Short selling often tells much about what is going on in a sector, particularly when there is a common trend across the major players in that sector.
The end of May short selling can now be accessed from NASDAQ. Interestingly enough, short sellers at the end of May lightened up almost across the board on major NASDAQ biotech stocks from May 15 to May 30:
From the major names, a change in the overall trend can be spotted.
You can see the full short selling report for biotechs at BioHealthinvestor.com to see which other biotechs had an increase in short selling and to also see what the more active biotechs with lower market caps saw in their short selling activity.
Shares of biotechnology company Gilead Sciences Inc. (NASDAQ: GILD) have been plunging this morning, despite the firm posting better-than-expected first quarter earnings per share. Hurting the stock this morning is the company's full-year sales guidance, which was unchanged.
Gilead Sciences reported late yesterday that its profit during the first-quarter jumped 22% to $496.1 million, or 51 cents per share, boosted by strong HIV treatments Atripla and Truvada sales. These numbers are up from $407.4 million, or 43 cents per share reported in the same period a year ago. Analysts' forecast was for lower earnings of 47 cents per share in the quarter.
The company's quarterly revenue also surged by a respectable 22% to $1.26 billion. For this period, the company benefited from strong gains from combination HIV treatment Atripla which came with sales of $342.2 million, a 70 percent rise. HIV drugs sales also saw a growth of 37% to $964.7 million. Analysts, on average, expected Gilead Sciences's sales to be $1.22 billion, according to Reuters Estimates.
Readers of this space know that biotech and pharmaceutical companies are not the preferred investment candidates, but there exceptions to the rule, and Gilead Sciences is one.
Gilead Sciences, Inc. (Nasdaq: GILD) is a biopharmaceutical company that concentrates on the research, development, and marketing of anti-infective medications with a primary focus on treatments for HIV.
In general, analysts see Gilead registering 25-30% revenue growth in FY 2008, following solid, double-digit gains in FY 2007. Further, Gilead should also register market share gains for HIV drugs, offsetting likely royalty revenue declines for Tamiflu, in the immediate years ahead.
Even in these uncertain times, there are stocks that have far better odds of outperforming than others. Yup, for a minute, just forget about all the different industries, economic guessing games, earnings-valuation time lags and the rest of the market randomness that makes stock picking so difficult and "market gurus" so ineffective. Focus instead on the incredibly telling stock charts of these companies:
Technical expert Leo Fasciocco seeks stocks that have broken out from technical basing patterns or those he feels are poised to make such a breakout, such as Gilead Sciences (NASDAQ: GILD), which has a "breakout level at $50."
The editor of Ticker Tape Digest explains, "Gilead Sciences, with annual revenues of $4.2 billion, makes therapies to treat life-threatening infectious diseases. It focuses on pulmonary and cardiovascular diseases.
"The company has four products -- Viread, Emtriva, combination pill Truvada, and triple combination Atripla -- in its HIV franchise, as well as Hepsera for hepatitis B. GILD recently received approval for pulmonary arterial hypertension drug Letairis, acquired from Myogen.
"The stock has climbed from $10 to $47 the past five years. It is one of the few stocks now that is knocking on the door of making a new high. With earnings growth to be solid this year and next, we see GILD in a good spot to be accumulated in anticipation of a breakout.
Last week, I wrote one article about 10 stocks making new 52-week highs and another about 10 stocks making new 52-week lows. Gold, oil and steel plays made up the majority of stocks making new highs while technology and finance companies were the ones plummeting.
Both articles gave some very basic rules on how to spot reversals while recommending investors cut their losses quickly and let their winners run. And, both articles were released mid-week around the same time of day. Yet the article about stocks making new lows turned out to be more than seven times as popular!
Why do you think that is? Sure, they're slightly more actively traded, but I believe investors are not comfortable buying into or holding commodity plays because they've already gone up so much. But they're perfectly willing to go down with the ship on blue chip brokers and technology plays, sometimes even doubling and worse, tripling up because they're invested in such "quality companies."
In sharp contrast to the ten horrifically downtrending stocks I warned against buying in this article, today I feature these 10 solidly uptrending stocks.
It's charts like theirs that make you wonder why you're messing around with any other stocks. Ahhh, if it was only that easy. No matter that all the stocks listed above are making new highs, now the concern is that they may have come too far too fast. In 2008, several of these stocks-the gold plays in particular-have risen nearly 50%. Obviously the oil stocks have also been surging, but how much further can the "black gold" plays really run?
Freddie Mac (NYSE: FRE) was downgraded to Sell by Merrill Lynch due to the credit crisis.
More analyst calls from Briefing.com:
Arcelor Mittal (NYSE: MT) was upgraded by Deutsche Securities from Holdto Buy. MT shares are up 3.75% in premarket trading.
Imclone (NASDAQ: IMCL) was upgraded at Cowen & Co from Neutralto Outperform.
Barrick Gold (NYSE: ABX) was downgraded by UBS from Buyto Neutral , and the target price lowered from $55 to $56
Gilead Sciences (NASDAQ: GILD) was downgraded by Bernstein from Outperformto Mkt Perform
Amazon.com, Inc. (NASDAQ: AMZN) shares took quite a hit Thursday, finishing the session down just over 5% "after founder and CEO Jeff Bezos sold more than $135 million worth of shares in his first insider sale in more than three years."
"Of all the stocks that I follow and recommend, there is one stock above all others that I have favored for years, and still do: Gilead Sciences (NASDAQ: GILD)," says biotechnology sector expert Michael Shulman.
In his industry-leading ChangeWave Biotech Investor, he explains, "I have owned it for a very-long time and it is fast-growing and rock solid among all of the market uncertainty. When that uncertainty ends, GILD will still be a fast-grower in a recessionary economy."
"The company is a commanding market leader in HIV treatments, sells and collects royalties on other antivirals for flu and Hepatitis B. Gilead recently announced earnings and it had profits of $402 million or 41 cents a share, topping analyst estimates by a penny. It also saw sales grow 22% to $1.1 billion. Despite several product launches and increased clinical trial expenses, the company's cash position doubled to $2.7 billion.
"On a conference call, management said that 2008 would be a very good year, with product sales in the range of $4.7 billion to $4.8 billion. That's more than a 25% increase over 2007 product sales and higher than analyst expectations of $4.6 billion.
"Growth was driven by HIV drug sales, which were up 35% last quarter to $864 million. Management does not guide profit expectations, but the Street has those profits at around $1.88 billion, and Gilead has beaten expectations 14 out of the last 15 quarters.
Gilead Sciences Inc. (NASDAQ: GILD) shares are trading higher this morning in anticipation of a presentation by COO John F. Milligan, Ph.D. at the 19th Annual Piper Jaffray Healthcare Conference in New York. Milligan will will provide an overview of the company at 11:00 a.m. Eastern, which will be webcast on the company's website, www.gilead.com. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on GILD.
After hitting a one-year high of $47.65 earlier this month, the stock has dropped off slightly. GILD opened this morning at $42.66. So far today the stock has hit a low of $42.36 and a high of $43.72. As of 11:15, GILD is trading at $43.52, up $1.61 (3.8%). The chart for GILD looks bullish but deteriorating, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a February bull-put credit spread below the $35 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in just 3 months as long as GILD is above $35 at February expiration. Gilead would have to fall by more than 19% before we would start to lose money.
GILD hasn't been below $35 since March and has shown support around $42 recently. This trade could be risky if one of the company's drugs runs afoul of the FDA, but even if that happens, this stock could be protected by strong support GILD found around $36 in August. Plus, the stock could find support at its 200 day moving average, which is currently at $40 and rising.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in GILD.
MOST NOTEWORTHY: The biotech sector, WESCO International, Wyndham and Century Casinos were today's noteworthy initiations:
BMO Capital initiated coverage on Arena Pharmaceuticals Inc. (NASDAQ: ARNA) and Gilead Sciences Inc. (NASDAQ: GILD) with Outperform ratings and a $16 target and $51 target and Celgene Corp. (NASDAQ: CELG) and Genentech Inc. (NYSE: DNA) with Market Perform ratings and a $69 target and $85 target.
CIBC initiated shares of WESCO International Inc. (NYSE: WCC) with a Sector Outperformer rating and $46 target. The firm believes lower estimates are already priced into shares and that the company's operating initiatives increase the chances for more stable margins in this environment.
Deutsche Bank started shares of Wyndham Worldwide Corp. (NYSE: WYN) with a Buy rating and $41 target. The firm believes stability of the timeshare industry, international expansion and improved transparency will serve as catalysts for shares.
Century Casinos Inc. (NASDAQ: CNTY) was initiated at Nollenberger with a Neutral rating, citing the underperformance of new properties and concerns from the smoking ban in Colorado; however, the firm believes the company is headed in the right direction.
OTHER INITIATIONS:
Soleil started shares of Sunoco Inc. (NYSE: SUN) and Valero Energy Corp. (NYSE: VLO) with Buy ratings and targets of $96 and $88, and initiated shares of Tesoro Corp. (NYSE: TSO) with a Hold rating and $55 target.
Rodman & Renshaw started shares of Labopharm Inc. (NASDAQ: DDSS) with a Market Perform rating.
UBS resumed coverage on Kroger Co. (NYSE: KR) with a Buy rating and $34 target.
MOST NOTEWORTHY: Kelly Services, Iron Mountain, Covenant Transportation and the biotech sector were today's noteworthy upgrades:
Merrill Lynch upgraded Kelly Services Inc (NASDAQ: KELYA) to Neutral from Sell and Iron Mountain Incorporated (NYSE: IRM) to Buy from Neutral after they adjusted estimates in the group to reflect risks of a recession in the U.S.
AG Edwards upgraded shares of Covenant Transportation Group (NASDAQ: CVTI) to Buy from Hold as they believe the stock is oversold after the company was able to renegotiate its debt covenants without significant cost increases.
Netflix Inc (NASDAQ: NFLX) was upgraded to Hold from Sell at Wedbush. The firm also upgraded shares of Kenexa Corporation (NASDAQ: KNXA) to Buy from Hold.
MOST NOTEWORTHY: Take-Two Interactive Software (TTWO), Greenbrier Cos (GBX), DirecTV Group (DTV), General Motors (GM) and Ford (F) were today's noteworthy upgrades:
Soleil upgraded shares of Take-Two Interactive Software (NASDAQ: TTWO) to Buy from Hold as they believe the new management team has quickly taken multiple steps to address key issues and is refocusing on profitable growth.
Morgan Keegan raised Greenbrier Cos (NYSE: GBX) to Market Perform from Underperform following the company's Q3 report.
Citigroup upgraded shares of DirecTV Group Inc (NYSE: DTV) to Buy from Hold as they see a 75% chance that Liberty Media (LCAPA) tenders for DTV within the next 12 months and could offer $30 a share for the company.
JP Morgan upgraded General Motors Corp (NYSE: GM) to Overweight from Neutral with a $50 target and Ford Motor Co (NYSE: F) to Overweight from Underweight as they see signs that unions will engage in radical changes, which could bring EPS upside. General Motors was also added to JP Morgan's Focus List...
Gilead Sciences Inc. (NASDAQ: GILD) opened at $81.24. So far today the stock has hit a low of $80.48 and a high of $82.17. As of 10:45, GILD is trading at 81.85, up 1.21 (1.5%).
The stock made a strong push in early spring to reach the low 80's and a one year high of 84.47 in May. The US Government has recently been ramping up efforts to fight against any future potential flu pandemic, including awarding multi-million dollar contracts to Sanofi-Aventis (NYSE: SNY) and MedImmune (NASDAQ: MEDI) to increase their capacity to produce flu vaccines. GILD, maker of Tamiflu, could stand to benefit from such efforts as well. Recent technical indicators for GILD have been bullish but deteriorating, while S&P gives the stock a 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $70 range. GILD hasn't been below $70 since January and has shown support around $78 recently. This trade could be risky if the FDA finds trouble with one of GILD's drugs, but even if that happens, this position could be protected by the support around $70 combined with its 200 day moving average, which is currently at $71 and rising.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls a position in GILD or MEDI. He does control a bullish hedged position in SNY.
Here are some highlights from this past week's 
Shares of biotechnology company 
Last week, I wrote one article about 10 stocks making new 52-week highs and another about 10 stocks making new 52-week lows. Gold, oil and steel plays made up the majority of stocks 
In sharp contrast to the ten horrifically downtrending stocks I warned against buying in 
Freddie Mac (NYSE: .gif){kind=logo}
Comfort Zone Investing: Keep your recovery expectations real
Will Americans have to slim down to fit into their cars?
Starbucks: The next McDonald's
