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Mark C. Minichiello submits: Several times a week, Seeking Alpha's Jason Aycock asks money managers about their single highest-conviction position - what they would own (or short) if they could choose just one stock or ETF. Mark C. Minichiello is chief investment officer of the Los Angeles investment firm QCA Capital Management and managing director of Quincy Cass Associates. He's also a founding principal of Chicago-based research firm Spin-Off Advisors. If you could only hold one stock position in your portfolio (long or short), what would it be?Complete Story »

Sudhi Analyst submits:I think Dr. Reddy's Laboratories (RDY) presents an attractive reward/risk opportunity for investors with a 2-3 year horizon. Dr. Reddy's is on the cusp of major growth RDY fiscal 2010 sales are approximately $1.6 billion. RDY has guided towards a target of 25% ROE and $3 billion in sales by fiscal 2012. In order to get there, I looked for the earnings needed. I make the following assumptions:

• Net income Margin stays same around historical 13-14% sales
• ROE guidance for fiscal 2011 will be upped to 25%

Thus earnings during the 3 year period needed to achieve the goal would be approximately $1 Billion. See model here. Complete Story »

Mike Havrilla submits:Since I first wrote about my idea for a new generic drug exchange-traded fund (ETF) nearly two years ago, the global index of 80 stocks has been a strong performer as it catches up with the strong underlying fundamentals for the generic drug industry which are outlined below. 1.) approximately 70% of all prescriptions in the U.S. are filled with generic drugs; 2.) IMS Health estimates $135 billion in branded drug sales (including $90 billion in U.S.) will face generic competition / patent expiration over next five years (including blockbusters such as Lipitor and Plavix); 3.) IMS Health estimates $42 billion in global generic drug sales in 2011, representing growth from an expected $28 billion in global sales in 2009 and $17 billion in 2008; 4.) IMS Health estimates that the generic drug industry is growing at 7.8%, which is a faster pace than the worldwide market for pharmaceuticals; and 5.) the National Association of Chain Drug Stores estimates that in 2007 the average retail price of generic prescription drugs was $34.34 as compared to a much higher (over 3X) average price for brand name drugs at $119.51. The HavRx Global Generic Drug Index is passively managed and tracks the performance of companies which meet any of the following three requirements: 1.) Derive either $500 million (USD) OR more than 50% of trailing 12-month revenue from the manufacture and sale of any type of generic (off-patent) prescription or over-the-counter (OTC) drug product intended for use by humans, including contract manufacturing services, active pharmaceutical ingredient (API) suppliers, and intermediate product suppliers for drug products and biological agents; 2.) Have one or more compound(s) in active clinical development OR have a pending ANDA with the FDA for a generic drug candidate; and 3.) Receive FDA approval for an ANDA within the past 12 months. The index excludes all companies that derive over 50% of trailing 12-month revenue from the sale of patent-protected or legacy brand prescription or OTC drug products. Approximately 75% of the companies in the index are based outside of the U.S. (including many small / mid-cap stocks based in China and India), which strengthens the case for a Global Generic Drug ETF since it would provide average retail investors with a cost-efficient means to trade the entire industry in a single investment vehicle. The accompanying tables include statistics for a semi-active generic drug ETF that would be rebalanced on a quarterly basis and equally weighted among active components with a market cap of at least $200 million and three-month average daily trading volume of at least 30,000 shares, in addition to the 15 largest index components by market cap.click to enlargeAs of late November, 55 of the generic drug index component stocks met these requirements with an average stock price gain of approximately 95% over the past year and over 15% gain for the entire index in the past three months. Generic drug stocks have outpaced the overall healthcare sector and related ETFs, such as the PowerShares Dynamic Pharma (PJP), iShares DJ US Pharma (IHE), Pharma HOLDRs (PPH), S&P Pharma SPDR (XPH), Healthcare Sector SPDR (XLV), iShares Nasdaq Biotech (IBB), and SPDR S&P Biotech (XBI).A Global Generic Drug ETF would also provide instant, diversified access to the small / mid-cap generic drug makers and suppliers that are tracked in this index and the subject of possible acquisitions by leaders in the industry such as Teva Pharma (TEVA), Mylan (MYL), Watson Pharma (WPI), and even big pharma companies such as Novartis (NVS) and Pfizer (PFE) that have significant generic drug divisions.Disclosure: No positionsComplete Story »

Mike Havrilla submits:On 9/18/09, Arena Pharma (ARNA) ($5.32, +9%) (heavy, above-average volume) announced lorcaserin met all primary endpoints and FDA benchmark with 63% of patients who complied with the protocol losing at least 5% of their weight. ARNA plans to file a NDA with the FDA in December. However, patients who took lorcaserin 10 mg twice daily achieved an average weight loss of 5.9% of their body weight, compared to 2.8% for placebo, causing shares of ARNA to initially decline on the news (with a recent turnaround and uptick) based on concerns for the commercial prospects of lorcaserin compared to Qnexa from Vivus (VVUS) ($11.51, +9%) (heavy, above-average volume), which is trading up on the lorcaserin results despite announcing a secondary offering of 9 million shares at a price of $10.50. Complete Story »

Chuck Carnevale submits:HistoryConventional wisdom would indicate that finding a sure thing in the stock market is an impractical dream. However, Teva Pharmaceutical Industries, Ltd. (TEVA) may be as close as you will ever get. As one of the top 20 pharmaceutical companies in the world this leader in generic and biogenerics is well positioned to prosper in today’s healthcare environment.Teva, however, is much more than just the largest generic manufacturer and distributor; they also are one of the most innovative participants in the important fields of neurology for treatments of devastating diseases, other autoimmune diseases, and oncology.Complete Story »

Hickey and Walters (Bespoke) submit:
With nearly one year having passed since the bankruptcy of Lehman Brothers, we looked to see how many stocks have had a positive return since September 12th, 2008. Looking at the current members of the S&P 500 (500 stocks), 55 names in the index have registered gains since last September, and less than half of those (27) have seen double-digit returns. While only 27 stocks are up more than 10%, 374 are currently down more than 10%, and 33 of those are still down by more than 50%. Overall, the average stock in the S&P 500 is down 21.6% since 9/12/08.click to enlargeComplete Story »

Mylan, Inc. (MYL) - Shares of the largest maker of generic medicines in the U.S. have tumbled more than 12.5% today to $12.12 amid reports that its employees were “overriding quality control procedures”. The bearish news sent option traders scrambling for put options on the stock. The near-term August 10 strike price had more than 5,500 puts picked up for an average premium of 19 cents apiece. Shares of MYL must decline by another 19% to $9.81 in order for profits to begin to accumulate for traders long the contracts. The now in-the-money August 12.5 strike had another 4,000 puts purchased for 84 cents each. Pessimistic positioning spread to the September 10 strike where 2,100 puts cost investors 27 cents premium. Finally, downside protection was coveted as far out as the October 10 strike price where 2,100 puts were bought for 38 cents apiece. Investor uncertainty regarding Mylan has increased substantially as seen by the surge in option implied volatility from 37% this morning to the current reading of 65%. SPDR S&P Homebuilders ETF (XHB) – The stock market isn’t quite getting the lift that one might have thought possible from the third straight monthly gain in sales of new homes. The report from the Commerce Department showed that June’s new sales were 21.8% lower than a year ago but up 11% month-over-month for a 384,000 seasonally adjusted annualized rate. Average new home prices fell $13,000 to $206,200 between May and June. Homebuilder stocks did flourish and a basket of these stocks gained 2% to $13.83. Options on the ETF were active and pointed to a mixed outlook. August expiration puts at the 14 strike traded some 10,000 times at a mid-market price of 75 cents per contract. This could have been one investor buying stock with built-in protection kicking in at $13.25. However, time and sales data shows that these puts traded simultaneously against the sale of the same amount of call options expiring in December with a 16 strike price for around 65 cents. In this case an investor might have shares put to him at or before August expiration for $14.00 per share and is looking to have them called from him before year end. So this actually appears to be an efficient way of positioning for further market upside of around 14% and at the same time reaping both premiums along the way. Complete Story »

Hickey and Walters (Bespoke) submit:
Below is a table of the S&P 500 stocks with the highest short interest as a percentage of equity float. For each name, we also provide its year to date performance, so you can see if the shorts have been winning or losing. Be on the lookout for these names as they report earnings this quarter. Ones that come in better than expected should do very well since shorts will be forced to cover. If the overall market continues to head lower, these names will most likely be some of the worst performers as shorts continue to pile in. As shown, KB Home (KBH) has the highest short interest as a percentage of float at 27.77%, followed by Mylan (MYL), Citigroup (C), and Zions (ZION). The list of names is mainly made up of Financial and Consumer Discretionary stocks that investors are very familiar with. Companies like Wynn Resorts, Nordstrom, Harley Davidson, and Abercrombie & Fitch are household consumer names that the shorts flock to if they think retail will continue to struggle. If or when retailers do begin to thrive again, these names should be some of the best performers. Other key names on the list include Intuitive Surgical (ISRG), US Steel (X), and Legg Mason (LM).Complete Story »

Ryan Barnes submits:When you lose, Don’t lose the lesson - The Dalai Lama For the better part of 5 months I’ve been kicking myself over not dumping Pfizer (PFE) from the Secular Trends Portfolio the day they announced the Wyeth merger. The second I heard about the deal I honestly thought the TV announcer had made a mistake; “No no, it couldn’t be Wyeth. That would just be stupid”Complete Story »

Neil Carvin submits: The GCFR Overall Gauge of Watson Pharmaceuticals, Inc. (WPI) decreased from 56 to 41 of the 100 possible points in the first quarter of 2009. Our analysis report explained this result in some detail. Watson's Revenue in the March 2009 quarter was 6.5 percent more than in last year's comparable period. Generic drugs were responsible for 60 percent of Revenue, up from 58.5 percent. Despite the head start provided by rising revenue, an $18 million charge to settle patent litigation with Elan (ELN) led to a small drop in Operating Income. A $1.5 million gain on the sale of assets in India might have made up some of the lost ground, but a higher state income tax rate also came into play. The bottom line was Net Income 3 percent less than in 2008.Complete Story »