US Equities
Last week we issued partial profit taking calls on the integrated oil stock ConocoPhillips (COP, $65.48, CSFB: Outperform), the oil service stock Halliburton Co (HAL, $26.03, CSFB: Outperform), and the mid cap biotech stock Neurocrine Bioscience Inc (NBIX, $55.50, CSFB: Outperform), after they hit our target price during December.
We maintain a positive view on the three companies and have increased the target prices accordingly. The partial profit taking aims to rebalance the positions after these stocks have risen between 16.67% to 23.43% from the recommended price.
As we are cautious on US equities in the short term, we would also like to extend our call to consider taking some profits in financial stocks, which have been performing quite well over the past months, such as Wells Fargo & Co (WFC, $58.17, CSFB: Outperform), Allstate Corp (ALL, $43.46, CSFB: Outperform), Bank of America Corp (BAC, $79.09, CSFB: Outperform), as well as on the small cap defence stock Teledyne Technologies Inc (TDY, $18.74, CSFB: Not rated) and in Pfizer Inc (PFE, $35.55, CSFB: Outperform), as these stocks are getting close to our 12-months target prices.
Bank of America could see some weakness in the coming days, as according to the newspaper the Observer, the company is being scrutinized by Italian officials and the SEC for its relationship with Parmalat Finanziaria Spa.
As the SEC could also be investigating Parmalat's public bond sales in the US, we could see negative news flow involving Bank of America, putting the stock under pressure in the short term.
Gold mining stocks have been performing very well in the last two years, as gold prices were on the rise. The stocks have in this period outperformed the bullion, as a result of the leverage of these companies' earnings to the price of price.
At the beginning of the up-trend in gold price, gold mining companies struggled to make profits as their cost per ounce for gold were higher than the price on the market. With rising gold prices gold miners started turning profitable and a slight increase in gold prices gave a boost to the bottom line.
But as gold mining companies have recently been able to generate healthy margins on the gold sold, the stocks could actually been looked at as deep in the money options, whereas further increase in gold prices would not result in the same substantial increase in profitability, and consequently would loose their attractiveness relative to the underlying, in this case spot gold.
We expect gold mining stocks to remain more volatile than spot gold prices and given the above situation switch a portion of the holdings in gold mining stocks into the gold bullion.
We have Newmont Mining Corp (NEM, $48.64, CSFB: Neutral) and Placer Dome Inc (PDG, $18.21, CSFB: Outperform) on the recommendation list, which are up 69.42%, respectively 86.77% since we first recommended the stocks.
We would like to advise investors to take partial profit in the gold mining stocks after this strong performance, especially in light of our view that they could be underperforming the rising gold prices going forward.
A stock that would offer an attractive switching idea for the profits taken is the drug maker Schering-Plough Corp (SGP, $17.70, CSFB: Underperform), which would be a turnaround play, after the stock suffered over the last three years amidst struggles to grow following the patent loss of its flagship drug Claritin.
The company CEO has undertaken drastic measures to turn the company around and bring it back to growth.
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Time to take profits on shares (page 1 of 3)
- Tuesday, January 06 - 2004 at 09:22
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Entering the New Year we would like to advise investors to take some profits in stocks that have outperformed the market strongly over the last two months.
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Credit Suisse, Private BankingTuesday, January 06 - 2004 at 09:22 UAE local time (GMT+4)
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This article was updated on Sat May 26 2007.
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