Sunday, February 11, 2007

February Performance Update and reflections on past picks

Click on the image below to see a table that shows the returns or losses of my past picks.

Looking back, I am still happy with the picks I have made so far. ALTU, ARNA and VRTX are obvious laggards but I think 2007 will be a good year for all of these good small and mid sized biotechs as clinical trial results become available.

What stands out was the good decision to get out of CELG and VRTX based on valuations. I still don't like CELG at $54 but at $32 I like VRTX a lot and I am waiting for a better buying opportunity around $30. Meanwhile, I am selling more April $20 puts to take advantage of time decay of option values since there is not going to be much news announced in the next two months. I believe VRTX stock is being punished because the management has decided to release already available clinical data in April at medical conferences. Investors, being a paranoid bunch, have decided to sell the stock and wait for those results before making up their mind about this product and the company. I think those results will be positive and VRTX will end up moving much higher. I will start to buy both shares and long-term options in VRTX in the coming weeks.

As far as the rest of the market, I anticipate a correction of 5-10%(which probably just started) in the first half of this year due to lower anticipated earnings and uncertainties around oil prices and inflation. So, I am a bit bearish with most of stocks out there. This summer should bring a much better buying opportunity. I am particularly interested in tech names that I do not own such as BRCM, AAPL and GOOG as well as some financial and energy stocks.


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