consecutive quarters of declining gross domestic product (GDP)] but the people are already feeling the effects,” Buffett said. “It will be deeper and last longer than many think.”

As Money Morning reported back in March, Buffett made a similar pronouncement to U.S. audiences during an interview with the popular cable-television network, CNBC-TV.

Buffett is the world’s richest man, with a net worth of $62 billion. As…

]]> The United States is already in a recession and it will be longer as well as deeper than many people expect, U.S. investment guru Warren Buffett said in an interview published Saturday in the German magazine Der Spiegel.

The United States is “already in recession … perhaps not in the sense that economists would define it [with two consecutive quarters of declining gross domestic product (GDP)] but the people are already feeling the effects,” Buffett said. “It will be deeper and last longer than many think.”

As Money Morning reported back in March, Buffett made a similar pronouncement to U.S. audiences during an interview with the popular cable-television network, CNBC-TV.

Buffett is the world’s richest man, with a net worth of $62 billion. As the chairman of Berkshire Hathaway Inc. (BRK.A, BRK.B), investors have for years followed Buffett’s moves to see which investments are going to take off next. Financial-research studies actually show that mimicking Buffet’s investment moves can be a most-profitable strategy.

A New Focus

Within the last year, Buffett has shifted his focus abroad – the precise strategy that Money Morning has been advocating since this global-investing news service was formed back in 2007.

Back in October, the Oracle of Omaha’s trip to South Korea encouraged our own bullishness on that country’s stock market.

And now Buffett has decided to have a look at Germany. However, Buffett remains most interested in German companies that are family-owned and well-managed. And he’s always in the hunt for carefully selected companies with great brand names and strong market positions.

“If the world were falling apart I’d still invest in companies,” he said.

Berkshire’s recent play for U.S. chewing gum icon Wm. Wrigley Jr. Co. (WWY) underscores that willingess to invest in the “right” opportunity, regardless of the general economic outlook. Just last month – against a backdrop of recessionary and inflationary fears, a weak dollar, soaring energy prices, and a spiraling credit crunch – Berkshire joined forces with closely held Mars Inc. and agreed to provide $4.4 billion in financing for the $23 billion deal. In addition to providing the debt financing, Berkshire will make a minority investment in Wrigley, valued at about $2.1 billion. It’s believed that Buffett is getting a discount on the Wrigley stake.

Once the deal closes, Wrigley will become a separate Mars subsidiary. And there may be a lot more to the deal in the long run, sources say. By helping Mars buy Wrigley, Buffett may actually be helping himself: As one, big privately held entity, the merged Mars-Wrigley giant would be much easier for Berkshire to buy outright should the secretive family that runs the business ever decide to sell it, sources said.

On a recent trip to Europe, Buffett made stops in Germany, Switzerland, Spain and Italy. But his first priority was to meet with leaders of the German mittelstand – the family-owned, medium-sized companies that are the backbone of the German economy.

“We would like more family owners of German businesses who, when they feel some need to monetize their business, think of Berkshire Hathaway,” Buffett said to the Financial Times.

Buying into privately held companies – usually those whose ownership remains in the hands of the founding family – is an investment play Buffett has run time and again – and virtually always successfully. Back in 2006, he made what then was his largest investment ever outside the U.S. market, when he spent $4 billion for an 80% stake of an Israeli metalworking firm that was family operated. At the time, Israel was out of fashion with U.S. investors, though Buffett’s headline-making deal changed those attitudes rather quickly.

Like Israel was then, and like Japan is now, Germany is currently unfashionable with U.S. analysts. As is also true of Japan, it seems to come as a surprise every time Germany comes out with a positive gross domestic product (GDP) number. Both countries had horrible periods in the 1990s, but analysts who think Germany is doomed to slow growth forever haven’t been paying attention.

Buffett also renewed his criticism of the derivatives trading that helped create the current global credit mess.

Buffett Criticizes Waste

“It’s not right that hundreds of thousands of jobs are being eliminated, that entire industrial sectors in the real economy are being wiped out by financial bets even though the sectors are actually in good health,” Buffett told the German magazine.

Buffett complained about the lack of effective controls.

“That’s the problem,” he said. “You can’t steer it, you can’t regulate it anymore. You can’t get the genie back in the bottle.”

When it comes to choosing investment targets, Buffett favors companies that have a competitive advantage, offering products or services that can’t easily be replicated by rivals. Businesses such as Mars and Wrigley, which each have strong consumer brands, fit the bill, Jerome V. Bruni, president of J.V. Bruni and Co., a Colorado Springs, Col.-based investment banking firm, recently told the Dow Jones Newswires.

The Wrigley deal is just the latest in a string of recent deals for the so-called “Oracle of Omaha.” Other recent investments include a stake in Kraft Foods Inc. (KFT) and GlaxoSmithKline PLC (GSK), Europe’s largest drugmaker.

Since taking over Berkshire Hathaway in 1965, Buffett has transformed the once-wheezing textile manufacturer into an investment vehicle that controls an amalgamation of more than 70 portfolio companies and that has a market value of $200 billion.

As of the end of last year, Berkshire owned 3.3% of Procter & Gamble Co. (PG), a consumer-products giant, along with big chunks of The Coca-Cola Co. (KO) and Anheuser-Busch Cos. Inc. (BUD).

Source: Warren Buffett, the “Oracle of Omaha,” Tells German Audiences That the U.S. Economy is in a Deep Recession

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