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Good morning,
Markets ar called hower this morning. This is what's happening today:
Markets in the US were trading in negative territory yesterday. Tech stocks being the worst performers yesterday. On of the reasons for the sell off was the fact that the president of windows was leaving Microsoft. Microsoft closed the session 3.22% down. The president of Microsoft was expected to become the next CEO of Microsoft but according to insiders, the president was forced to leave after he had clashes with other executives. The problem with Microsoft is that it is a dying stock. It is a good name, has alot of cash but the problem is, the company is not going anywhere. It is not doing well in the tablet market, it was a failure in the mobile market and now Windows 8 is another big disappointment. The stock was up 20% for the year at one point but is now trading flat after it lost all the gains after all these disappointments.
On the other hand, Cisco reproted a profit for Q113 that exceed analysts expectations. The profit was a result of cost cutting, shutting businesses and reducing prices to win back sales lost. Cisco's pricing and job cuts appear to drive earnings growth, pleasing investors. However the company did highlight concerns about maintaining profit margins going forward. Keep in mind that although a company like Cisco beat expectations, the bar was lower and this should be taken into consideration. Shares of the company rose as much as 8.2% after hours.
Another stock which is having a good day is Sharp. Sharp shares jumped as much as 11% to Y168. Sharp is in final talks with Intel to get an investment of Y30 billion yen to Y40 billion, which would make the world’s biggest chipmaker its top shareholder. Before this annoucement, Sharp was in financial distress. Sharp hemorrhaged Y103 billion in cash from operations in H112 and said that there was “material doubt” about its ability to stay in business. The Company is promoting a turnaround plan that includes seeking 2,000 voluntary retirements, cutting salaries, selling assets and reducing capital investments. Fitch Ratings cited Sharp’s growing liquidity risks in cutting the company’s credit rating Nov. 2 by six levels to B-, a junk rating defined as “highly speculative.”
Important positive news came out of Chine today. The yuan’s jump to a 19-year high has revived demand for bonds as the government more than tripled the amount foreign investors can invest with local currency. China will increase the quota for the Renminbi Qualified Foreign Institutional Investor Program by 200 billion yuan ($32 billion) from 70 billion yuan. The country’s corporate and sovereign bonds have returned 3.2% this year, beating the 2.6% for U.S. Treasuries and the loss of 5.5% for Shanghai’s stock index.
Xi Jinping and Li Keqiang, who may be announced in the top party posts this week, must address the highest benchmark government borrowing costs in almost a year as they fund stimulus for an economy that has slowed for seven straight quarters.
Regarding gold, we saw a turnaround in the price yesterday after Deutsche Bank came out saying that the gold metal will reach a price of $2000/oz in 2013 after all the stimulus packages that will take place and increase the fear of inflation. That a 16% increase to the current price of $1728.55/oz.
I'd like to end the blog with a short comment on Apple. Apparently the weakness in the price of the company came after it was annouced that two board members sold $7mln worth of shares in the company. The first thing that comes to mind is that something must be going wrong. In my opinion, I think there has never been a better time to be buying Apple than now. When you heard that board members sell stock in the company they own you start to worry. But the thing is with Apple its different. First of all $7mln is just 0.0014% of the value of the company! That's practically nothing. Plus what you need to know is that the salaries and bonus that these people earn are extraordinary plus they get million dollars worth of shares in the company as bonuses each year. You really think just because they sold $7mln worth of shares in the company they are 'worried'. Don't forget that back in the days when Steve Jobs was CEO he too used to sell stock in the market. These guys have a very expensive lifestyle to maintain. So don't worry about the headline. This is not a small stock where if the CEO sells stock in an illiquid market the company is doomed. This is Apple we are talking about.
Stock to watch: Gilead Sciences (Price $72.70, Price Target $95)
Our Buy rating is based on our assumption that Gilead's base business & HIV franchise will not erode significantly starting in 2018 when some of their marketed products start to go generic. Our thesis is also contingent on the success of two key assets Stribild, Gilead's HIV pipeline product and GS-7977, Gilead's acquired pipeline Hepatitis C (HCV) asset.
For further information on Gilead Sciences or other stocks and bonds we follow, contact our offices on 25688688.
Good day and happy trading!
Kristian Camenzuli
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