Let me throw a few ideas out, some related to stocks, some related to politics, you let me know what you think about them.
1.
Genentech reported earnings yesterday after the closing bell. DNA reported some great sales numbers and earnings up 73%, wow. The stock still trades for a P/E or more than 100 so it is really too hot for my tastes, (especially when AMGN only trades for 26 times this year's earnings), but the stock is hot.
The real news is that while the company is making a ton of money on its two cancer fighting block busters, it has nine drugs in stage three trials and 30 in the pipeline. That is a lot of innovation, that is a lot of improved lives. The next time you hear a politician talk about science direct them to someone who really knows about science, at a company like Genentech. The cures we need won't come out of the government's NIH, they will come out of companies like DNA.
2.
Infosys, a company I love with a stock I had to leave, reported earnings this morning. If you got up at 4:30 to hear the original Indian call (or more likely the 7:30 US call), then you already know that net income was up 37% as the company continues to take business from more entrenched US and European IT players. However, the
stock was down 7% today, why? because analysts were expecting even higher growth, that's right down 7% when net income is up 37%.
The sell off made me feel better about selling the stock a month ago when I thought the price was too high. The company is great, and the more I learn about it, the more I like it. I think Infosys is such a great company that at $72.50 a share, at 37 times 2005 earnings, I still think about buying some. There are a lot worse things you could do with your money than buying shares of a company that is an emerging global leader.
3. Aquila, just so you don't forget that I like value stocks I have to throw in one beaten up, beaten down, poor performing utility stock. Worse, a money losing utility that just issued 131 million new shares of stock, diluting existing shareholders.
But, before you give up on me, Aquila has also been selling off non-core assets, and paying down debt, and everyone knew they were going to issue 131 million new shares, most shareholders had factored that in when they bought and the resulting debt pay down will save the company something like $24 million per year. The key for Aquila is to pay off enough debt to be profitable and then start paying a dividend again.
Right now Aquila trades at a Price to Book value ratio of .79 when most utilities trade for more like 1.2-1.4 times book value. So if Aquila could get back to positive and pay any kind of dividend, then the book ratio could normalize. There is a lot more detail to the story, but it could happen.
Let me know your thoughts at timothyb{@}timothyburger.com
Timothy Burger
