Goldsmith comment: Dan's Internet went down, so I'm writing The Digest today.
Phase 1 editor Rob Fannon shot us an e-mail this morning telling us shares of Crucell (CRXL) – his first recommendation as Phase 1 editor – soared 35% last night after the company said it was in talks with Wyeth about a takeover.
Crucell is up another 12% today and probably heading higher. Rob thinks the company is worth $2 billion – about another 30% gain from today's prices. Phase 1 readers are up over 230% on the stock... and will probably make much more once the deal actually closes.
Biotech was one of the best-performing sectors last year, only falling around 12%. The larger companies in the sector, like Genentech and Celgene, have lots of cash and lucrative products that are immune to competition from generics. These "Big Biotech" stocks led the sector's strong performance.
Meanwhile, small-cap biotechs – constantly in need of cash infusions to continue operating – had a tough year as the credit crisis unfolded. The survivors now tout dirt-cheap share prices. Big Biotech and Big Pharma – sitting on billions of dollars in cash – are about to go on a huge buying spree.
Rob thinks a wave of mergers and acquisitions will trigger the next major biotech bull market. In the past four biotech bull markets, investors booked three triple-digit gains and one quadruple-digit return... And that's just from buying the major biotech index. Buying individual companies can lead to astronomical returns. Imagine banking several-hundred-percent gains on just a few, choice stocks.
Rob is currently researching the biotech companies best positioned for takeovers at big premiums. The potential gains for this year's Phase 1 picks are massive.
There have already been two announced biotech M&A deals so far in 2009... and Stansberry readers owned both of them (George Huang recommended Indevus in his FDA Report). Rob expects to see a ton more. To learn more about Phase 1, and see what Rob is currently researching, click here...
Still more layoffs... Drugstore owner Walgreen said it will cut 1,000 management positions by mid-2009. Data-storage giant EMC will axe 2,400 employees, or 6% of its workforce. Computer manufacturer Dell will slice 1,900 jobs in its Irish manufacturing plant. Lenovo, the world's fourth-largest computer maker, will cut 11% of its global workforce, or 2,500 employees. And finally, Wells Fargo said it's planning on layoffs this year, after the Wachovia takeover is complete.
More pain for retailers... department store Macy's will close 11 stores in the U.S.
Even the mighty Wal-Mart (WMT) has taken a hit. The mega-retailer reported that sales, excluding gasoline, for its U.S. stores (including Sam's Club) open at least a year grew 1.7% last month. Wal-Mart Vice Chairman Eduardo Castro-Wright said the holidays were more challenging than expected because of the economy and "severe winter weather" in some parts of the country. Extreme Value pick Wal-Mart cut its fiscal fourth-quarter earnings estimate from $1.03-$1.07 a share to $0.91-$0.94 a share.
Of course, Wal-Mart's numbers are relative. Below is a table from the Wall Street Journal showing Wal-Mart's "bad" numbers versus the same-store sales of some other U.S. retailers.
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New highs: Crucell (CRXL).
In the mailbag... why gold is as good as cash, and why one developer doesn't want the government's money. We'd love to hear more opinions on your tax dollars at work... feedback@stansberryresearch.com.
"How do I feel about my tax dollars being used to cover up the mistakes of crooked banks and developers? I feel we are coming closer every day to the outcome predicted by one of the characters in Ayn Rand's book Atlas Shrugged (1957):
When you see that trading is done, not by consent, but by compulsion - when you see that in order to produce, you need to obtain permission from men who produce nothing – when you see money flowing to those who deal, not in goods, but in favors – when you see that men get richer by graft and pull than by work, and your laws don't protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed.
"We are not quite doomed yet but, if something doesn't change soon, it sure does seem to be coming." – Paid-up subscriber Leland Hosford
"I'm a developer. I lost my entire investment in a commercial real estate project. I lost it because of two factors: cost overruns and a refusal of the market to embrace the office condo concept, with the latter being the most difficult factor to overcome. I didn't ask the government to bail me out, and I don't want my tax dollars bailing out others. It is not the role of the taxpayer to step in to commercial real estate. There are very few jobs at stake in bailing out existing projects, and those under construction will be taken over by others, if the economics justify it. The government should not play a role. The banks made lots of money during the good times, and they didn't share those earnings with the government. Why should the government share their losses? The only justification for putting taxpayer money into the banks is to prevent the whole system from collapse. To the extent that's necessary, I support it, but there must certainly be a limit on what is needed. As for crooked developers and bankers, they should be prosecuted pursuant to existing laws, and if found guilty, sent to jail." – Paid-up subscriber Brian
"[In response to James Wood, who wrote, 'I just don't understand the practical nature of using precious metals in commerce.'] Porter, I have a friend who is a successful dentist, having attended the U of CA at Davis. She was able to do so because her father kept his savings in gold and therefore had something of value when Saigon fell. My friend was 5 years old. She and her family got out on a boat, and eventually to the usa, by paying gold to smugglers." – Paid-up subscriber Julia
"I remember your comment that people kill themselves at market bottoms. Article in the WSJ today about a Chicago Real Estate exec shooting himself, another in the FT about a German billionaire business man committing sicide after trying to save his 'empire' from a credit disaster. Time to get in!" – Paid-up subscriber J.S. Fowler
Regards,
Sean Goldsmith
Baltimore, Maryland
January 8, 2009