Thursday, July 26, 2007

Genzyme solid as a rock

At last - one of my companies issues an earnings report that the market likes!

Genzyme reported revenue growth of 18% and earnings growth of 30%! They are so confident in the growth of their products and in their ability to keep increasing profit margins that they are predicting earnings growth of 20% per year over the next five years!

How many companies are able to predict that kind of earnings growth so far into the future? That is why I stated recently that the risk - reward ration with Genzyme is incredible, and why I have invested a significant sum in them.

Genzyme should make at least $3.50 per share in 2007 so even after yesterday's rise they are on a 2007 PE of 18 and a 2008 PE of 15.

I am almost tempted to put all my investments into Genzyme and forget about the stock market for the next five years but that would be a bit rash!

I like Genzyme's CEO Henri Termeer who clearly shoots from the hip. I like their wide product spread which dilutes the individual risk of one of the products falling out of favour. And I love the fact that they would probably be untouched by a global recession. Just to add the icing to the cake they have a substantial pipeline with several new products coming to the market over the next couple of years.

Watch out eBay, Genzyme is rapidly becoming my favourite investment!

Saturday, July 21, 2007

Google Juggernaut Continues

Google reported Q2 earnings on Thursday night and guess what - the stock is down! It seems whatever sort of numbers GOOG reports the stock will take a tumble.

This time the bears seized the fact the earnings were slightly below analysts expectations and only represented a 28% year on year growth.

Never mind the facts that revenue grew at 58%, traffic to the high margin sites was higher than expected and the management explained exactly why operating expenses were a bit higher than normal in Q2.

Actually despite all the hype, by the end of Friday GOOG was only down 5% - hardly tragic for a stock that had already made 20% in the last 3 months.

Google should still make $15 per share this year and at least $20 in 2008. A 2008 PE of 26 seems fairly cheap for a company that just grew revenue at 58%.

I am still holding out for $600 before I reduce my holding in GOOG. I seem to remember some analysts had that as a 2006 price target but multiple compression meant it did not happen.

I have a big exposure to Google and I like it that way. The company is monetising the continued growth of the Internet in a way few other companies seem able to do, eBay included.

Thursday, July 19, 2007

eBay on track

eBay reported Q2 earnings last night.

What is my 5 minute take?

eBay is doing great at the moment. Revenue growth is accelerating, the buy back program is making a material difference to EPS and cash flow is extremely strong.

GMV growth is still struggling in their two biggest markets; Germany and the USA. If they can re-accelerate growth in these markets then investors really will start to get excited.

There are a couple of worries; Skype growth is not where it should be and the total number of listings is dropping in some countries. But eBay management are working hard on these issues.

I love the fact that Meg understands that the eBay experience should be FUN and is introducing new initiatives to make the buying process even more fun.

I can see eBay making $1.7 per share in 2008. If eBay end this year on a forward PE multiple of 25 that gives them a price target of $42.

One day the share price is going to start moving. When it does I will be ready. I have been for the last 18 months but then I am a patient person!

Wednesday, July 11, 2007

Genzyme shows the risks

After a few weeks of intense decorating I am gradually surfacing again. Maybe I would be better off hiding for a few more weeks judging by the market performance at the moment and especially Genzyme.

I stated a few weeks ago that the risk - reward ratio with GENZ was incredible. I still stand by that statement, even though GENZ is down over 10%.

GENZ has been displaying the risks of investing in biotech; the rewards will come later.

Biotech companies issue bad news sometimes. That is a fact of life. Not all trials will go your way. But if your pipeline is deep enough then long term the good news should outweigh the bad news. This is the case with GENZ.

CEO Henri Termeer recently stated that the company should double its revenues in the next five years based on its current products alone. This is a nice starting point.

Even if Tolevamer fails to ever be commercialised there are enough other drugs in the pipeline to significantly add to revenues over the next five years.

GENZ is on a 2007 PE of 18 and a 2008 PE of 15. That is fantastic value for a company growing at 20%.

Sadly I already have a full portion of GENZ but this is one for the long term.