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Martha Stewart 0, Carl Icahn 1By Graham SummersMonday, August 28, 2006 Last Thursday, the iShares Global Healthcare ETF (IXJ) rallied to new highs.
The move has come as little surprise to anyone who follows insider trading: the sector has been one of the most popular among insider bulls for months now.
As such, the next few months should be big for healthcare stocks, since insider purchases typically precede market moves by six months or so. And insiders were buying these stocks throughout the late spring/early summer.
Even more exciting, the sector is also starting to draw attention from some of the bigger names in finance. The most obvious example? ImClone Systems (IMCL).
ImClone designs and sells cancer treatments. Currently, its primary breadwinner is ERBITUX, a medication used in congruence with radiation treatment for head and neck cancers.
You may remember ImClone for its role in introducing striped pajamas to Martha Stewart’s wardrobe. Now, the company is involved with another shining star… it’s become the hottest pick in billionaire hedge fund manager Carl Icahn’s portfolio.
Icahn began to establish his position in the company back in 2002. However, in the last two years his involvement with ImClone was practically nonexistent: according to SEC filings, Icahn didn’t add to his position during this time.
Until now...
ImClone put itself up for sale back in January 2006. Between the lack of decent buy-out offers and the market corrections of May and June, ImClone shares got brutalized, falling from $40 per share to $32.
To make matters worse, the company took itself off the auction block on August 10, sending IMCL shares even lower.
Icahn took advantage of the dip in price to load up on shares. From August 15-23, he bought more than $61 million worth of the IMCL’s stock. Taken altogether, these purchases are the second largest insider investment in the healthcare sector in the last three months.
Now owning 12% of the company, Icahn was invited to join ImClone’s board. He’s accepted the invitation and has also nominated three other candidates for the board.
Here’s a little more insider information… ImClone shares are currently cheaper than they’ve been in three years. We’re talking about a biotech company with an FDA approved medication on the market, trading at a cheap price to earnings (P/E) multiple of 9.
Even better, we’ve got an investing legend owning 12% of the shares outstanding, and possibly joining the board of directors.
This set-up is so good, it should be illegal.
Oops, sorry Martha.
Good investing,
Graham
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