Note: As of 9/15/11 Nick Lee no longer manages a Covestor model
Author: Nick Lee
Covestor model: Event Driven
Disclosure: Long SVNT, DSCO as of time of writing
Recently we’ve seen a lot of action in commodities, with the near-parabolic rise of precious metals. Some commentators have opined that the action culminated with the dramatic drop in silver, which seemed to lead other commodities down as well.
While I’m not sure this is yet a contrarian perspective, I hold the view that this is an opportunity to acquire some exposure to silver and gold if one does not already have a position. Particularly I think Silver Wheaton Corp. (NYSE:SLW), Global X Silver Miners (NYSE:SIL), and Market Vectors Gold Miners ETF Trust (NYSE:GDX) represent still low-hanging fruit. Although I have not been particularly enthusiastic about precious metals recently, I’ve been looking for an opportunity to start a position – thus this recent weakness on the coattails of the CME decision to raise margins may be my cue.
Additionally, we recently increased our position in Savient Pharmaceuticals (NASDAQ: SVNT) after the company reported disappointing sales numbers. I think SVNT under-estimated sales for Krystexxa, but the situation demonstrates why one should always take profits when dealing with small-cap biotech, which we did.
I am also very confident about Discovery Laboratory (NASDAQ: DSCO). DSCO is engaged in developing a liquid (and eventually aerosolized) KL4 Surfactant. Although the company is currently sporting an anemic market cap and share price that only a speculator could love, we think the stage is set for the company to succeed.
Ultimately we are bullish on U.S. equities and precious metals going forward. Certainly there are always reasons to be cautious, but the economy is gradually improving and corporations will continue to reflect the improving business climate, with the last leg being the eventual recovery of commercial real estate.
Savient Pharmaceuticals press release, 5/5/11, http://investor.savient.com/releasedetail.cfm?ReleaseID=574706