Monday, August 8, 2011

Teva - Time for more

Teva stock is down about 24% from its previous peak.  Ouch.
It started going down based on its earnings report and subsequent poor clinical trials on Liquinamod MS Drug.  This is likely to lower future earnings estimates at some point in time, but the stock still has single digit p/es.  The stock further snowballed after earnings in conjunction with recent market declines.  It is a little hard to articulate why a European financial problem or US debt downgrade should adversely impact an Israeli drug manufacturer. One theory might be that Teva has had a lot of hedge fund ownership, and some of those funds might be in a situation where they are forced to sell something. Teva's bad results have made it a likely candidate for liquidation, and hence possible there is some forced selling going on making it a good time to step into the battle..

CCI is long one lot at $48 and will almost certainly be long a second lot at a cost (after options adjustments) of $41.67.   Stepped into the downdraft today to sell Sept $37.50 puts for $1.37.  If the stock stabilizes we will make about 3.6% in 6 weeks or if the drop continues we will be long a third lot around  $36.13.

Performance for this holding is tracked with a google doc here

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