Sold 4 blokcs at 27.48, and bought back the 400 July 40 calls at .70. All in all, my transaction on TOL resulted in a .50/contract x 400 gain on the calls, and .08 cents gain per share.
This post will attempt to refute the unwarranted downgrade by Friedman, Billings Ramsey & Co. analyst Jim Reddoch, following the late-stage clinical trial results of Erbitux that were released on June 6, 2006. Both Fridman, Billings Ramsey & Co and Citigroup cited the following concerns as justification for downgrade: 1. Though the response rate for the drug in combination with chemotherapy hit 52 percent versus 38 percent for patients treated with chemotherapy alone, survival rates did not significantly differ between the two groups. 2. The data calls into question Erbitux's long-term value and could diminish the likelihood of an acquisition with a significant premium. 3. Competition is now a factor in regards Genentech's Avastin, which would not be able to replace in front-line treatment, except under certain circumstances. In addressing the analysts' concern regarding the insignificant survival rates between the two groups in the study, It's important to note that the study involved 238 people, though it was originally meant to enroll 2,200. results were obtained from a cancer and leukemia Group B randomized clinical trial (CALGB-80203) of ERBITUX in the treatment of patients with previously untreated metastatic colorectal cancer. The number of subjects tested is considered a small population and is well below the average of 560-- which the majority of phase 3 clinical trials enroll. Because enrollment was closed at 238 patients, the results represented only 11% of the intended power to account for an evolving standard of care. Simply stated, the survival and progression free survival endpoints were not sufficiently powered to reach statistical significance. Therefore, it very clear that the powering of the trial was inadequate to draw firm conclusions. That said, analysts from both firms were wrong in advising clients that results from this study could foreshadow other similar studies on Erbitux in combination with other treatments. This assumption is not only un-scientific, but also without constructive criticism. Allen Venook, M.D., Professor, Clinical Medicine, University of California, San Francisco, was the principle investigator in the study. As to ERBITUX's long-term value being in question, the documentation of trials on the drug's efficacy puts this matter to rest. In the most recent study, Markus Borner, M.D., of the Institute of Medical Oncology, Inselspital, Berne, Switzerland, presented preliminary results from a Swiss Group for Clinical Cancer Research randomized Phase II study of capecitabine and oxaliplatin with or without ERBITUX as first line treatment of patients with metastatic colorectal cancer. Objective response rate was the primary endpoint of the study. A total of 74 patients were recruited for the study and evaluable for preliminary response after follow up for at least nine weeks. Following a median of four treatment cycles, response rates were 43% (21/44) in the chemotherapy alone arm and 61% (23/44) in the combination ERBITUX and chemotherapy arm. The rate of disease control was 76% and 87% in the chemotherapy and chemotherapy plus ERBITUX arms, respectively. On a different note, ERBITUX have pushed the stock's value up 25 percent over the last 8 weeks. I continue to think that Imclone has an underappreciated cancer pipeline. The company is also in the midst of several other developments, working on drugs targeting cancer ranging from pancreatic to ovarian. This asset is not fully appreciated by many investors, in my view, and I continue to believe that the Street is overly pessimistic on the potential for Imclone to be acquired. I expect peak sales of Erbitux in the U.S. to top $1 billion. The company is also in the midst of several other developments, working on drugs targeting cancer ranging from pancreatic to ovarian. On a persoanl note, Carl Icahn bought another $7,032,750 worth of IMCL last week and now controls 10.37% of outstanding shares. See link for details at: http://sec.gov/Archives/edgar/data/765258/000092847506000167/xslF345X02/form4060806_ex.xml
I'll comment very briefly on the current weak technicals becuase I feel the rich fundamentals are going to violently cause the shares to surge soon. I would be an unhedged buyer of TOL above the resistance of 28 to 28.15. Meanwhile, I feel more at ease monitoring the hourly and daily charts to scalp the stock here and there. While much of the reduced estimates in revenues, earnings, and gross margins have been priced in shares of home builder stocks (some have been sliced in half from their 52 week high), It's important to realize how off-balance sheet joint venture forms have and continue to assis stocks like TOL and HOV. Home builder stocks benefit from these JVs by by accessing lot positions, expanding market opportunities, establishing strategic alliances, managing risk profiles, and leveraging capita bae to enhance returns on capital. HOV, for example, reported 1st quarter results which included 9.5 million of income from unconsolidated JVs. Now, while this collected amount seems minute to the company's 1.57 billion in revenue, it's a nice piece of of HOV's 160 million to 165 million of income before taxes. So, HOV added about 9 to 10 cents to its 1.55/share after tax-adjusting the JVs income. That is not bad at all! Similarly, TOL partnered with a joint venture in Hoboken, NJ. which is converting apartments into condos and in another development which is building luxury condos in Brooklyn.
Dr. Sumit Dhanda of Bank of America Securities held conversations with multiple clients in regards to Intel. He maintains a "buy" rating of 25 on the stock, as Intel's new chip producsts scheduled for release in the third quarter takes back market share loss from rival AMD. Dr. Dhanda expects intel's current inventory to be completely flushed by the end of the third quarter, as the launch of new desktop processors (Conroe, Merom, and Woodcrest) hit the market. Furthermore Dr. Dhanda's conversations with a large AMD chipset supplier suggest that sales for AMD chipsets in the second quarter are tracking to a roughly 15% sequential decline. Conversations with several server players (including Tyan, Inventec and other channel contacts), corroborate his view that Intel has made significant improvements in its next generation server solution (Woodcrest).
According to Wells Capital Management; Factset; Thomson Financial/Baseline, the following list of large caps are resonably priced based on their P/E rations and median price. Ticker Price Chg* Current Median** ExxonMobil XOM $58.82 2.4% 9.6 15.7 General Electric GE 34.40 â6.6 16.9 19.3 Citigroup C 49.95 4.8 11.4 12.1 Microsoft MSFT 22.04 â13.6 16.6 23.1 Bank of America BAC 48.85 6.5 10.7 11.4 Wal-Mart WMT 47.04 â1.5 15.6 25.2 J&J JNJ 61.17 â8.1 16.2 19.6 Procter & Gamble PG 53.24 â4.0 18.6 21.9 Pfizer PFE 23.91 â14.5 11.9 17.3 AIG AIG 60.23 9.1 10.6 15.7 Altria Group MO 70.95 4.7 13.3 11.3 JP Morgan Chase JPM 42.25 19.1 11.9 12.2 Chevron CVX 57.17 4.4 7.4 11.7 Cisco Systems CSCO 19.91 2.6 17.5 24.4 IBM IBM 79.15 5.5 13.4 18.1 Google GOOG 386.51 31.9 38.7 52.2 Wells Fargo WFC 68.23 11.2 13.3 13.9 AT&T T 26.59 13.4 12.7 15.5 Intel INTC 17.39 â35.3 18.5 25.2 Coca-Cola KO 43.38 â1.7 18.6 23.5 ConocoPhillips COP 60.52 10.8 6.4 8.9 PepsiCo PEP 60.30 7.9 20.0 21.6 Verizon VZ 31.84 â9.1 12.1 13.8 Wachovia WB 54.44 8.4 11.3 12.4
In its 38 years of operations, Intel fought of many threats. In 1991, IBM, Mototola, and Apple formed the "PowerPC" alliance to create chips that will challenge Intel's and Microsoft's. Intel responded with chips that adopted some of the alliance's technical ideas. In 1997, Intel rival Cyrix created chips that enabled computer maker Compaq to pioneer the cheaper 1, 000 dollar PC. Intel responded with a low-cost Celeron chips. In 2000, Transmata announced a lower-power laptop microprocessor that emphasized longer battery life over performance. Intel repsonded with its Centrino campaign that combined laptop microprocessors and wireless internet. In 2003, AMD undermined Intel's Itanium chips by launching low-power Opteron chipsthat balanced speed, power consumption, and efficiency. Intel responded to the Opteron with power-efficient microprocessors (Merom, Conroe, and Woodcrest) due in June 26, 2006, August 2006, and September 2006, respectively.