Wednesday, April 11, 2007

DNA is Ready to Climb, RIMM Dangerous

Good news came this morning when investors reacted well to Alcoa's and Progressive's earnings beats. Yesterday, I suggested investors stay away form Alcoa and buy into Progressive. While I wrong about Alcoa, the stock only went up about 1.5%. Progressive, on the other hand, is up 5.2% on its modest beat. Good job to longs on both of these trades.

I like Genentech (DNA) going into earnings today. I have a little bias in this decision because I made a pretty nice profit buying this stock last quarter. What's unique about this play is the fact that the stock is trading near its pre-earnings price of last quarter. What does this mean? The stock has significant room to move back up to the $88.00/share it was trading at after last quarter's release. DNA's P/E is slighty above its peers, but not enough to warrant any significant downside potential if the numbers were to miss. DNA has also beat estimates each of the last four quarters. A history of success at a low price makes DNA my play of the day.

Finally, I want to caution RIMM investors. RIMM has a great history of beating the street, but the price changes the next day to not accurately correlate with the earnings beat. That being said, it appears pointless to speculate on this stock going into earnings, because any accuracy in your earnings derivation will not necessary result profits the next day.

Good Luck All!

1 comment:

Agree to Disagree said...

Don't ever give up on RIMM. I urge all of you to remember that you can do ANYTHING if you put your mind to it. Trust your instincts.