Category Archives: GENZ

Illumina Shines After Appearing on Watch List

In yesterday’s note, we outlined what appears to be the conclusion of Sanofi-Aventis’ (SNY) attempt to buy Genzyme (GENZ) in a $20 billion deal that was 7 months in the making. Genzyme was on our October 30, 2009 Nasdaq 100 Watch List before Sanofi-Aventis made the initial offered to buy Genzyme (GENZ) in July of 2010. At the time, the New Low team suggested that because so many of the companies on our Nasdaq 100 Watch List were in the drug sector, there was likely to be acquisitions or merger in the same industry. The alternative reaction is for individual investors to bid the price of the stocks higher.

On our December 19, 2009 Nasdaq 100 Watch List, Genzyme (GENZ) shared a place on the list with Illumina (ILMN) (article here). As mentioned yesterday, the price performance of Illumina (ILMN) since being on our December 19, 2009 Watch List has been amazing. Below is a comparison chart of Illumina (ILMN) and Genzyme (GENZ).

Illumina (ILMN) has managed to increase in value by over 3 times as much as Genzyme in the same period. Even the sweetened offer by Sanofi-Aventis, from $69 a share to $74, is not enough to put a dent in the gap between Illumina’s performance against Genzyme. In mid-January 2010 (article here), we pointed out the strength of Illumina’s reported earnings which pushed up the share of the company 15% in a single day. Purchase of ILMN in mid-January 2010 have overshadowed the rise of Genzyme in its path to acquisition.

For companies that appear on our Dividend or Nasdaq 100 lists, we believe it is only a matter of time before the market recognizes the value. In many instances, even a cursory overview of the company’s financial information using sources like Value Line, Morningstar and Mergent (assuming the worst case scenario) can provide a fair approximation of true worth.

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New Low Team Nails it on Genzyme Deal

It appears that the long predicted outcome for Genzyme (GENZ) is about to come to fruition.  In our October 30, 2009 Nasdaq 100 watch list (article here), we suggested that because of the concentration of drug companies at or near a new low, the prospects were good that an acquisition had to take place in the industry. 
We had already highlighted the individual prospects of Genzyme on October 17, 2009 (article here).  In that piece, we said:
"Finally we have Genzyme Corp. (GENZ) at $55.94. This stock has historically traded at 19 times cashflow. The 2008 cashflow for this GENZ was $2.82, according to Mergent’s (Valueline had the higher figure.) GENZ, although selling 19% above the 52-week low, is a far superior value proposition. The shares outstanding have grown by 2.7% from 2006 to 2008 while the long-term debt has fallen by 85% over the same time frame."
Apparently, it took Sanofi-Aventis nearly 9 months to realize the Genzyme was as good as we believed it to be.  Sanofi-Aventis offered $69 in July of 2010 but Genzyme's natural reaction was to say, "pay or don't play."  Sanofi-Aventis caved and offered $74 to close the deal. 
In a fashion similar to a ratings agency, Moody's decided to suggest that it may raise the credit rating of Genzyme.  Duh!  The company is about to ink a $20 billion takeover offer.  This raises the prospect that another company will step in and make a counter offer for Genzyme.  This could lead to a true bidding war thereby nullifying the need for credit ratings for the purposes of borrowing money. 

We hope that the work we have done on this site is evidence of the soundness of our strategy.  Tomorrow we will outline another stock from our Nasdaq 100 Watch List that has made the Genzyme deal look like peanuts in comparison.

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Flash Crash Follies

Flash Crash Follies is a running tally of stocks that get ensnared by regulations as an outgrowth of the May 6, 2010 "flash crash."  While the explosive crash of stocks (either up or down) on the NYSE is a symptom to a bigger problem, we want to chronicle what was never reported to have happened before May 6, 2010.  Action packed moves in the price of stocks that will bring pleasure, pain and finally resignation at the state of the free market as we know it. 
We've added commentary from the mouthpiece of the NYSE or NASDAQ to explain away "erroneous" trades or canceled orders.  Before long we're going to hear politicians getting into the fray on specific "erroneous" trades.  What will this devolve into nobody knows for sure.  However, we're willing to bet that in due time, the treatment of the symptom will become a distinct problem of its own.

"...the folly of human laws too often encumbers its operations." Adam Smith

September 28, 2010 (date contains Bloomberg screen shots from third party source)
Apple (AAPL), Research In Motion (RIMM), IBM (IBM), Dell (DELL), General Electric (GE), Oracle (ORCL), Microsoft (MSFT), Hewlett-Packard (HPQ)
Stocks of the above noted companies took a dive at the same time on September 28, 2010.  The exchanges didn't provide commentary on the actions taken as a result of the instantaneous decline and rise in value.  many have attributed specific declines to "newsworthy" issues related to the specific companies.  However, no one has stepped forward to explain the statistical anomally of so many companies experiencing the same issue at exactly the same time.

July 29, 2010 (date contains article link from third party source)
Cisco Corp. (CSCO)
At 10:41am EST, Cisco (CSCO) shares spiked by 11% due to an order imbalanced triggered by 100 shares.  CSCO rose from $23.37 to $26 which triggered circuit breakers prompting Jamie Selway, managing director at broker White Cap Trading LLC in New York, “We’re stopping trading in incomparably liquid products because of dumb mistakes...”  In this instance, the NYSE-owned AMEX which handles very few trades in CSCO could not fulfill orders placed on their exchange even through there were plenty of shares being trades on alternative exchanges.  Ultimately, CSCO was trading with the liquidity of a penny stock.  Soon enough, firms with intimate knowledge of where they place their trade can play the illiquidity to their advantage.  The AMEX and other small exchanges will be under attack.

July 23, 2010 (date contains article link from third party source)
Genzyme Corp. (GENZ)
At 1:18pm EST and 1:25pm EST, Genzyme Corp. (GENZ) triggered circuit breakers when the stock attempted to rise by more than 10% on two separate occasions within the same day due to rumors about a takeover. Nasdaq OMX spokesman Robert Madden gave no justification for the halt in trading. However, traders and money managers expressed the sentiment that “at some point, you need to let efficient market theory rule how stocks trade.” In this case, Genzyme wasn't allowed to rise as much as speculators were willing to bid the price up.

July 6, 2010 (date contains article link from third party source)
Anadarko Petroleum (APC)
At 10:56am EDT to 11:01am EDT, Anadarko shares trade from $39.14 to $99,999.99. “‘We are still learning from the experience,’ he [Ray Pellechia] said.”
June 29, 2010  (date contains article link from third party source)
Citigroup (C)
At 1:03pm EDT, Citigroup shares trade from $3.80 to $3.3174 or down 12.7%. “The erroneous trade was subsequently canceled, NYSE spokesman Ray Pellechia said.”

June 16, 2010 (date contains article link from third party source)
Washington Post (WPO)
At 3:07pm EDT Washington Post stock trades from $450 to $919 or up 104%. All trades were cancelled. “‘What happened today was not due to a substantive, true move in the stock. It was simply an error,’ NYSE spokesman Ray Pellechia said.”
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Nasdaq 100 Watch List

Watch List Summary

At the end of the week for September 17, 2010, the top performing stocks from our Nasdaq 100 list for August 15, 2010 are Oracle (ORCL) with a gain of 21.27%, Qualcomm (QCOM) with a gain of 12.07% and Computer Associates (CA) with a gain of 11.57%.
The worst performing stocks from our August 15th watch list are Intel (INTC) down –1.78%, Applied Materials (AMAT) down –1.34% and Activision (ATVI) down –0.46%.
The average gain for the watch list was 6.33%. Of the two stocks that we pointed out as being standouts from August 15th, Garmin (GRMN) exceeded the average return by climbing 9.57% while Paychex (PAYX) underperformed the average gain by rising 3.92%.
A distinction that needs to be made between this week’s list and our August 15th list is that we’ve ranking the companies on this list by those stocks nearest their 52-week low. Our previous list was ranked by those stocks that had the highest dividend yield and within 20% of their respective 52-week low.

Performance Review

The following is a total return (appreciation plus dividends) performance review of our Nasdaq 100 Watch List from September 11, 2009:
  • Stericycle (SRCL) up 44.48%
  • Genzyme (GENZ) up 25.54%
  • Pharmaceutical Product Development (PPDI) up 20%
  • Cephalon (CEPH) up 5.92%
As a group, the average gain for the stocks mentioned was 23.99%. This is contrasted by the Nasdaq 100 gain of 16.07% in the same period of time.

*chart does not reflect dividend reinvestment for PPDI

Nasdaq 100 Watch List

Below are the Nasdaq 100 companies that are within 20% of their respective 52-week lows. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and rigorous due diligence.

Symbol Name Price P/E EPS Yield P/B % from Low
PAYX Paychex, Inc. 25.95 19.67 1.32 4.80% 6.67 5.27%
INTC Intel Corporation 18.81 11.26 1.67 3.40% 2.3 6.87%
AMAT Applied Materials, Inc. 11.02 24.44 0.45 2.50% 2.03 7.33%
YHOO Yahoo! Inc. 13.89 22.77 0.61 N/A 1.59 7.34%
MXIM Maxim Integrated Products, Inc. 16.91 41.86 0.4 5.00% 2.15 7.91%
GILD Gilead Sciences, Inc. 34.56 10.47 3.3 N/A 4.58 8.93%
ATVI Activision Blizzard, Inc 10.82 41.94 0.26 1.30% 1.21 8.96%
DELL Dell Inc. 12.45 15.74 0.79 N/A 3.92 9.80%
RIMM Research In Motion Limited 46.72 10.24 4.56 N/A 3.2 9.85%
AMGN Amgen Inc. 55.22 11.73 4.71 N/A 2.28 9.87%
DISH DISH Network Corporation 18.77 11.26 1.67 N/A N/A 10.02%
CSCO Cisco Systems, Inc. 21.86 16.46 1.33 N/A 2.82 10.31%
XRAY DENTSPLY International Inc. 30.66 16.55 1.85 0.70% 2.6 10.45%
MSFT Microsoft Corporation 25.22 12 2.1 2.10% 4.76 10.95%
SPLS Staples, Inc. 19.49 17.26 1.13 1.80% 2.2 11.69%
PDCO Patterson Companies Inc. 27.15 14.67 1.85 1.50% 2.3 12.52%
SHLD Sears Holdings Corporation 66.83 27.38 2.44 N/A 0.9 12.87%
GOOG Google Inc. 490.15 21.29 23.03 N/A 3.77 13.03%
LIFE Life Technologies Corporation 46.51 29.91 1.56 N/A 1.97 13.16%
STX Seagate Technology. 11.16 3.55 3.14 N/A 1.95 13.41%
FLIR FLIR Systems, Inc. 27.24 18.52 1.47 N/A 3.25 13.50%
GRMN Garmin Ltd. 29.64 8.95 3.31 5.10% 2.21 13.52%
TEVA Teva Pharmaceutical Industries 53.48 19 2.82 1.20% 2.48 13.81%
FLEX Flextronics International Ltd. 5.55 15.72 0.35 N/A 2.26 14.20%
COST Costco Wholesale Corporation 61.29 21.93 2.8 1.30% 2.43 14.75%
HSIC Henry Schein, Inc. 56.35 15.82 3.56 N/A 2.31 14.77%
CERN Cerner Corporation 79.18 31.31 2.53 N/A 3.83 14.85%
CELG Celgene Corporation 55.25 29.99 1.84 N/A 5.11 15.06%
CA CA Inc. 20.44 13.43 1.52 0.80% 2.02 15.48%
ERTS Electronic Arts Inc. 16.26 N/A -1.06 N/A 1.96 15.63%
VRTX Vertex Pharmaceuticals Incorpor 36.25 N/A -3.53 N/A 9.01 16.00%
KLAC KLA-Tencor Corporation 31.05 25.31 1.23 3.30% 2.32 16.34%
STLD Steel Dynamics, Inc. 15.01 15.73 0.95 2.00% 1.58 16.45%
WCRX Warner Chilcott plc 22.75 11.2 2.03 N/A 2.82 16.55%
LOGI Logitech International S.A. 15.39 22.57 0.68 N/A 2.68 16.86%
CEPH Cephalon, Inc. 62.26 12.48 4.99 N/A 2.09 17.36%
URBN Urban Outfitters, Inc. 34.11 22.19 1.54 N/A 4.26 18.85%
FWLT Foster Wheeler AG. 24.19 10.8 2.24 N/A 3.46 18.99%
FISV Fiserv, Inc. 53.56 17.16 3.12 N/A 2.57 19.55%
JBHT J.B. Hunt Transport Services, I 35.26 26.73 1.32 1.40% 7.56 19.73%
CTAS Cintas Corporation 27.71 19.64 1.41 1.70% 1.67 19.96%

Genzyme Corp: Value is Finally Being Recognized

There has been a lot of news about Genzyme (GENZ) being considered as a takeover candidate by Sanofi-Aventis (SNY). Typically, rumors are simply that, nothing more than prattle about a washed up company that has little or no life remaining. However, we have demonstrated that discussions of Genzyme (GENZ) being taken over are not so far fetched.
On October 17, 2009 (article link), we had only four companies that were on our Nasdaq 100 Watch List that was within 20% of their respective 52-week lows. This was in contravention to the overall market; which was racing higher every day. So compelling were the companies on the list that we felt it was necessary to give mini-profiles on their value propositions.
Genzyme (GENZ) was one such company that was on that list. We included Genzyme (GENZ) as the last company we profiled since we felt that it was “…a far superior value proposition.” This was despite the fact that Genzyme (GENZ) was the farthest from the new low among the companies on the list.
On October 30, 2009 (article link), we weren’t surprised that drug and medical device makers dominated our list of companies near a new low. In that posting to our site we said, “The continued undervaluation of these companies makes them prime targets for acquisition…” Genzyme (GENZ) was on the list and trading at $50.60. The performance of the stocks that were on the on the October 30 watch list is as follows:

The average gain for the group was 15.32% in 9 months. The worst performing stock has been Gilead Sciences (GILD) with a decline of 22.21%. The best performing stock has been Biogen (BIIB). Our sanguine view on Gilead Sciences (GILD) may be worth reviewing since it has fallen so much since October 30, 2009.
Genzyme has already indicated that they’re not going to accept the Sanofi-Aventis (SNY). This opens the door for competing bids, which should push the price up. Our view at this time is that Genzyme is strictly a speculation, at best, given the rise of nearly 33% since our mention of being a takeover candidate in October 2009.