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Strategies & Market Trends : Roger's 1997 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Jay Quinty who wrote (8607)	12/18/1997 9:21:00 PM
From: Bill Wexler	Read Replies (1) \| Respond to of 9285

<<But, don't forget what you posted recently.....wait for it to break on news >> I think you misunderstood me. What I meant was that I wouldn't short a momentum stock anymore (YHOO being a perfect example) until enough news was known - even if I miss the first big drop down. There may be situations where there is no doubt the company is deteriorating, but the stock experiences short-term volatility to the upside. Biovail fits into the second category. I am very confident that the current squeeze is not a YHOO-style situation. BVF is a safe short right now and can be dollar-cost averaged if the squeeze continues higher. BioVail is NOT a momentum stock. Biovail is fascinating because the bad news is already out, and I believe that investors have bought the stock without looking beyond the company's earnings press release. Look at the company's last 6-K. Revenue growth was actually flat, and manufacturing revenues actually decreased 10% in a nine month comparison from 96 to 97 and 35% in a three month comparison. What really raises the red flag is the balance sheet. Note that even though Biovail is proudly showing off its "earnings", they actually had to borrow $10,000,000 in the last nine months so their checks wouldn't bounce. The company is now effectively in the hole. Bottom line: investors are paying 15x sales for a generic drug manufacturer in a cutthroat business. Besides playing fast and loose with the revenue recognition accounting, the CEO has secretly traded his company's stock from offshore accounts. BVF is a terrific short. I believe that the stock will crumple in a matter of months. P.S. Calculate the net margin and ROE. Seem too good to be true? That's because it is!!! The earnings are scince-fiction numbers. Asensio beleives this stock should be trading around 12 a share. I think it should be trading around 8.