J.Crew and Harrah's = $$$

Sometimes you need a strong conviction to hold a stock that is tanking. I built up a position in J.Crew with purchase prices ranging from $41 to $54. The stock was in the dumps with the softness in the retail sector. I had a strong conviction with this stock and it was simply due to the fact that they sell great merchandise. Yesterday, the company released blow out earnings of $0.42 per share versus street estimates of $0.36. Revenues increased 21% and same store sales increased 8%. These are amazing numbers in a soft retail environment. This stock is a keeper and it’s up, up and away. The stock closed up 19% today.



What else am I doing these days? I’m just playing it safe with the spreads in some of the recent mergers. One of the merger play is Harrah’s, which is being acquired by Texas Pacific Group and Apollo Management for $90 in cash. This deal is expected to close in January pending the completion of regulatory approvals. The stock is around $88, which would generate a 2.2% return in two months or an annualized return of 13.6%. Investors are worried that the mortgage credit crisis may affect this deal, which is totally nonsense. If they simply take the time to read the regulatory filings, they’ll see that this is a solid deal and financing is not a concern.

Who's Next?

The biotech M&A is alive and kicking. Celgene (Ticker: CELG) just announced the acquisition of Pharmion (Ticker: PHRM) for $3 billion or $72 per share, which is a 46% premium to its stock price. This is an excellent acquisition for Celgene although a bit pricey. Now who’s the next to go? Biogen Idec (Ticker: BIIB) of course, but Genzyme (Ticker: GENZ) and Amgen (Ticker: AMGN) have been mentioned frequently. Genzyme’s chart looks great even without talk of a deal. The stock bounced nicely off its 50 day moving average and should break into new highs. Amgen is a lot to swallow, but it’s still possible.

Genzyme On Carl Icahn's Radar

This is making the wires quickly... Carl Icahn has accumulated a few shares (1,518,463 to be exact) in Genzyme (Ticker: GENZ) from today's SEC filing. This guy is usually not a passive investor so it'll be interesting to see what he plans to do with his shares in Genzyme. He's been focusing on the biotech sector recently and has forced Medimmune and Biogen Idec (Ticker: BIIB) to put themselves up for sale. Genzyme is in much stronger position than those companies with earnings projected to growth at 20%+ for the next couple of years. Genzyme stock is cheap and now Carl Icahn wants to maximize its value. With this news, Genzyme will pop tomorrow.

Portfolio Update (November)

Not much to report since the last portfolio update except that the portfolio is up ~ 14%. This is mainly from the strong performance of Genzyme, Qiagen and Invitrogen. I nibbled back into Master Card just before the blow out earnings report. The big mistake was selling out of Berkshire Hathaway and now its up ~ 10% after I sold. Never bet against Warren Buffet. I'm still looking to consolidate the portfolio by selling some of the smaller holdings.

Ticker	% of Portfolio	% Return
Amgen (AMGN)	3.59%	-26.19%
Genentech (DNA)	3.68%	-11.68%
Genzyme (GENZ)	52.14%	+329.71%
Invitrogen (IVGN)	4.32%	+449.59%
J Crew (JCG)	2.35%	-20.24%
Master Card (MA)	1.02%	+16.20%
MGM (MGM)	2.52%	-0.90%
Monsanto (MON)	3%	+21.21%
Melco PBL (MPEL)	0.46%	-33.96%
Microsoft (MSFT)	1.37%	-5.40%
Pfizer (PFE)	4.35%	-16.25%
Qiagen (QGEN)	18.77%	+430.06%
Sears (SHLD)	2.43%	-25.12%
TOTAL UNREALIZED GAINS = +122.62%