Macro: The Bottom Line (12/31/2013)

As the year draws to a close, the markets have been largely quiet and devoid of liquidity. Rather than trying to read too much into what has happened over the past week, this is a good opportunity to reflect on the key themes to focus on in 2014. Here's our list of the top macro themes to look out for in the new year:

The Yellen Fed - No End to Easy Money: After the initial mayhem in the summer of 2013 (when bond yields were surging and most foreign currencies were in free fall vs. the dollar), markets have largely digested the reality of Fed tapering. The general consensus now is that the Fed will continue to reduce its monthly asset purchases (aka money printing) by increments of $10 billion, phasing out these purchases entirely by the summer of 2014. But as we've continued to stress, the Fed's determination to pursue tapering is not a result of a change of heart. No, it's merely a recognition that outright money printing is no longer an effective tool to boost growth and employment. Instead, the new term that you'll hear thrown around is "forward guidance," essentially the Fed committing itself to low rates for years to come. So in other words, the era of easy money will likely continue through 2014 and beyond, especially under the chairmanship of the uber-dovish Janet Yellen. Don't go rushing into the dollar, and don't give up gold for dead just yet. 

EUR and JPY - Fight the Central Banks at Your Own Peril: For a few months now, we've been warning about further weakness in the euro (EUR) and Japanese yen (JPY) going forward. As a reminder, our bearishness stems from our view that neither the European Central Bank nor the Bank of Japan would be able to resist the temptation to dabble in more activist monetary policy. Both the euro area and Japan face structural economic issues that have yet to be addressed by policymakers, and the mid-year momentum that we saw in both economies could sputter (in fact, it already has in Europe, where growth slowed to a mere 0.1% in 3Q 2013). With fiscal policy constrained (including a doubling of the sales tax in Japan), and reform efforts lacking at best, the most user-friendly option for both countries would be money printing.

Emerging Markets - The Good, the Bad, and the Ugly: Since the early 2000s, markets have in many ways treated the term "emerging markets" as though it was a monolithic concept. China, Brazil, Hungary, South Africa ... all these mid-income economies became investor darlings, one way or another, especially after the Fed turned on the money-printing tap in 2009. However, starting in late 2013, we've seen that this is no longer true - the days when investors piled into everything with an "EM" label on its are over. Instead, you'll see greater scrutiny of individual emerging economies, and greater differentiation between the good, the bad, and the ugly. On the "good" side, you have countries that are actively reforming their economic structures for the better. Mexico, with its oil-sector liberalization (as we've written about previously), is a prime example. China, thanks to its recent land-rights reforms, would arguably also belong under the "goods" as well (even though its opaque financial system looks prone to risks). The "bads" feature Mexico's main rival in Latin America, Brazil. After serving as an investor magnet for years, Brazil's structural problems (ranging from stifling bureaucracy and poor infrastructure to labyrinthine tax and labor laws) are now condemning the country to a shameful 1-3% growth rate. The "uglies" consists of Turkey, Indonesia, and South Africa - among many others - all suffering from a combination of structural distortions and heavy dependence on foreign capital. In 2014, expect these differences to play out even more, and the term "emerging market" to take on a new meaning.  

Geopolitical Hotspots: Aside from the much-reported tensions in Egypt, Ukraine, and Thailand (all of which have captured global headlines but have had a rather contained effect on markets), there are two main hotspots to look out for. The first is the East China Sea, where the escalating tensions between China and Japan (the world's 2nd and 3rd largest economies, with $300 billion in annual bilateral trade) risk having ripple effect far beyond the region. The second is Iran, where 2014 will be crucial in determining whether the initial signs of detente will pave the way for a lasting deal on the country's nuclear ambitions. Either way, the ramifications on oil prices could be significant.

We from the Macro team at Red Bull wish you a Happy New Year and all the best in 2014!

My 2014 Predictions - Sectors

It is a Christmas time and actually my company is closed for all the week and 3 more days till Jan 1, 2014. Lucky for us, isn't? Not so for me. Actually I'm working all the days, even more including the weekends. Why so? Well, the product I'm responsible for is undergoing a submission with a very tight timeline. I have to capture up with all the newly available data to digest and summarize. I'm kind of overloaded at the moment. Anyway, back to investment. As I indicated last time, I'd like to make some predictions for 2014 but just put the idea out there without much details. I may delineate more later when I have more time. These are the big trends I'm seeing, which may help you make some money if you also believe so.

Muni bonds - Municipal bonds are those issued by towns or cities, which are historically very safe and reliable as a high yield income source. Even better they are tax free. Right now, you can buy Muni at a huge discount and this is the best time to buy Muni. I like a Muni ETF,  NEA, which is at about 10% discount and paying 6.6%. This yield, since it is tax-free, is equivalent to about a 10% yield if taxable. I bet Muni will be doing fine moving forward and when it does, you you also enjoy a nice capital gain, when it comes back to its normal valuation,  in addition to the high income yield. NEA is trading at $12.11/share at the moment and is paying its interest on a monthly basis, another good feature if you let it compounded.

Coal - Coal has been beaten down terrible in the past 2 years but I think it has likely bottomed and now is a good time to buy coal. Like steel that I have talked about in the past couple of months and my AKS call options have shown me 500% gain, I bet coal may follow a similar path. The easiest way to invest in coal will be its ETF, KOL, which is traded at $19.43 per share.

Copper - Similarly, copper has likely bottomed and I think it will capture up with the recovering economy, especially in the emerging market. I like FCX, the biggest copper mining company in the world. This is a company with a lot of discounted great assets and is also paying a very nice dividend over 3%. FCX is currently traded at $37.5 per share.

Technology - Not like those mentioned above that have been beaten down badly till now, the technology sector is actually doing very well in the past 2 years. But I bet it will continue doing fine in 2014. I like the leveraged ETF, ROM, which is trading hands at $108.84. If it ever comes down in the near future, that will be a great buying opportunity to get in.

Merry Christmas and Happy New Year

It is Christmas eve again and I wish my friends a very Merry Christmas and a great Happy New Year!

So what could be a great Christmas and New Year gift in terms of investment? There are many but I think Apple is definitely one of the best. I have talked about Apple quite a lot in the past 1-2 years. Most recently I predicted that Apple was poised for an explosive move. I also figured that Apple should retest the level around $450 where it would be another great buy. Well, all turned out to be very true. Since then, Apple has performed strongly and likely it will go way up from here. I think the Christmas shopping season will be a great time for Apple and its earnings will likely be boosted by the Apple fans shopping during this period. The deal with the Chinese biggest mobile phone company to sell iPhones in China is a huge catalyst, which will push Apple to a height not seen for years. I'm very bullish for Apple and I think $1000 per share is not far from here for Apple!

By the way, since the year end is very close, I'm thinking to make some predictions for 2014. There are several big trends developing which I think are good areas for trading or investment in the new year. I will be writing them in the next 2 blogs to close the year of 2013.

Macro: The Bottom Line (12/23/2013)

• Fed starts tapering
• Mexico opens its energy industry 

Fed starts tapering: The "big event" for US markets last week was the final FOMC meeting of the year. Following the meeting, Fed policymakers decided to "taper" their bond-buying QE program by $10B (from $85B to $75B). This decision caps a 2013 marked by market volatility (at times extreme) over the question of when the Fed would pull the trigger on tapering. Notably, however, the post-announcement market reaction was largely muted, with both Treasury yields and the dollar trading largely flat on the day. There are two possible explanations for what would seem like a surprising lack of alarm from the markets. First, aside from the tapering itself, the Fed added some language reinforcing its commitment to keeping interest rates low (for example, committing to leave rates untouched as long as inflation is projected to be below 2% and unless unemployment falls well below 6.5%). The second factor has to do with what we on Red Bull have been pounding the table on for weeks now: tapering does not equal a shrinking of the Fed's balance sheet. Tapering still means that the Fed will keep pumping tens of billions of dollars of liquidity into the markets well into 2014, albeit at a slower pace. And even once it ends QE altogether, the Fed will likely still reinvest proceeds from its bond- and mortgage holdings. So for all the headlines (and headache) that tapering has caused through 2013, the mantra still holds: easy money is here to stay, with all its longer-term consequences for the dollar.

Mexico opens energy industry: At a time when the US Congress continues to be the epitome of dysfunction, Mexico's lawmakers have accomplishment something truly revolutionary: they, working closely with the administration, have successfully pushed through a comprehensive constitutional amendment that allows private investors to actively share in Mexico's oil wealth. As a background: back in 1938, Mexico's government enshrined the State's primacy over natural resources in the Constitution, and allowed the state-owned oil monopoly (Pemex) the exclusive rights to exploit those resources. It's as if the US Constitution banned oil/natural gas exploration and production to all but a Dept of Energy-controlled federal entity - there would very likely be no fracking boom! Thankfully, Mexico's politicians have recognized that for the country to become a 21st-century player in global energy markets, such archaic laws do more harm than good. This is one of the few major structural reform initiatives being taken in emerging market, and the investment implications are hard to underestimate. Mexican assets, from the peso currency to the country's equity markets, could see an extended boost going forward. Not to mention the benefits to be reaped by US energy firms, which now find themselves with new untapped opportunities available to them just south of the border. 

Another trade on techincals

First of all, I must say I was a bit disdaining Bernanake and did not expect that he dare to initiate the tapering of QE3, although technically he indeed did not start the tapering immediately this year as the Fed will start it in Jan. Honestly I still think the tapering won't last long as the Fed would be stunned how high the Treasury yield will go that they cannot stand anymore eventually. Likely they will return to the same level of QE3 or even higher before long. We will see.

You may notice that the crude oil has returned back to be close to $100 again. Usually, when oil turns high, the oil service sector should also be doing fine. But a divergence is occurring lately that the oil service is declining instead. However, if you study the price action chart more carefully for the oil service sector ETF (OIH), you will find an interesting pattern: right now OIH is just sitting at its long-term support line. Even more phenomenally, there are 4-5 times in the past year that OIH came down to kiss its support line and each time it turned around to shoot up. I think the chance is high that OIH will behavior in the same way again this time. I'm bullish for OIH and think it will go up pretty soon to catch up the oil price.

A biotech royalty company

If you understand what I have talked about royalty mining company, you should know why this is one of the best business models out there. The best gold royalty company is Royalty Gold (RDLD) and Silver Wheaton (SLW). Now I find another royalty company but in the biotech industry.

Ligand (LGND) is just such an company operating with a business model by developing or acquiring royalty revenue generating assets. Ligand has assembled one of the largest and most diversified portfolios of current and future royalty-generating assets in the industry. These therapies address the unmet medical needs of patients for a broad spectrum of diseases including thrombocytopenia, multiple myeloma, diabetes, hepatitis, muscle wasting, dyslipidemia, anemia and osteoporosis. Ligand has established multiple alliances with the world's leading pharmaceutical companies including GlaxoSmithKline, Onyx Pharmaceuticals (a subsidiary of Amgen Inc.), Merck, Pfizer, Baxter International, Bristol-Myers Squibb, Lundbeck Inc., Eli Lilly & Co. and Spectrum Pharmaceuticals. It has 10 products in the market and over 90 fully-funded partnered programs. It is profitable and cash-flow positive. With a portfolio of this rich, it has only 21 employees. That's the beauty of a royalty company, very lean and efficient.

While I really like Ligand, I don't think it is a good buy at the moment. Its share price is a bit expensive and more troublesome is its price curve. It is showing a clear double top shape, which is typically bearish. I will put it on my radar screen and will get in if it indeed plunges in the next few months. In the long run, Ligand will be very profitable. Don't ignore it!

 

Macro: The Bottom Line (12/16/2013)

• Congress reaches two-year funding deal

• Politics trumps economic reason ... also in Germany

Congress reaches two-year funding deal: On Thursday, the House of Representatives passed a deal that extends federal-government funding through Sept 2015. The deal, if approved by the Senate this week as expected, would ostensibly spare the country from another round of budget brinkmanship between Democrats and Republicans, at least for the next two years. That alone would be a positive - it's about time that members of Congress end the stonewalling and short-term dealmaking that has plagued the budget process since 2010, and focus on long-term solutions to long-term problems. But it's precisely in addressing these structural problems that the deal falls far short. First, the deal is projected to reduce the budget deficit by a paltry $20 billion - in comparison, the Congressional Budget Office estimates that the US ran a nearly $700 billion deficit in fiscal year 2013 alone. Not to mention that $20 billion is barely a scratch in the national debt, now at more than $16 trillion. Second, the deal does nothing to address the debt ceiling, which will have to be addressed again in 2014, and will likely involve a much nastier fight between the two parties. So policy risk in the US is not entirely banished. But at least Congress has proven that it still understands the meaning of "compromise," even if it means taking only half-hearted measures. 

Politics trumps economic reason ... also in Germany: If you thought political games were the preserve of the US Congress alone, think again - look no farther than across the Atlantic to Berlin. Over the weekend, Germany's two main opposing parties (the conservative CDU and the center-left SPD) overcame the final hurdles to forming a governing coalition. That's right, as strange as it sounds, the two historical rival parties agreed to bury the hatchet and rule together for the next four years. Think of it as portions of the Democratic and Republican caucuses agreeing to form a joint administration. Sounds merry, doesn't it? Well, not when you consider the costs. You see, German Chancellor Angela Merkel (from the CDU) was so keen on sealing a deal, she was willing to concede large chunks of her agenda to the SPD. The result? A shot in the foot for German competitiveness. First, the deal fixes the nationwide minimum wage to 8.50 euros / hour (that's more than $10 an hour)! I guess that's not too shocking if you live in San Francisco, but in certain regions of Germany - particularly the former communist East, where worker productivity is still comparatively low - it will likely lead to job losses. Second, it lowers the retirement age for certain workers to 63. This sets the wrong precedent at a time when Germany is facing unprecedented demographic headwinds. Overall, the deal seems to suggest that German politicians are taking the country's position as Europe's strongest economy for granted. This may be fine for now, but one must not lose sight of the potential longer-term damage. By the time the consequences are felt, it might be too late. Yet another reason to be cautious on the Eurozone's long-term prospects.

Short Tesla!

Tesla (TSLA), the electronic car company, was the Wall Street darling in the past 1-2 years. There was so much euphoria for it, its stock had gone parabolic all the way up to almost $200 even when it is still losing money as a business. This kind of euphoria for any stock wouldn't end well. NO EXCEPTION! In the past few weeks, Tesla got crashed and dropped to as low as $120 but it has fought back since then. However, technically all the indicators have pointed to a very bearish moment for it: it is hitting a very strong resistance right now. It is kissing its 50 day moving average from below (the green line); it is hitting the downtrend line (the red straight line); and its RSI is approaching the overbought level (80). I think Tesla has to go down in the next few weeks and likely to test its low or next support level around $120, which is its 200 day moving average (the red curve).
Buying Tesla put options could be a good trade for some quick money!

Turn this fiasco into your profit

If you listen to any news, you must have heard what happened to the website for Healthcare.gov, or more popularly called Obamacare. When it was up and running about a month ago for people to sign up the new healthcare insurance under Obamacare, it was a total fiasco. People simply could not logged onto the website. It went so bad that even a hearing was held by the House to investigate what happened. So who was behind this famous website? CGI Federal – a subsidiary of CGI Group (GIB), a Canadian company which got the contract to develop this website for the US government. Believe or not, CGI got $1 billion for the contract but could not make it work appropriately. No surprise, with this kind of debacle, it won't bode well with its stock. Actually Deutsche Bank recently downgraded the stock to "Sell", targeting it down to $24. The thing really makes me interesting is its technical outlook. You see, CGI has been trading in a very well defined channel in the past year. Recently it pierced through its low band of the channel at around $35 and now it is trading hands at $33. This is a very bearish sign and often indicates a change of the uptrend. I think there is high probability CGI will go down much more from this level and shorting CGI is a great opportunity!

A clear sign of overbought for Yahoo

Yahoo jumped 3.4% today following an analyst's upbeat call. I guess he is reading my blog and following my footstep? Just kidding. But I think Yahoo is clearly showing the classic sign for overbought. My two best and most reliable indicators are saying that to me: it is moving outside of the upper band of the Bollinger Bands and the RSI is over 80! As the red circles show what happened when RSI went above 80 two times in the past half year. It generally coincided with the stock price curve touching or over the BB upper band and then came down in the next few weeks. I think this is what will happen this time as well. Shorting Yahoo for the short term may be a profitable idea.

Macro: The Bottom Line (12/09/2013)

• US economy gains momentum - but don't expect the Fed to rush to the exits on stimulus

• Update on the Euro and Yen

 

US economy gains momentum - but don't expect the Fed to rush to the exits on stimulus: This week must have been a welcome respite for President Obama after being slammed for several weeks for the Healthcare.gov debacle. Through the week, it appeared that the positive economic data flow just wouldn't stop: (1) very strong new home sales data, (2) an upward revision to 3rd quarter GDP growth to 3.6% annualized, and (3) a jobs report showing >200K jobs created in November and a drop in the unemployment rate to 7%. Positive developments indeed. But are they enough to send the Fed to the exits on stimulus? Definitely not! For one, while the 3rd quarter headline GDP number was impressive, half of the growth was driven by companies stockpiling inventory. Actual consumption growth, on the other hand, was revised down to below 2%. So in other words, the strong growth we saw largely had to do with optimism about future consumer activity, not necessarily about the present. Should holiday season sales disappoint, companies could be left with an overhang of inventory, dampening the outlook for the 4th quarter. Beyond the details of what drove growth in the 3rd quarter, the broader issue with the US economy is that businesses are investing less than before in fixed assets and equipment. Investment in equipment actually fell in the 3rd quarter. Why does this matter? Because business investment is crucial to raising the efficiency of each worker - productivity in economist-speak - which in turn allows for sustained wage growth. With both business investment and productivity growth both showing signs of slowing, a Fed exit at the moment risks hobbling the recovery just when it appears to be gaining momentum. Bottom line: the recent data is encouraging, but the era of money-printing is far from over.

Last week, we discussed why the Euro and the Yen are both subject to weakness in the near future. Here's an update on the two currencies:

• Euro - don't be daunted by last week's bounce: Yes, it's true that the Euro jumped past the 1.37 mark versus the Dollar last week. But this changes nothing in terms of the overall outlook for the two currencies. First, while we don't see an end to Fed printing anytime soon, the FOMC will very likely taper the pace of its stimulus within the coming months, which will be supportive for the Dollar in the near term. What about on the ECB side? Well, they temporarily abstained from implementing any of the new measures under discussion (new long-term loans to banks, direct asset purchases, negative deposit rates). But does needing more time for discussion mean that they won't implement these measures in the future. We don't think so. With the Euro area economy barely managing a 0.1% growth rate in the 3rd quarter, and inflation still below 1%, we strongly believe that the ECB will have to resort to more stimulus.
• Yen - now at 103 to the Dollar: In contrast, the Yen did move in line with our expectations last week, weakening to 103 versus the Dollar. Despite all the optimism surrounding Japan's hyper-active policy mix, recent data suggests that the results have been mixed at best. Just today, Japan's 3rd quarter GDP growth was revised down to 1.1% (a meaningful slowdown from the 3%+ growth we saw in the 2nd quarter). At the same time, exports haven't recovered enough to allow Japan to return to a trade surplus. In short, if things don't start picking up soon, expect further stimulus talk - and more Yen weakness.

Yahoo has a lot higher to go

Yahoo has rewarded me very well since I talked about it about 2 years ago.Yahoo has increased more than 100% since then. You can find the the latest one here. With this kind of value already added, is it running near its end of momentum? Far from it! Actually I bet Yahoo may have another 100% to go in the next 1-2 years. Here is why.

Right now, Yahoo is trading hands at $37 with a market cap of around $37 billion. The Wall Street estimates Yahoo's intrinsic value around $12 billion. In other words, Yahoo seems quite expensive as it is priced at about 3 times its book value. But I think the Street has again largely undervalued Yahoo, as much as they did 2 years ago. Ironically, the situation for Yahoo has not really changed in the past two years but it seems the Street just could not figure this out. As I told you 2 years ago, Yahoo has a huge stake in the Chinese leading online retail (about one quarter of Ali Baba shares) and in the Yahoo Japan (about one third of the company shares). Per the current values of these two companies, they are worth over $30 billion already, almost equvilent to the value of the whole Yahoo market cap. In other words, the Wall Street again counts Yahoo's core Internet business as nothing. But as you must have also known, Yahoo is reviving under the leadership of Marissa Mayer and its own business is booming fast. That's why I think Yahoo will likely continue to advance significantly in the next few years, which should be reflected in its stock shares.

Again, I'm not sure now is the greatest time to buy Yahoo as I'm still leaning towards some sort of significant market correction. If Yahoo declines meaningfully in the near term, take the opportunity to get in.

Gold and Silver: a short term explosive bouncing up is likely

It is all over again! Remember a couple of months ago when everyone was expecting the Fed would ease QE, the Treasury 10-year yield fiercely jumped up to almost 3% and gold/silver fell like a stone? Then Bernanke surprised almost everyone (but not me) that the Fed did not ease QE at all. The Treasury yield dropped all the way down to about 2.5% as I predicted and gold/silver jumped high in revenge!

Well, the market is playing this game again. In about 2 weeks time, the Fed will meet again and herd investors listen to and believe again the pundits talking about QE easing at this Dec Fed meeting. The Treasure yield is again crippling up to almost 2.9% and gold/silver is getting decimated once more. My bet? No way the Fed will ease the QE and the market will be surprised once again.

I expect gold/silver will fight back violently with an explosive moonshot, at least for a short term. If you are a trader, this may be a good opportunity to buy DGP, a double long gold ETF for some quick money.

Macro: The Bottom Line (12/02/2013)

 

A Tale of Two Currencies

With US markets largely devoid of major developments due to the US Thanksgiving holiday, this edition of Macro: The Bottom Line will be short and sweet. We'll focus on the Euro and Yen, two currencies about to be driven lower by their respective central banks.

• Danger for the Euro - the ECB is becoming less German

• Yen - $70 billion per month is not enough 

Danger for the Euro - the ECB is becoming less German: Now, we understand that you've been reminded too many times on Red Bull about the dangers of the Euro. And yes, we still view the monetary union of 17 (soon to be 18) countries as dysfunctional and vulnerable to further existential crises down the road. But before we even get there, the Euro faces a more immediate danger: the European Central Bank is becoming less German. What does this mean? Well, though it's been in crisis-fighting mode for the past 3 years, the ECB has in fact refrained from QE. This was largely because of the influence of the Germans on the ECB Governing Council, who with their trademark inflation-phobia refused to join the Fed's money-printing club. Until now. With annual inflation in the Euro region now below 1%, it seems the ECB has decided deflation is now the greater evil. So now speculation has been rife that the ECB could unveil new measures - long-terms loans to banks, outright QE, or even negative deposit rates. Importantly, the Germans have been remarkable silent (whereas in the past they would've been loudly pounding the table at the first sign of money-printing). All this could play out very badly for the Euro.

Yen - $70 billion per month is not enough: The Euro is not alone in the danger zone. Its Far Eastern cousin, the Yen, could also be on the verge of further weakening. You see, even though the Bank of Japan (the central bank) has already been printing the equivalent of $70 billion a month with a goal of bumping up inflation to 2% within 2 years, it's become clear to several members of the BOJ board that it will likely miss its goal. Some have now come out publicly in favor of an even more aggressive monetary stance. What that will look like remains unclear. But one thing's for certain: there's only one direction for the BOJ to go - toward money-printing overdrive. 

On the geopolitical front, high-octane anti-government protests are festering as we speak in Ukraine and Thailand. We'll spare you the details, but suffice to say both protest movements seem to want to dig in their heels until their respective governments resign. So far the market reaction has been largely contained within those specific countries, but Red Bull will continue to monitor any broader implications from these events.

What do the new statin guidelines mean for investment?

Statins are a class of drugs to lower cholesterol levels. This is a huge market because high cholesterol has become epidemic in developed world, especially in the US. I guess everyone understands that high cholesterol is one of the major risks for cardiac diseases. Heart disease is the No. 1 killer of men and women in the United States. It is estimated that one in four deaths, or roughly 600,000 annually in the United States, are caused by heart disease. Understandably, selling statins is very profitable. Do you know how big the sale used to be for the top statin drug, Lipitor sold by Pfizer? The annual sale for Lipitor topped $12 billions. Yes, correct with just one drug, the biggest drug ever in the whole pharma industry! Until now, the indication for statins are purely based on the levels of cholesterol but this is about to change, a big time.

A few days ago, the American Heart Association and the American College of Cardiology released new guidelines for the way doctors treat high cholesterol. In a nutshell, using statins are not just based on the cholesterol levels; rather, it calls for considering the risk factors such as age, weight, blood pressure, or whether a patient smokes or has diabetes. Since such risks are so prevailing for Americans, likely the majority of the people having more or more, it virtually dramatically expands the indication population for statins. With this new guidelines, the medical insurance will cover the drug cost, which means the sales for such drugs will be of moonshot. Actually it is estimated that about 10% of Americans who are not qualified for statin treatment per the old guidelines will now be qualified for the treatment. This a tremendous profit potential for drug companies which sell statins.

While many companies will be the beneficiaries, I think the biggest winners are probably the generic companies which sell cheap statins which have lost patent protection. There are many such generics and more to come in the next few years. I like Teva (TEVA), an Israel company that is also the largest generic company in the world. It is already selling a billion dollar statin, a generic version of Zocor. With the new guidelines, the sales will likely shoot up significantly. Another generic company that may benefit a lot is Mylan (MYL), it is selling a generic version of Lescol, which is not only indicated for both heredity and non-familial high cholesterol, but also for the secondary prevention of cardiovascular disease. One stone for two birds, sort of speaking.