September: The Market Punisher
September 2, 2003
Welcome to September which is also known as the worst month of the market. In the last 52 years September has been the biggest percentage loser for the S&P 500 and the Dow Jones Industrial Average. However, the day after Labor Day has been up in seven of the past eight years. What does all this mean? The broad market indexes should experience a pull back this month which we think will set us up for a major fourth quarter rally.
The momentum that has come back into the market has many market pundits crying bubble. This is true in the sense that many of the sectors getting bid up are not going to keep their gains. The fast money chasing the latest and greatest currently has energy plays center stage. This fancy cannot last but we have a basket of energy stocks that have been performing very well. If this is something of interest we will share this basket with our readers.
This month we will see some real opportunities if the market experiences a major decline and as always we are out there looking for them.
SEEC The Movie
In our last edition, The Business To Business Bubble, we featured little known SEEC Inc (SEEC) and received some interesting feedback. One reader suggested that the SEEC drama along with the entire Kleiner Perkins relationship be made into a movie. This is actually not a bad idea and probably one day someone will buy the rights to the film.
The stock has inched up a little to close Friday at $1.11 up 11% from our mention. This is not a stock that should be chased. Daily volume is scarce at best and the volatility is incredibly high. If and when good news or bad is announced the reaction will probably create a 30% move in either direction.
We inform you that one of our editors owns shares of SEEC Inc (SEEC) at an average cost of $1.00. Our editor can buy or sell shares in this stock at his own discretion. This should be viewed as a potential conflict of interest.
Flamel Technologies On Fire
Last week Flamel Technologies (FLML), one of the companies in our nanotech basket, saw its shares rocket over 25% after announcing a deal with Bristol-Myers (BMY). The two have entered into a licensing and commercialization agreement to develop and market Basulin®, Flamel's new controlled-release insulin now entering Phase II human trials.
Bristol-Myers will pay $20 million upfront as well as an additional $145 million in future milestone payments. If and when the drug receives regulatory approval Flamel will be entitled to double digit royalties on sales of the diabetes medication. In return, Bristol-Myers gets exclusive rights to Basulin.
When we first introduced Flamel to our readers in the June 17th edition (The Big View On Nanotechnology) shares were trading at $12.05. Friday's closing price of $28.49 per share puts Flamel up a whopping 136.39% in less than three months. Ideas with this type of return are what we hope to continually bring our readers.
Buyout Basket Due Out Shortly
We have decided to delay the release of our "buyout basket" until sometime in September due to the usual market plunge this particular month has been notoriously known for. The momentum fueling the market has made the risk to reward on some of the buyout candidates less appealing. September usually punishes investors so a market decline will undoubtedly create better entry points.
Currently, there are five companies we are tracking that make for likely acquisition candidates. Many of our readers have submitted their own ideas. We appreciate the time and effort that they have put into their research. It is always a pleasure hearing what you have to say. All comments may be sent to editor@smallcapmarketwatch.com.
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