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Weekend Edition

The Best of The S&A Digest
Saturday, December 20, 2008

 On Thursday, S&A FDA Report editor George Huang sent us a note about his latest trade. Two of his most recent trades are up 40% and 80%... and it's only been one month. So we thought we'd pass this along...
 
I believe it's the best trade I've come up with all year. The stock first came across my radar in October... now it's 40% cheaper. The company has $160 million in cash and no debt. The stock is trading at exactly cash level. The company is trying to sell an annual royalty stream of $30 million. The royalty is growing at double-digit rates. Using the most conservative estimates, I peg the value at more than $130 million. The deal should close in the next few quarters. You can double your money on cash alone.
 
The company collects another $40 million of royalty revenue off another drug. This money is enough to fund operations. At today's prices, we get both royalty streams and the pipeline for free.
 
Even better, the board has started a Dutch auction for $50 million worth of shares at a price range just slightly above cash. The tender is putting a solid floor on the stock price. So the possibility of losing money in the near-term is close to nil.
 
 Though forecasting is a fool's errand, Francisco Blanch, Merrill's head of global commodity research, shouldn't do too badly with his oil predictions. On November 26, Blanch called for oil to hit $25 a barrel in 2009. Now he says, "If we reignite economic growth to a very fast level, we will have a shortage of energy again," sending oil to $150 in two or three years.
 
So oil could be anywhere between $25 and $150 in the next two to three years. Write that down...
 
 General Mills and ConAgra both sound upbeat about their businesses. General Mills reported a 3% decline in second-quarter profits this week (mainly from commodity-hedging losses), but the company raised its full-year forecast. And ConAgra, maker of Healthy Choice meals and Chef Boyardee, said it expects growth in full-year revenue, too.
 
Both companies are profiting from a fall in food costs – which were at record highs several months ago – and a weakening economy that is forcing more people to dine in.
 
Food-related stocks have been a relatively bright spot in 2008. Grocery chain Kroger, food wholesaler Nash Finch, and Wal-Mart, the country's largest grocer, are all higher than they were a year ago...
 
Wal-Mart and Kroger Both Higher Than Last Year
 
 "Gold is the only asset that is completely outside of the credit system and the only asset that has no liability," says one of the best money managers of all time, Jean-Marie Eveillard, manager of the five-star First Eagle Gold Fund.
 
Eveillard has 35% of the fund's assets in bullion. He doesn't own the gold-tracking ETF: "If you look at gold as insurance, then gold bullion is preferable." Readers of our newsletters have heard this advice regularly since 2001.
 
And... believe it or not... some readers took our advice:
 
I believe it was Steve who recommended buying the new 1 oz. $50.00 gold buffalos. Having never purchased gold coins but having some faith in you all, I screwed up my courage and purchased 10 proof buffalos @ $800.00 each directly from the mint. At the time gold was selling for about $670.00/oz so this was a leap of faith.
 
I finally got around to sending them to PCGS for grading. Guess what? I have 3 2006 proof grade 70, 6 2006 proof grade 69 and one 68. So two years later the 10 coins are now worth about $12,000.00 based upon recent pricing and offers. – Paid-up subscriber BK
 
Steve's found another way to invest in gold that could bring 600% returns or higher... The trick is, this investment soars after gold's price rises.
 
Regards,
 
S&A Research




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