March 29, 2006
MID CAP POP!!
PAINKILLER TRIALS MEANS DOLLARS FOR YOU!!
MAD MAIL and THE LIGHTNING ROUND!!
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"I think you should buy Roper (ROP)! Buy, buy, buy!
Listen up, because I've developed what I think is a great predictive method with my fellas at thestreet.com, and I think it can make you some mad money.
So let's talk a little about ROP. They're really just a diversified industrial stock that serves a set of niche markets. ROP makes products for water, energy and radio frequency markets.
These things are important, but they are not why ROP could make you some mad money.
See, today, ROP was added to the S&P Midcap 400. The S&P 400 Midcap represents a portfolio of 400 firms ranging from $200 million to $11 billion.
"On Cramer's Mad Money, we do not endorse drug use. And we most definitely do not endorse drug dealers! Drugs are bad, but just because we don't endorse something doesn't mean we can't try to make some mad money off of it.
Now, if you pay much attention to the news [NY Times: 'Drug-fighters Turn to Rising Tide of Prescription Abuse'], you know that the prescription drug that's getting abused is oxycontin. That's that pain killer that Rush Limbaugh got in trouble a few years back...
Oxycontin use among people 18-25 grew 25% from 2004 to 2005. Let me tell you something: these kids are not all taking it for their arthritis.
There's an alarming trend of abuse around this drug, particularly by young people. And, while we certainly do not condone it here on mad money, we must recognize its effect on the market
OO (OAKLEY INC)
" Almost 25% of the float is short. I think that OO could be a short squeeze, but I don't recommend it for that. I recommend it because it's cheap and good and the restatement is going to prove management right."
Q: Need help regarding how to buy foreign stocks.
A: You've got to find a broker that is willing to help you on the foreign side of things.
a company gets added to the S&P 500, it gets a meaningless
pop. You all know this. Okay, Google a little
pop can make you money if you're already in the stock. But,
won't make you much money if you get in after the spike because it's
just a one-off thing.
Now, joining the Midcap 400, that's a different story! (All aboard)
'Thinking mid cap'
As I was saying before, I've been working on something with my guys at thestreet.com, and this could you some money.
We've been doing some analyses. It turns out that, when a company joins the Midcap 400, you don't get one big pop, you get a sustained, gradual move up that is just much better than anything that happens to a stock when it joins the S&P 500.
We looked at the last 19 stocks to get added to the Midcap 400, going back to October of 2003. And we found that, since being added, these stocks have produced an astounding 34.66% average return. (House of pleasure)...
Now, it's not surefire. But 16 stocks up, 3 down... I call that a good trend!
It's easy to understand how this works. There's a lot more money going into the midcap index, and midcap stocks generally, than there is going into the S&P.
Nobody wants to own large cap stocks much, even though you hear people constantly coming on these shows saying, hey, they're about to get back in vogue.
Everybody wants to own the midcap stocks that are going to grow, grow into the large cap ones. That's what we want. We want to buy them here, and then we sell them when they're just major bulls.
Now, we are not going to jump blindly into blindly into ROP, just because it fits this trend. That would be idiotic.
You shouldn't buy midcap companies just because they have been anointed. You need to do a little homework, so you avoid train wrecks.
ROP, fortunately, is a company that I think is worth your conviction.
It's a little $3.9 billion company that's been showing strong growth and should continue to grow. They've put a lot of focus into expanding their market share in each of the niche markets they serve, and in expanding their distribution, and in forging good relationships with customers.
ROP doesn't try to expand its target market like a lot of diversified industrial players mindlessly do. Instead, they try to capture more share in the markets they currently serve.
The good thing about this strategy is that it's a lot cheaper to sell more of your current product than it is to design and sell a whole slate of new products.
Plus, they have a great radio frequency identification (RFID) company and I am itching to own RFID companies that aren't Symbol Technologies (SBL).
The bottom line: ROP has a great business that could make you money just by growing, but there is this unbelievably great trading catalyst, which is that, companies that get added to the S&P Midcap 400, like ROP just got added, have shown really strong returns in the last two and a half years. Not only do I think that won't stop, I think that ROP will be one of those that racks up the big gains!"
oxycontin can't make you rich. It's a done
co. That made it was privately held to begin with.
Aha, but there's a new drug on the way... oxymorphone! And this thing should be the next oxycontin!
The drug's made by the new - and I'm anointing it right here, right now - the new best of breed pain pill co. And I'm calling this one Penwest Pharmaceuticals (PPCO).
The company has got some good proprietary drugs, but the big thing for me is the oxymorphone! The expectations for this drug: very low, but I think it's a potential blockbuster!
I like painkillers as an investment for more than just their abuse potential.
Chronic pain's a terribly under-treated condition. Probably, because it's so easy to fake! And all the treatments are so easily abused, but that doesn't mean it's not serious. Nor does it mean that it shouldn't be treated.
There's an actual legitimate market for these drugs. The abuse potential? I call that the icing on the cake.
Here's the lowdown on this oxymorphone. They just posted some fabulous, fabulous phase 3 clinical trial data on the American Pain Society's website.
There are two sets of data. First, there's the study of patients who hadn't been on opiates before. These patients all experienced significant reductions in pain, compared to the placebo. That just means the drug works.
The real trick is in getting people who take other kinds of opiates - like morphine, vicodin, percoset - to switch to the new oxymorphone er (i.e., extended release).
So the second set of data tested patients who already had a tolerance to other kinds of opiates. And they found that oxymorphone worked well on them too.
Tolerance can be a big problem with these drugs, and so can addiction, which is why, finding a pain killer that works when you've got a tolerance, and one that's less addictive, is very important!
Now, there's a catalyst, there's a data point that I want you to focus on: this data from PPCO is going to be presented in san antonio from may 3rd to may 6th.
I think you gotta be in PPCO before that happens. You've got a month to do your homework and find a nice entry point. You don't have to buy the stock all at once; I want you to take your time.
Right now, analysts are projecting peak sales of about $400 million a year for this drug. And they usually treat that number like it's very optimistic.
I disagree. I think $400 million in sales is low balling!
There aren't enough good proprietary extended release pain killers like this one. The last one was oxycontin. And do you really think doctors will prescribe that over oxymorphone, now that it's considered the prescription drug public enemy number one? I don't think so.
I bet oxymorphone er will capture the pain market and, as soon some brilliant, but morally bankrupt, teenage drug dealer figures out how to disable the extended release mechanism, they'll see a big sales spike from the people who fake pain to get abusable drugs.
Here's the bottom line!: I think PPCO will become the best of breed in the pain pill space and, like it or not, that means you can make some mad money off it!
ADM (ARCHER DANIELS MDLND)
Q: Given the focus on ethanol, which of the corn industry competitors would you focus on?
A: We have been playing the wet mill with Archer Daniels (ADM). We are not going to deviate. We do think the stock has moved up a little bit, so we're only giving it one thumb up, and it's a tepid one, but that's your play.