Welcome to stocks in the news where the headline meets the trendline.
Stock Number One: Salix. (SYMBOL: SLPX)
And the headline says: Deal Creates Gastrointestinal Leader – OptionsMonster
“Santarus agreed to be purchased by Salix Pharmaceuticals for $2.6 billion, or $32 a share,’ says OptionsMonster. “SNTS, which closed at $23.22 yesterday, is ripping 38 percent before the opening bell on [the] tradeMONSTER platform. SLXP gains more than 11 percent as well”
So you want to know what’s wrong with the stock market these days? With America in general? I counted four law firms that are already threatening to sue Santarus Pharmaceutical over this deal because they’re sniffing more money.
They want Salix pay more.
Analyst from Cantor says Salix is paying too much for the deal.
What Salix is looking for is the existing distribution network that Santarus offers them further gastrointestinal products.
The company currently trades about five times sales, which is a little rich for any biotech.
Our Ransom Notes Trendline says: Avoid Santarus and Salix
Stock number two: Toll Brothers Inc. (SYMBOL: TOL)
And the headline says: Toll Brothers Floats New Stock Issue – Motley Fool
“Toll Brothers is hoping to strengthen its capital foundation with a fresh offering of common stock. The company announced it is floating 6.25 million shares in an underwritten public flotation priced at $32.00 per share. Additionally, the issue's underwriters have been granted a 30-day purchase option for up to an additional 937,500 million shares.”
Recommended
Toll Brothers will use their $1.7 billion in cash to finance the purchase of a California-based homebuilder, as was announced earlier this week.
The company is trading about 21 times earnings, with forward projections for the next five years coming in about 19% average annual growth. Earning estimates in the short run have been paired back a little bit recently, however.
With interest rates expected to stay at current levels --if maybe just a little bit higher-- Toll Brothers should continue to be a leader in the industry. However it’s probably fairly priced as of now.
Our Ransom Note Trendline says: Hold Toll Brothers
Stock Number Three: J. C. Penney Company (SYMBOL: JCP)
And the headline says: J.C.Penney's October Results Signals Turnaround Taking Hold – JC Penny
“J.C.Penney’s sales release for October 2013 is very promising,” writes Walter Loeb of Forbes. “Sales increased 0.9% over the previous year.As I have written about in past blogs, it is what I thought would happen for several reasons including very easy comparisons and better management,” says Loeb.
The problem with JC Penny isn’t sales. It’s that they’re burning about $1 billion in cash every six months. They have about one $1.6 billion in the bank and are expected to lose $3.50 pre share in 2014 and over $6.00 per share 2015.
Same-store sales increases are great, but it doesn’t solve the problem that they’re not profitable. Much more likely that this company will going to bankruptcy even though we seen the stock price rally since mid-October
Our Ransom Note Trendline says: Sell JC Penny
Join the conversation as a VIP Member