I need a vacation from my vacation.

Here it is, my son's spring break.  We had planned to head up to San Francisco to enjoy the city by the bay for a few days.  On my son's bucket list was a trip to Alcatraz.  I don't think I had a bucket list when I was fourteen.  If I did, it would have included such things as living to fifteen, wishing my dad would not find out about my real scores in school, and on one particular day hoping my mother did not discover I had smoked a Marlboro at the End of Huntington Beach Pier.

Well one out of three ain't bad.  I made it to 15.  Thought I had the cigarette thing covered but even after rubbing 6 dead anchovies on my face and in my hair she still knew.  But I digress.

We stayed home because, we are at the tail end of our construction project and the next few weeks are critical to having everything done in order.  We chose to have some meetings with the various contractors to have a punch list of things for them to do in order to finish.  A punch list is a list of places where you want to punch your contractor as the project come near an end.  We have face, nose, kidney, and yes below the belt.  Yes I know digressing.

A Couple To Consider

I Can Dig It

I can dig it, he can dig it
She can dig it, we can dig it
They can dig it, you can dig it
Oh, let's dig it
Can you dig it, baby
I can dig it, he can dig it
She can dig it, we can dig it
They can dig it, you can dig it
Oh, let's dig it
Can you dig it, baby. 

Yeah it was 1969 and they landed on the moon and the Friends of Distinction had a big hit record with that song.  Now everybody is diggin it.  Rare Earth Metals that is. 

We have done a couple of articles on these most precious of elements, and even thrown out some picks of the days.  GMO in Nov 2010 (Up about 27%), TUFF Jan 2011 (Down about 72%  we got out at 11% down.), to mention a couple.  We have also mentioned but not recommended MCP Molycorp, back in the summer of 2010, (Coulda Woulda Shoulda) up 386% since then.  Many people from California would recognize this mining company and the big whole scraped into the side of the mountain in Mountain Pass, CA on their way to Las Vegas.

Any who, MCP is probably a good pick as it is still one of the few rare earth mining companies that the Chinese don't own.  Despite it looking a little rich with a price to sales ratio of 174.37 and a price to book of 23.8, the fundamental do not look to bad.  I have had this on a watch list for about a year.  Yeah I know, why haven't I bought it?  Because it is on my watch list I get alerts from time to time and I received an interesting one while in Japan.  This news is courtesy of Seeking Alpha, a great website with quality bloggers and publishers.  I know because I was published there once.  The audience tore me apart as my post was too simple and a complete waste of their time.  (Digressing again.)

About the time I put Moly on my watch list they had entered into an agreement with GRA Grace.  The agreement provided GRA with 80% of Molycorp's Lanthanum production through 2012 at a 2010 fixed price.  So currently that element is being sold to GRA for about 11% off current spot prices.  That gives Grace an attractive advantage in the market place.  At the current pace of construction it is a 100 million dollar cost savings to Grace. 

Fundamentally W.R. Grace looks healthy as it stands.  The current PE ratio is 13.75, no debt, price to free cash flow is an impressive 14.05, and all other metrics look real healthy.  It closed today at $41.25.  There appears to be a lot of resistance at the 37.70 range.  Here is our play.  We are in a short term one month call option with a strike price of 40.00.  We paid $1.68 a contract for that privilege.  It expires on May 21.  We will be looking for $2.40-2.50 a contract as out exit price.  You could also go long on the stock.  So get out your shovels and dig up some homework on GRA and see if we can all hit pay dirt.  The contract closed today at $2.20 so we are looking pretty good.                 

Just Say Yes To Drugs

Over the years we have done well with Pharm stocks.  One of our earliest glory stories was a company called Gull Labratories.  It had a diagnostic kit and drugs for treating Lyme disease.  It was the only lab that had figured out how to distinguish between Lyme disease and mononucleosis or even worse disorders.  It was a cheap and easy test and treatment.  After having done my homework, I went way out on a limb and bought my first round lot of stock. One hundred shares of GULL for $4.20 a share.  This was about 1988-1989.  I share my thinking with a doctor and an airplane pilot.  About 8 months later I sold out at $12.30 and change.  I did not have a good reason other than I had a natural triple and that don't happen too many times in your life.  My Delta Airlines Pilot friend rode it to 22 and sold out.  The big difference was he had bout 1,000 shares.

Since then we have made money on a half a dozen or so pharms.  It is probably one of our best performing sectors over all.  It is a fickle group of stocks.  Generic makers and government intervention can kill these stocks in a single press release. 

We are have been watching  NVO Novo Nordisk A/S, a healthcare company, engages in the discovery, development, manufacture, and marketing of pharmaceutical products in Denmark and internationally. The company operates in two segments, Diabetes Care and Biopharmaceuticals. The Diabetes care segment covers insulins, oral antidiabetic drugs, and other protein-related products and projects comprising glucagon and protein-related delivery systems, as well as GLP-1 analogue. The Biopharmaceuticals segment provides products in the areas of haemophilia, growth hormone therapy, hormone replacement therapy, and inflammation therapy. Its products are marketed and distributed through subsidiaries, distributors, and independent agents in 180 countries. Novo Nordisk A/S has a collaboration agreement with Archimedes, Inc. The company was founded in 1925 and is headquartered in Bagsvaerd, Denmark.

Fundamentals are strong and IBD love them giving them a 99 rating.  They just had a huge bump because of some positive statements from the CEO.  Usually CEOs don't say positive things a few days before earnings release unless they are going to beat.  They report Thursday.  We have a long buy order in at 129 and we are hoping to catch it tomorrow.  That would be a good entry point.  FinViz reports that First Magellan Fund just established a 500,000 share position.