Cutting-Edge Buys

11/20/2008 12:00 pm EST


Michael Murphy

Former Editor, New World Investor

Michael Murphy, editor of New World Investor, is pounding the pavement, finding multi-sector opportunities.

Amgen (Nasdaq: AMGN) recently held their business update meeting, and the tone was great. They have weathered the storm in Aranesp, where they think another 10% to 20% sales drop primarily in Europe will mark the bottom, and they expect denosumab for osteoporosis to be a blockbuster. They'll file for approval in the next few weeks, which should give the stock a boost. Hold both the AMGN January 2009 $70 LEAP call (YAA AN) for my original $20 target—a long shot, I admit, but I think we'll get a chance to sell this position at much higher prices. Also hold the January 2010 $40 LEAP call (WAM AH) that is well over my buy limit for the $35 target.   

Polysilicon prices fell about 25% during the past three weeks—dropping from $180 a pound to around $135 a pound, due to a dramatic slowdown in the semiconductor sector. Polysilicon is the major ingredient for making of solar cells, so this is good news for solar companies. 

In addition, scientists at Rensselaer Polytechnic Institute have developed a reflective coating that helps solar panels soak up more sun, no matter what angle it is coming from. Current solar panels absorb only about two-thirds of available sunlight. The coated panels harvest 96.2% of available sunlight, a 44% improvement. That means a coated panel can cost 31% less for the same power output—a significant savings. This is good news for our holdings in Energy Conversion Devices (Nasdaq: ENER) and Canadian Solar (Nasdaq: CSIQ). Buy ENER up to $32 for my $65 target. Buy CSIQ up to $31 for my $65 target.

American Science & Engineering (Nasdaq: ASEI) beat both revenue and earnings expectations. Revenues grew 50% from a year ago to $56.3 million, and earnings hit 83 cents a share. They booked $93.5 million in orders, and end the quarter with a $197 million backlog.  That's 61% higher than last year.

Although the company still has very unpredictable earnings quarter-to-quarter, there's no doubt the trend to more security spending will continue through any economic downturn.  The stock jumped over my buy limit, so I am taking it off the Top Buy list, but if there is any significant dip you should buy ASEI under $59 for my $93 target.

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