Saturday, August 22, 2009

Murphy Stocks

I'm checking out the Money Show investor conference in San Francisco.

Most of the speakers I have little interest in hearing. They even have a speaker from S&P. WTF is that all about? Aren't they the guys that downgrade companies after the sh*t hits the fan? But the event has grown so large that even a critical perusal of the speaker's list will result in a couple of speakers that will be worthwhile listening too.

One speaker that stood out from the crowd is Michael Murphy of New World Investor. His outlook on the economy is pretty much in sync with EPJ, accept for the short term. He is looking at the Fed's growing assets and is short-term bullish on the stock market and economy, because opf that growth. Of course, we are looking at the huge assets and noting that the assets are not causing the money supply to grow (M2 nsa). Thus, in our view, the current upspike is about to end very abruptly.

Long term, we are both very negative on the dollar and expect that at some point inflation will kick in, as the Fed will have to print enormous amounts of money to buy Treasury securities that will be issued.

Murphy has also done some work on hyper-inflations of the past, and pointed out during his speech that the German stock market was one area that was able to keep pace with the German hyper-inflation. This supports a comment Nobel Prize winning economist F.A. Hayek made that equities are one of the best hedges against inflation.

But rather than amacro-economist, Murphy is mostly a stock picker. I like his stock picking style. He seems to pick stocks that have the potential for huge gains, and he generally appears to pick stocks that are not impacted by general macro-economic trends.

The one exception to stocks that aren't influenced by macro-trends is his Buy recommendation on American Stock Exchange traded, Paramount Gold and Silver Corp.

He also likes BioCryst Pharmaceuticals Inc. which has the only flu treatment that can be delivered intravenously. Also on his list is Electro-Optical Sciences, Inc. Electro has a mechanical method to detect skin cancer that eliminates the need for a biopsy. FDA approval is expected later this year.

Both these medical stocks appear exciting, however, I hasten to add that, longer term, health related stocks will be hurt by Obamacare. Short term this won;t be a problem for companies that are coming online with product now. Long term the health "deciders" are going to be deciding against new products.

Other Murphy recommendations are:

Arena Pharmaceuticals, Inc

Rochester Medical Corporation

Akamai Technologies, Inc

Harmonic Inc.

QuickLogic Corporation

Suntech Power Holdings Co. Ltd.

US Geothermal Inc.

Alvarion Ltd.

TowerStream Corporation

Should you buy these stocks now, with what appears to be a strong possibility of a big drop ahead? Study the stocks and if there are one or two you like, take small positions now and wait for the downturn before adding to positions.

If the downturn is as severe as I expect it to be, these stocks will generally be available at a lot lower price.

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