The Easiest Strategy to Double Your Money in Two Months

The Easiest Strategy to Double Your Money in Two Months
By Dr. George Huang, editor, S&A FDA Report
September 11, 2009

PDL Biopharma squandered its fortune.

PDL was one of biotech's earliest success stories... Its scientists developed techniques that made possible some of the most successful biotech drugs to date. Today, the company still fetches more than $300 million per year in royalties from top-selling cancer drugs like Genentech's Avastin and Herceptin.

But PDL management wasted most of its royalty income on compensation and ill-advised acquisitions. So back in 2007, investors revolted. They forced out the CEO and demanded a new corporate strategy from the board.

The board split PDL into two companies. The parent, PDL Biopharma (PDLI), keeps all the royalty assets to distribute to shareholders. And the spinoff, Facet Biotech (FACT), keeps the drug pipeline and the antibody technologies.

I watched the spinoff closely, because I knew my FDA Report subscribers would have a chance to scoop up the shares at a significant discount. Here's why...

Institutional investors will often sell spinoffs without thinking. Certain mutual funds have market cap restrictions. Some can't hold unprofitable stocks. Other times, funds that track an index will dump spinoffs because the new company is not included in the index.

Whatever the reason, spinoffs tend to get sold off with no regard to price or value... which can create huge profit opportunities.

See, Facet held approximately $330 million of cash in the bank when my subscribers entered the trade. Yet, at $8 per share, it only sported a $200 million market cap. Not only did we pick up a stock trading at a 40% discount to cash, we also got a multiproduct pipeline and one of the industry's best technology platforms for free.

At the time, it was already the perfect setup. If shares simply traded back to cash levels, we'd make 40%. If Facet released positive results from any one of its drug candidates, we could double our money in a single day. But things turned out even better... We weren't the only investors who thought Facet was a bargain.

Last Thursday, large cap biotech Biogen-Idec offered $14.50 per share for Facet, a 60% premium over the previous day's closing price.

The bid may have been way over Facet's share price... but it was still a slap in the face. It represents only a tiny premium over cash and values Facet's lucrative technology and pipeline at zero. Facet's board took little time to rebuff the offer as "inadequate." And a revised offer near $20 per share is more reasonable. Regardless of the outcome, my FDA Report readers have already doubled their money.

I wouldn't get into Facet now... It's no longer the bargain it once was. But if you want to double your money in less than two months, look toward new spinoffs. You'll find 40 or 50 new opportunities each year.

Bank 50% Every Year on Left-for-Dead Stocks

The Market's Giving Away 30%... Get in Before It's Gone

One easy way to hunt down these names is to browse the holdings in the Clear Spin-Off Index (CLRSO). It's comprised entirely of new spinoffs prior to their graduation from "rookie" status (about two years).

This is your best place to find companies undergoing the same forced selling as Facet. You might even find a few names trading at a discount to cash.

Good investing,

George Huang

P.S. Two more cash-rich biotechs are hiding out in the FDA Report portfolio. These left-for-dead stocks offer big upside without the risk. To learn more about the FDA Report, click here.

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	Last	Change	52-Wk
S&P 500	1030.66	+0.25%	-19.58%
Oil (USO)	37.54	+1.58%	-60.76%
Gold (GLD)	93.21	+0.45%	+14.57%
Silver (SLV)	14.07	-0.15%	+5.39%
U.S. Dollar	77.97	+0.49%	+4.96%
Euro	1.44	+0.90%	-2.30%
VIX	24.62	-1.32%	+24.60%
HUI	359.64	+1.91%	+3.79%
10-Year Yield	3.46%	0.02	-0.28

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Company	Sym	Industry
Mylan	MYL	pharma
Tata Motors	TTM	Indian autos
Discovery	DISCA	TV programming
Sterlite	SLT	copper mining
ICICI Bank	IBN	bank
Credit Suisse	CS	bank
ON Semi	ONNN	semiconductors
Advanced Semi	ASX	semiconductors
Ross Stores	ROST	clothing stores
Western Digital	WDC	data storage
Cognizant	CTSH	outsourcing
Wipro	WIT	outsourcing
Goldman Sachs	GS	investment bank
Marvel	MVL	movie production
Advantest	ATE	semiconductors
Intl Game	IGT	gambling
Vivo Participacoes	VIV	wireless telcom
ASML	ASML	semiconductors
Texas Instruments	TXN	semiconductors
Telefonica	TEF	telecom
Silver Wheaton	SLW	silver mining
Lubrizol	LZ	cehmicals
Comp Brasileira	CBD	grocery stores
NVIDIA	NVDA	semiconductors
Baidu	BIDU	Chinese search
Infosys	INFY	outsourcing
Oracle	ORCL	systems software
Metavante	MV	credit services
Red Hat	RHT	systems software
Micron Techn	MU	semiconductors
Shire	SHPGY	pharma
Broadcom	BRCM	semiconductors
Telecom Italia	TI	telecom
Makita	MKTAY	power tools
Scor	SCRYY	insurance
Priceline	PCLN	online travel
Marvell	MRVL	semiconductors
Starbucks	SBUX	coffee
EMC	EMC	data storage
Lam Research	LRCX	semiconductors
Ultrapar	UGP	gas distribution
Seagate	STX	data storage
NIDEC	NJ	electrical equip
Vmware	VMW	systems software
Novo-Nordisk	NVO	pharma

Company	Sym	Industry
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