LIFC: Make(over) your portfolio with this Biotech Beauty
In a previous post, I indicated that LIFC was one of my larger positions. I believe it might be useful to illustrate the reasons I see value in this small-cap biotech. My reasons are strategic, fundamental, and technical.
Strategically, Lifecell is a key player in the Human Tissue Industry, which has turned a corner in society in terms of acceptability and utility. As medicine has broken new ground, and confidence has grown in the ability to operate effectively on burn victims, patients involved in serious accidents as well as people looking to “augment” themselves, physicians are sourcing LifeCell’s patented industry-leading Alloderm product more and more, to the tune of 900,000 grafts since Alloderm was engineered back in 1994.
Fundamentally, let’s look at the numbers:
At an operating margin of 21.67%, an ROE of 16.61%, no debt on the books, this is a sound company, despite it’s small-cap stature. Earnings clock in at $0.37 in FY’05, expected at $0.53 in FY’06 and $0.75 in FY’07. Revenues appear to be growing at 40% annually, so earnings growth at the same rate is a little conservative, in my opinion. Assuming earnings grow at 50% annually, and applying a P/E of 60 to our “real” expectations of $0.59 in FY’06 brings us to a fair value of $35.40 or a 20% upside to the current market price.
Technically, this stock has been a stalwart, despite the rough waters that it (and all other equities) have had to negotiate over the last 6 weeks. An 8-week cup with handle formation has been created after breaking out on a phenomenal earnings report in which LIFC trounced analysts’ estimates by 33%. LIFC broke out above 25 and has maintained its position above the 25 mark while forming it’s current cup w/handle formation. Expect that when this market finally gets back in a buying mode that this stock will continue it’s “stalled” breakout from 2 months ago. Although fundamentally, fair value is ~$35, technically, this stock has set itself up to potentially make a run to $50-$60 over the next 4-6 months.
I rate it a STRONG BUY.
the Australian Stem Cell Institute………………..
http://www.arc.gov.au/GRANT_PROGRAMS/centre_stem.htm……………………..
just posted 6-22-2006…………. that Alloderm
is being investigated for
“stem cell delievery” and specifically for spinal cord therpy and neurological trauma.
Now if Alloderm is being used
for the most complex of tissues
to work with “NERVE TISSUE”
thats quite a testiment to how
special the Alloderm might be.
BONUS #1
skin is the largest organ of
the body.
Bonus #2
a demographic triple play.
junk food pattern causes
4-5% more patients a year,
junk food patttern requires
5% more per patient per year.
price increases of 3-5% per
year.
i went to far today with Lifecell. my nose has been to the
grind stone on this one for weeks
and just wanted to be useful and
entertaining and make the most of this new blog from the city of angels!
Not at all – both Muizz and I love these posts and its definitely stimulating. You have been entertaining and educational. Please keep blogging with us.
Oh and if we don’t respond right away, its not that we don’t want to. We can only promise that we will try to respond as soon as possible.
– Faisal Laljee
the truth is i got a a few
big blocks, but i took
some off the table and shorted
a little bit in the same small
account , both around $30.50.
i was just being greedy.
i assume the shares are gonna
blow through $31 soon enough
but when? until then i am
just speculating on a range of
$29.01-ish low end and
$30+ high end. there are alot of head strong chartest that
are shorting saying it cant go
through $30, but some had panic
and bought late today when it crossed $30 in last 2 hours of
trading….also i ponder if end of the quarter window dressing is causing firmness. without newsflow i speculate that trading near the highs is unsustainable for the very short term, but sooner or later this little zone will expire. i would cover ideally in mid 29s, but may cover faster and higher then that in morning if nasdaq index is firm.
usually my day trade arent great, my attempted forte is to be visionary about big growth,
but i had good vibes about today, used mantras to shut head up, got a clear sense $30.60 was coming.
so i had to post…………………….
consider waiting for you
next buy around lower $29s
unless newsflow sends stock
up the charts and through $31 sooner. also, watch ISRG,
if it crosses $110.01 iam
assuming its on the way to $120
without much fuss. i assume
the lows were last week around $97, and the chart is stair stepping up. Lifecell and ISRG
are finally getting the “defensive halo” they deserve.
they were hit last week because
of the “RISK” and “PE ratio”
portfolio shuffling.
thursday 1015am est
Lifecell today
sold 500s 30.90
sold 160s 31.31
sold 400s 31.96
maybe day wise,
but 12 month foolish.
thursday 11 am est
Intuitive Surgical
buy 100s 109.40
buy 150s 109.75
iam leary of afternoon
index action. ISRG
is crossing over $109,
the 5 day consolidation.
i am dying to know how
many robots they shipped.
i assume a record 42-45,
with a expanding backlog.
and the street will react
favorable, like last time.
12:20 Pm
ISRG $110.70
this is the time to
make ISRG decision.
dont chase it later.
2pm EST
Lifecell short cover
200s 30.35.
need to buy back another
1,600 for long positions.
ISRG another long
50s 110.90
I remember Homer, over at Morningstar, recommending LIFC as a “screaming” buy arounf $12.00. the stock then dropped to around $7.00-8.00, and I still didn’t get in.
I’m still trying to dis-entangle my foot from my rear on that one.
Mike
guzzothecontrarian.blogspot.com