Saturday, September 28, 2013

U.S. Stocks Lose Ground Over Shutdown Worries

With anxiety over budget negotiations on Capitol Hill keeping buyers at bay, U.S. stocks fell Friday, with the S&P 500 index and the Dow suffering their first weekly drop since August.

The Dow Jones Industrial Average fell 70 points, or 0.46% to close at 15,258.2, a 1.3% decline for the week. The S&P 500 dropped almost seven pints, or 0.4% to 1,691.75, a 1.1% loss for the week.

And the Nasdaq Composite fell 5.8 points, or 0.15% to close at 3,781.6.

Wall Street remains unsettled over the lack of progress in budget and debt-ceiling talks in Washington. The government shutdown looming on Oct. 1 overshadowed encouraging consumer-spending data and an upbeat earnings report from Nike (NKE).

Nike rose 4.7% to close at $73.64 after the Dow component posted better-than-expected earnings led by strong sales growth in the U.S. and Europe and wider gross margins.

Americans’ personal spending rose 0.3% in August from a month earlier and incomes increased 0.4%, the Commerce Department reported. The gains were in line with economists’ forecasts.

But most eyes were fixed on Congress. The Senate on Friday approved a short-term spending bill that would help avoid a government next week. House Speaker John Boehner on Thursday said the House wouldn’t accept the bill.

The yield on the 10-year Treasury note slipped to 2.62% from 2.643% late Thursday. Yields move inversely to prices.

Crude-oil futures declined 0.27% to settle at $102.76 a barrel. October gold futures advanced 1% to $1,336.90 a troy ounce. And the U.S. dollar declined against both the yen and the euro.

In corporate news:

J.C. Penney (JCP) fell 13.15% to close at roughly $9 after the retailer agreed to sell 84 million shares late Thursday. The offering was priced at $9.65 a share, 7.4% below Thursday’s closing price.

Goldman Sachs (GS), which is managing J.C. Penney’s stock offering, dropped 1.5% to close at $159.85.

Lumber Liquidators (LL) fell 5.2% to close at $107.13 after federal authorities executed a search on Thursday at the company’s headquarters in Virginia, a move the company said involved the importation of some wood-flooring products. Before Friday’s decline, the stock had more than doubled this year.



Friday, September 27, 2013

Small Cap Biotech News Watch (CTIC, BIND & TNIB)

If you have not been watching the biotech sector lately, you should start paying attention as the sector along with small cap biotech stocks like Cell Therapeutics Inc (NASDAQ: CTIC), BIND Therapeutics Inc (NASDAQ: BIND) and TNI BioTech (OTCMKTS: TNIB) continue to produce a steady stream of good news for investors thanks to positive industry trends. Moreover, Ophthotech Corp (NASDAQ: OPHT), Foundation Medicine Inc (NASDAQ: FMI), Evoke Pharma and Fate Therapeutics Inc (NASDAQ: FATE) are this week's biotech IPOs that will no doubt be watched closely by Wall Street and industry observers in general. With that in mind, consider the following biotech news or recent articles about the industry and the small cap players in it:

Biotechs Are Back In Favor Thanks to Positive Developments. A Forbes article on Monday noted how Biotech is back in favor thanks to a "number of new drug approvals, affirmative data, and accelerated sales and earnings growth at the big biotech companies." The article went on to note that those trends along with a robust M&A environment are the key ingredients for a sustainable biotech bull market rally which has already helped to drive up the price of many biotech stocks. What's Behind The Booming Biotech IPO Market. Another Forbes article from last weekend noted that after a decade long drought, there have been over 30 new biotech offerings this year and more than $2.5 billion raised for the best IPO market since 2000 and the second busiest IPO year in the 30+ year history of biotech. The article then went into some detail about the following key trends helping the biotech market: 1) Generalists are back, chasing the sector's outperformance; 2) Recent IPO vintages have done very well in biotech; 3) Biotech is benefiting from a 'recycling-scarcity' cycle; and 4) The JOBS Act has certainly greased the skids of the offering process with its test-the-water and confidential S1 approach. Four Upcoming Biotech IPOs. noted this week's IPOs on Monday, which are Ophthotech Corp, Foundation Medicine Inc, Evoke Pharma and Fate Therapeutics Inc. Expect biotech investors and analysts alike to be watching how these IPOs perform and then how their shares perform in the coming days, weeks and months. BIND Therapeutics IPOs raises $70.5 million. Last Friday, small cap BIND Therapeutics, which has no products on the market (BIND-014 is its most advanced treatment candidate as its in mid-stage clinical development as a possible treatment for a form of lung cancer and an advanced form of prostate cancer), fell 6.1% to $14.09 on its first day of trading. The BIND Therapeutics IPO raised $70.5 million. Cell Therapeutics Raises $15 Million. Late last week, small cap Cell Therapeutics, a small cap biopharmaceutical company with integrated portfolio of oncology products aimed at cancer, announced the closing of its previously announced sale of 15,000 shares of its Series 18 Preferred Stock directly to Quogue Capital LLC for gross proceeds of approximately $15 million (net proceeds of $14.8 million). All of the shares of Series 18 Preferred Stock were converted and investors received 15,000,000 shares of common stock issuable upon conversion. The 2013 Fierce 15 Biotech. has also come out with its annual Fierce 15 report detailing fifteen up-and-coming private biotechs who naturally could end up as the next hot IPO. So it might be worthwhile to browse through the list for future investment ideas. TNI BioTech Makes Important Announcements. Up and coming small cap TNI BioTech was formed in 2012 to acquire patents, develop treatments, market and license immunotherapies for the treatment of cancer, HIV/AIDS and autoimmune diseases using methionine enkephalin (MENK) and low dose naltrexone (LDN) with its first patents and therapies being acquired from Dr. Nicholas P. Plotnikoff and Dr. Fengping Shan. TNI BioTech recently announced a manufacturing and supply agreement with Laboratorios Ramos for the production of Low Dose Naltrexone ("LDN"), which can normalize the immune system and help those suffering from HIV/AIDS, cancer, autoimmune diseases and central nervous system disorders, for commercial use. In addition, TNI BioTech has given a financing update which noted the company has received $826,250 as consideration for the exercise of the previously-issued warrants and $531,250 for the purchase of common stock under the Private Placement, for an aggregate sum of $1,357,500.

Wednesday, September 25, 2013

Back to Basics Investing: Small Cap Wound Care Stocks (DSCI, OCLS & ARTH)

Small cap stocks Derma Sciences Inc (NASDAQ: DSCI), Oculus Innovative Sciences, Inc (NASDAQ: OCLS) and Arch Therapeutics Inc (OTCBB: ARTH) specialize or have a focus on wound care – a medical problem that has plagued mankind since the dawn of time. After all and think back to our Civil War when disease along with infections resulting from improper wound care probably killed more soldiers than actual battles. Even today, infection after surgery or after receiving a wound or injury of any kind is still a constant threat. And then there is the scaring that can result from any sort of invasive surgery or injury. With those thoughts in mind, here are three small cap wound care stocks trying address these problems:

Derma Sciences Inc. A specialty medical device / pharmaceutical company focused on wound care, small cap Derma Sciences is a fully integrated manufacturer, marketer and supplier of a complete line of products for wound and skin care in the following categories: Advanced Wound Care, Traditional Wound Care, Burn Care, Skin Care and Bathing, Specialty Securement and Closure Devices, and First Aid. The company has two wholly owned and operated manufacturing facilities in Toronto and China plus it offers contract manufacturing services for OEM or private label products. Back in early June, Derma Sciences reported positive results from a Phase 1 diabetic foot ulcer study. Otherwise and back in May, Derma Sciences reported that revenue rose to $18.8 million from $15.3 million while its net loss grew from $2.5 million to $6.3 million year over year as sales of traditional and advanced wound care products improved, but the company spent more to promote its advanced wound care products while research costs grew because it started treating patients in two late-stage trials of a treatment for diabetic foot ulcers. On Wednesday, Derma Sciences rose 7.22% on unusually high trading volume to $15 (DSCI has a 52 week trading range of $9.10 to $15.45 a share) for a market cap of $254.65 million plus the stock is up 39.5% since the start of the year, up 50.7% over the past year and up 158.6% over the past five years.

Oculus Innovative Sciences, Inc. A global healthcare company that designs, manufactures and markets prescription and non-prescription products in over 20 countries, small cap Oculus Innovative Sciences has over 100 SKUs commercialized worldwide that are used to treat patients in surgical/advanced wound management, dermatology, women's health and animal health. Back in June, Oculus Innovative Sciences reported $15.5 million in revenue for the twelve months ended March 31, 2013 verses $12.7 million for the same period in the prior year while the company's operating loss minus non-cash expenses (EBITDAS) was $1.5 million verses $3.3 million. However, the Oculus Innovative Sciences is focused on an intended IPO for subsidiary Ruthigen, Inc, but the number of shares to be offered and the price range for the offering have not yet been determined. According to the plan, Oculus Innovative Sciences will retain all Microcyn drug and device indications while Ruthigen will focus on RUT58-60, a drug candidate intended for the prevention of infection in trauma and surgical procedures that still needs more funding. Oculus Innovative Sciences itself is aiming to reduce its operating expenses while targeting EBITDAS breakeven with the spinoff. On Wednesday, Oculus Innovative Sciences rose 0.37% to $2.68 (OCLS has a 52 week trading range of $2.34 to $7.00 a share) for a market cap of $14.31 million plus the stock is down 37.3% since the start of the year, down 48.3% over the past year and down 85.9% over the past five years.

Arch Therapeutics Inc. A medical device company, small cap Arch Therapeutics offers an innovative and superior approach to the rapid cessation of bleeding (hemostasis) and control of fluid leakage (sealant) during surgery and trauma care – meaning its value proposition is based on the premise of faster and safer surgery. In addition, Arch Therapeutics has noted on its website that last year, the global market for hemostatic agents saw over $2.8 billion in sales and nearly $1.3 billion in sales for fibrin and other sealants. All told, combined sales of over $7 billion are predicted in 2017. As for Arch Therapeutics' product, its AC5™ is a synthetic peptide comprising of naturally occurring amino acids that stops bleeding promptly when its squirted or sprayed onto a wound. Moreover and unlike many competitive products, AC5™ conforms to irregular wound geometry to allow for normal healing plus it helps to maintain a clear field of vision. However and while Arch Therapeutics' products are not yet in human clinical trials, the company is progressing in preclinical development. On Wednesday, Arch Therapeutics rose 5.66% to $0.560 for a market cap of $24.6 million.

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The Bottom Line. If you have overlooked wound care as an area to invest in, you may want to take a closer look at small cap wound care stocks like Derma Sciences Inc, Oculus Innovative Sciences and Arch Therapeutics.

Are Watchmaker Stocks Nice Portfolio Accessories? MOV & FOSL

On Tuesday, small cap watchmaker Movado Group, Inc (NYSE: MOV) surged 10.5% after it reported earnings and it's the only real pure play watchmaker as mid cap Fossil Group Inc (NASDAQ: FOSL) has diversified into other accessories and has almost tripled over the past five years. Given the problems many clothing retailers are having, its probably worth taking a closer look whether or not watchmakers or other accessory stocks might make better investments.

What You Need to Know About Movado Group and Fossil Group

Top Small Cap Companies To Watch In Right Now

Here is what you need to know about both watchmakers:

Small cap Movado Group, Inc. designs, manufactures and distributes watches from ten of the most "recognized and respected" names in watchmaking: Movado, Concord, EBEL, ESQ Movado, Coach, HUGO BOSS, Juicy Couture, Lacoste, Tommy Hilfiger and Scuderia Ferrari. The Movado Group has manufacturing facilities in Switzerland; its corporate headquarters in Paramus, New Jersey, USA and Bienne, Switzerland; and sales and distribution offices around the world as its timepieces are sold throughout North and South America, Europe, Asia and the Far East. Yesterday, Movado Group reported a 17% revenue increase to $138.3 million thanks to higher sales of its namesake watches and Scuderia Ferrari plus the later timing of the Swiss international watch and jewelry fair held annually in Basel. Net income came in at $20.7 million verses $14.7 million. The Movado Group also raised its full-year earnings and revenue forecasts plus raised quarterly dividend by 60% to 8 cents per share. It should be noted that in the earnings call, the COO stated:

…the sales growth is all driven by productivity. When you look at it -- and I'll remind you of the percentages of market growth that took place in the U.S. When you look at the Movado brand -- and again, this is third-party independent data -- the market excluding Movado in our price points of $300 to $3,000, grew 1% for the 12-month period ended June 30, 2013. Movado grew in excess of 15%.

The COO added that he believes the momentum will continue plus the company will get some additional benefit "because of the Coach repositioning" and "some additional door expansion in Scuderia Ferrari." Otherwise and going into earnings, data from Yahoo! Finance gave the stock a trailing P/E of 18.45 along a forward P/E of 18.02 – figures that have probably changed but don't necessarily make the stock overvalued for new investors.

Midcap Fossil Group says it was the first American brand to bring value and style to the watch category and offers an extensive line of watches under its proprietary FOSSIL®, RELIC®, MW®, MW MICHELE®, MOBILEWEAR™ and ZODIAC® brands plus it licenses watches under brands such as ADIDAS®, BURBERRY®, CALLAWAY GOLF®, COLUMBIA SPORTSWEAR®, DIESEL®, DKNY®, EMPORIO ARMANI®, MICHAEL MICHAEL KORS® and MARC® by MARC JACOBS (Note: FOSL's watches cost from $7 at discounters to $4,000 at luxury retailers, with a majority selling $85 to $600). In the early 1990's, the Fossil Group expanded its core business by launching a line of accessory products such as handbags, belts, small leather goods and sunglasses. In early August, the Fossil Group surged nearly 20% after it reported earnings. Specifically, the Fossil Group reported a net sales increase of 11% to a record $706 million as North America wholesale net sales increased 4%, Europe wholesale net sales increased 16% and Asia Pacific wholesale net sales increased 14%. Net earnings hit a record of $67.7 million verses $57.3 million for the same period last year while a rosy guidance for the full year was also given. The CEO cited "strength in our FOSSIL(R) and SKAGEN(R) brands and double-digit sales increases in our multi-brand watch portfolio and in jewelry." The Fossil Group also repurchased $169 million or 1.7 million shares under its stock repurchase program and had remaining authority to purchase $843 million of its common stock at the end of last quarter. Otherwise, it should be mentioned that the Fossil Group has a trailing P/E of 18.59 and a forward P/E of 15.90. Share Performance: Movado Group and Fossil Group

On Tuesday, small cap Movado Group rose 10.5% to $41.99 (MOV has a 52 week trading range of $28.25 to $42.56 a share) for a market cap of $1.35 billion plus the stock is up 48.2% since the start of the year, up 46% over the past year and up 72% over the past five years while Fossil Group fell 1.79% to $113.98 (FOSL has a 52 week trading range of $78.75 to $129.25 a share) for a market cap of $6.44 billion plus the stock is up 27.6% since the start of the year, up 29.8% over the past year and up 286.2% over the past five years.

As you can see from the above chart, the more diversified Fossil Group has outperformed the Movado Group.

Finally, here are the latest technical charts for both stocks:

The Bottom Line. For me, I'd be a bit more comfortable with the Fossil Group as its more diversified rather than with the Movado Group that's focused on watches. Either way, both stocks look like good portfolio accessories at least for the rest of this year.

Tuesday, September 24, 2013

How To Invest Like Bill Ackman

In some ways, Bill Ackman invests like he's riding a bicycle.

In the summer of 2012, Ackman joined fellow hedge fund manager Daniel Loeb and half-dozen other cyclists on a very long bike ride. Although Ackman, a fierce competitor, was admittedly out of shape for such a ride, he pulled out to lead the pack early, only to eventually fall well behind the others. One participant noted, "I've never had an experience where someone has gone from being so aggressive on a bike to being so hopelessly unable to even turn the pedals... (Ackman's) mind wrote a check that his body couldn't cash."  

Some activist investors like to start with a small position or take a "backseat" role, but Ackman starts out in high gear: He takes on management directly and generally looks for a board seat immediately. Ackman does all his research upfront -- as seen from some of his multi-hundred-slide presentations -- before taking a stake, and he has a goal in mind before even approaching management.

He's come a long way over the past decade, now that he's running Pershing Square Capital Management, a premier activist hedge fund. The general consensus is that he has a loud and outspoken personality -- though it's not always put that nicely -- but there's no denying that he tends to do fairly well as an activist investor.

Bill Ackman's Biography
Ackman's confidence dates to his high school days, where he wagered his father, a real estate executive, $2,000 that he would get a perfect score on the SAT. He didn't get a perfect score -- he missed only four questions -- but he also didn't lose any money, as his dad backed out of the bet the night before.

Ackman earned undergraduate and MBA degrees at Harvard University. While at Harvard, Ackman had the foresight and good fortune to take a class taught by Marty Peretz, who later provided half a million dollars in seed money for Ackman to launch his first hedge fund. After getting his MBA in 1992, Ackman teamed with former classmate David Berkowitz to form the Gotham Partners hedge fund.

  CNN Money  
  Ackman's come a long way over the past decade, now that he's running Pershing Square Capital Management  

Gotham failed a decade later after a bad investment in a golf course operator, but Ackman was back in the hedge fund world the following year, starting Pershing with a mere $54 million. His returns at Pershing have been so great that he has amassed a fortune of more than $1.2 billion, over half of which he plans to give away to charity as part of the Giving Pledge, in which Warren Buffett has taken a leading role.

The media has had a fascination with Ackman lately that has been nothing short of amazing. Vanity Fair's piece in March 2013 added fuel to the fire, painting Ackman as an extremely competitive, larger-than-life character. This competitiveness and his "smartest guy in the room" mentality have earned Ackman a number of critics among fellow hedge fund managers.

Bill Ackman's Investment Strategy And Big Wins -- And Losses
Ackman has taken activism to the next level, superseding some of his hedge fund cohorts by targeting high-profile large-cap companies. As any good deep value activist investor does, Ackman runs a niche portfolio, generally owning fewer than 10 companies, with a high concentration of his portfolio invested in his top two or three picks. 

One of Ackman's biggest wins came as Gotham Partners was closing. While winding down his first hedge fund, Ackman was also researching mortgage insurer MBIA (NYSE: MBI). Ackman challenged MBIA's triple-A rating, alleging that the company was guaranteeing untested asset-backed securities. His allegations drew the attention of New York's attorney general, who investigated Ackman for six months but eventually dropped the investigation. Ackman began shorting MBIA in 2004 at around $60 and rode the stock all the way down to $8 before closing out his short.

Another one of Ackman's biggest wins, and a stock he still owns, is General Growth Properties (NYSE: GGP). Ackman snatched up GGP shares for $0.35 back in 2008 when the mall operator was struggling to stay out of bankruptcy. Since then, the stock has made Ackman nearly 100 times his invesment.

Conversely, some of Ackman's biggest blunders have been in the retail space. This includes his latest half a billion-dollar loss on struggling retailer J.C. Penney (NYSE: JCP). Ackman sold his entire 18% stake in JCP after a public letter to the board calling for a new chairman caused immense backlash, and it became apparent that the retailer's issues might be more deeply rooted than in management alone. 

Other big blunders include Target (NYSE: TGT) and the now-bankrupt bookstore Borders. Ackman lost some 90% of his fund's Target investment after the financial crisis hit, sending Target's shares into freefall. Ackman was hoping to persuade Target to spin off the vast amount of property it owned into a real estate investment trust (REIT). Borders slipped into bankruptcy after Ackman was unable to find a buyer and his attempt to merge Borders with Barnes & Noble failed.

In his latest investor letter, Ackman notes that he and Pershing "have had three failures on the long side: Borders Group, Target, and J.C. Penney. Clearly, retail has not been our strong suit, and this is duly noted."

Bill Ackman's Portfolio: What's He Holding Now?

As of June 30, 2013. Pershing's position in APD is now more than twice what it was at the end of the second quarter, and the fund no longer owns JCP. 

Ackman and Pershing's largest position remains Canadian Pacific Railway (NYSE: CP). Back in 2011, Ackman launched a campaign to oust CP's CEO and install the former CEO of rival railroad company Canadian National. Ackman was successful, and the stock has been on a tear ever since, nearly tripling from his original investment. 

His second largest position is actually a combination of a call position and stock ownership in Procter & Gamble (NYSE: PG). Ackman got active in P&G in 2012 and immediately began pushing for cost cutting and overhead reduction; soon after, P&G's CEO stepped down. Ackman's key thesis is that P&G could see earnings per share (EPS) of $6 in fiscal 2016 and should trade upward of $120 by then, not bad considering he paid about $65 for the stock.

After returning only 12.4% net of fees in 2012, compared with the S&P 500's 16%, Ackman and Pershing are back with a vengeance, starting his newest activist campaign in Air Products (NYSE: APD). Ackman's multi-billion-dollar investment puts Pershing's ownership of Air Products at 9.8%. Ackman had hoped to funnel even more capital into the company, but the Air Products implemented a poison pill with a 10% threshold.

In a trade that has turned into a proverbial clash of the hedge fund titans, Ackman is still on the short side of Herbalife (NYSE: HLF) -- only the sixth short position in Pershing's history -- and it's estimated he could be down as much as $300 million on the trade. Ackman continues to stand by his short, defending it against major hedge funds on the long side, which include Carl Icahn and George Soros. Ackman built his short position in late 2012 after publicly calling Herbalife a pyramid scheme. Ackman has also launched a website and put together a 334-slide presentation to support his thesis. Ackman also engaged in a war of words during a half-hour CNBC segment with Icahn, who has said that Herbalife could turn out to be the mother of all short squeezes. 

Action to take --> Ackman's activist campaigns appear to have run their course for a number of his top holdings, including Canadian Pacific, General Growth and Beam (NYSE: BEAM). For investors looking to invest in stocks that could still benefit from Ackman's activist expertise, I would consider Air Products and Procter & Gamble. Ackman appears to be sticking with what he knows; one of his biggest wins of late was at Canadian Pacific, an industrial stock, and so it's no surprise his newest campaign is at yet another industrial company, Air Products. Both P&G and Air Products should also be big benefactors of a rebounding economy. If you really want to invest like Ackman, be on the lookout for next year's planned IPO of Pershing Square Holdings, which will allow investors to invest in Ackman's hedge fund through a shell company.

Total Gains 2% as Barclays Upgrades on Lower Capital Spending

Shares of French oil giant Total (TOT) have gained 1.9% t $58.27 this morning after Barclays upgraded the stock to Equal Weight from Underweight.

Associated Press

Barclays’ Lydia Rainforth and team explain their reasoning:

Total's Capital Markets Day presentation did enough to convince us that it can control capex more than we had previously anticipated. In doing so, it also set out a more credible path to returning the company to cash flow neutrality post both capex and dividends potentially as soon as 2015. There remain challenges to delivering the 2017 operating cashflow aspiration, as evidenced by an implicit reduction in prior cashflow assumptions over the 2015-2017 period, but the coming 12 months should see Total show both improved production and cashflow with the start up of a number of key projects scheduled. It is this combination of improved operational momentum we forecast for Total together with much better visibility on capex and free cash flow, which drives our upgrade on the stock to Equal Weight…

Top Undervalued Stocks To Watch For 2014

Total’s strength comes as U.S oil majors have stalled today. Exxon Mobil (XOM) has ticked down 0.1% to $87.69 , Chevron (CVX) has fallen o.4% to $125.07 and ConocoPhillips (COP) has dropped 0.3% to $70.35.

Capital Outflows from Bond Funds Near Record, Bond Bear Market Keeps Growing

By now you have caught on that interest rates have risen, and they appear poised to keep testing higher yields. With the 10-year Treasury yield so close to 3% and the 30-year Treasury so close to 4%, history indicates that these certainly will be tested. As interest rates have now risen well over 100 basis points since the start of May, investors are bailing out of bond funds at a breakneck pace. Independent research service TrimTabs shows just how bad the carnage is: bond mutual funds and bond exchange-traded funds (ETFs) have redeemed a whopping $30.3 billion so far in August.

You are seeing a very large capital exodus by any stretch, particularly when you consider that the reading measured was only through August 19, leaving another week and a half before the month is finalized. TrimTabs showed that this month's outflow is already the third-highest on record, and it now tallies up to a whopping $114.1 billion in redemptions since the start of June.

Prior to June, TrimTabs represented that bond funds had posted capital inflows for 21 consecutive months. The record month of outflows was the $69.1 billion in June, and July saw an outflow of $14.8 billion. TrimTabs warns that the Fed’s tapering risk may be more disruptive than most market participants believe. Here is how TrimTabs puts this figure into context, and it is a truly massive figure:

The record inflows into bond funds in the previous four years likely account for the intensity of the recent redemptions. A staggering $1.20 trillion poured into bond mutual funds and exchange-traded funds from 2009 through 2012. Many investors probably didn't grasp the interest rate risk they were taking. Now that they're suffering losses in funds they regarded as "safe," they want out fast.

Best Stocks For 2014

Capital outflows have been heaviest in municipal bonds and Treasury bond funds. The municipal bond mutual funds TrimTabs tracks daily posted an outflow of $2.1 billion (2.3% of assets) in the past month, while municipal bond ETFs redeemed $199 million (1.7% of assets). Treasury bond mutual funds tracked posted an outflow of $3.4 billion or some 1.8% of assets in the last month, while Treasury bond ETFs redeemed $1.9 billion or 0.5% of assets.

Here is what we would be concerned with. If $1.2 trillion in new capital poured in from net inflows over a four-year period and only $114 or so billion has come out in three months, then this bear market in bonds still has quite a ways to go. A 3% yield on the 10-year may have to rise to 3.50% or even 4%, and that 30-year yield at almost 3% may have to rise to 4.5% or even 5%, if history is any great yardstick.

Sunday, September 22, 2013

Jim Cramer's 'Mad Money' Recap: Don't Fear the Selloff

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NEW YORK (TheStreet) -- Do not fear the coming selloff, Jim Cramer said on "Mad Money" Tuesday.

Tomorrow's Federal Reserve news will most likely send the markets lower, said Cramer. Investors need to be patient and sit on the sidelines until the chaos subsides.

Cramer said the markets will be running the gauntlet over the coming weeks because as soon as the Fed announcements are out of the way, the wrangling in Washington will begin and thus continue the selloff. The selling won't be over in a day, Cramer warned, which is why he continues to urge investors to raise cash so they can be ready when the time to buy returns. Why not just sell everything? Because this time the U.S. isn't the only game in town, so what the Fed has to say just isn't as important, according to Cramer. There are other factors, mainly China and Europe, that are helping the global markets along, which makes tomorrow's news just a bump in the road. That's why Cramer said he'd only commit half of his cash after the market falls between 2% and 3%, then wait a few days longer to see if things get really ugly when Washington gets rolling. Fund managers will be returning to buy on the selloff eventually, he noted. Meanwhile, companies are taking charge of their own destinies through mergers and acquisitions, as well as with a little help from an uptick in activist investing. All of these points will lead to a strong fourth quarter, Cramer concluded. Investors just need to wait until stocks have run the gauntlet before getting back to buying. Executive Decision: Chip Johnson In the "Executive Decision" segment, Cramer spoke with Chip Johnson, president and CEO of Carrizo Oil & Gas (CRZO), the oil shale driller that's seen its shares soar by 70% since Cramer last spoke with Johnson in February. Johnson explained that Carrizo had a strategy of aggressively drilling and establishing itself in many shale regions throughout the country. But now that it has enough wells to hold onto its acreage, the company is scaling back and selling non-core assets in order to fund its continued operations. He characterized the move as better matching capital expenditures to cash flows.

That strategy has worked well, Cramer noted, as Carrizo has now overcome its funding gap and can now fund operations through 2014.

Johnson cited the Niobara shale field in Colorado as one of Carrizo's many untapped assets. He said the region is just getting started but so far has been very profitable. Meanwhile, his company has been selling some of its Barnett shale assets as those wells have been primarily producing dry gas, which is not Carrizo's strong suit.

When asked about the possibility of being acquired, Johnson said that every small producer is being studied by larger companies, but he remains focused on growing and establishing his company's acreage and is not pay attention to possible acquisitions.

Cramer said Carrizo remains a great growth story and he remains a believer in the stock. More Anointed Stocks Continuing with his "Anointed Stock" series, Cramer looked at the best-performing biotech stocks of the year with the help of colleague Bob Lang for some technical analysis. First, Lang looked at Celgene (CELG), a stock that's been running since mid-August on high volume. Lang felt that with the MACD and Williams' oscillators both showing an embedded overbought condition, this stock would rally hard through the end of the year, after first pulling back to its 50-day moving average of $140. Next, Lang looked at Regeneron (REGN), which after rallying from $170 to $300 a share broke out over a double top to continue to new all-time highs. Lang noted the RSI and Williams' oscillators also showed strong overbought conditions, making this stock a buy after it pulls back to its floor of support at $275 a share. Then there was Gilead Sciences (GILD), which Lang said had the best trend line of the bunch. Lang felt this stock could be bought even without a pullback. Lightning Round In the Lightning Round, Cramer was bullish on ARM Holdings (ARMH), Intel (INTC), Zoltek (ZOLT) and Cisco Systems (CSCO). Cramer was bearish on (BIDU), Coach (COH) and Arena Pharmaceuticals (ARNA). Executive Decision: Jean-Jacques Bienaime In the "Executive Decision" segment, Cramer spoke with Jean-Jacques Bienaime, CEO of BioMarin Pharmaceuticals (BMRN), the orphan-drug maker whose four drugs have already racked up over $500 million in sales thanks, in part, to their high price tags of between $95,000 and $350,000 a year. Shares of BioMarin are up 28% since Cramer last featured the company in June. Bienaime explained that with orphan drug makers it's not about the number of patients who you treat, it's about improving the quality of life for those you do. He said the patient populations they serve run between just 200,000 patients in the U.S. down to just 10,000 patients. But with no other alternative treatments available, insurance companies are willing to pay the drug's big premium since it makes such a huge difference. Bienaime also touted his company's fifth drug, which is currently in Phase III testing, as a game changer for BioMarin because that drug also could more than double the company's revenue. When asked about the scores of patients who are literally dying to get into new drug trials and studies, Bienaime said BioMarin works to get effective and safe drugs onto the market as quickly as possible, but it can't always accept new patients into their studies because they require randomized samples and double-blind studies. Cramer called BioMarin one of the strongest biotech stories out there and one investors need to investigate. No Huddle Offense In his "No Huddle Offense" segment, Cramer threw up his hands and said it's time to surrender all hope that Washington will ever understand the potential of oil and natural gas in our country. "How can this be so hard?" he asked. Nearly all of the objections to natural gas have been met or debunked, Cramer continued. Yet, you'll be hard-pressed to find any elected official who's not on the renewable energy bandwagon touting solar and ethanol rather than stopping oil and gas imports from hostile nations. Cramer said it's almost as if Congress has declared war on gaining energy independence and is now seeing higher gas prices as an incentive to conserve. Renewable energy, he concluded, is like a religion in Washington that cannot be stopped. To watch replays of Cramer's video segments, visit the Mad Money page on CNBC. To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here. -- Written by Scott Rutt in Washington, D.C. To email Scott about this article, click here: Scott Rutt Follow Scott on Twitter @ScottRutt or get updates on Facebook, ScottRuttDC

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