5/25/09 - Titan Pharmaceuticals (TTNP.PK): Was Perfect and Still Potentially Is

Man, the perfect stocks have been hard to come by recently. I've mentioned to several people that I think a lot of it has to do with the market cooling a bit from its 30% bounce off the March 09 lows. Until further ammunition is disclosed to move the market higher, it looks like the theme of this blog will revolve around potentially perfect stocks. The stock that I believe has a strong potential to move higher in the near future is a stock that I considered posting about two weeks ago. I was hesitant to do so because it had already had a massive jump in price. After anticipating a sizable pull back, I've come to the conclusion that it's just not going to happen. In spite of an 85% move up since initially being on my radar, Titan Pharmaceuticals (TTNP.PK) is still potentially a perfect stock.

Titan Pharmaceuticals, Inc. is a bio pharmaceutical company developing proprietary therapeutics primarily for the treatment of central nervous system (CNS) disorders. The Company is focused on the clinical development of the following products: Probuphine for the treatment of opioid addiction and Iloperidone (also called Fanapt): for the treatment of schizophrenia and related psychotic disorders. Titan directly develops its products and utilizes corporate partnerships for marketing and distribution such as the one with Vanda Pharmaceuticals, Inc. for iloperidone.


Titan Pharmaceuticals was bordering on bankruptcy, had laid off the bulk of their employees, and shutdown much of their operations. However, the company's fortunes all changed on 5/7/09 when FDA granted approval to market Fanapt. Vanda plans to make Fanapt available in pharmacies later this year. Titan is entitled to receive royalties on global net sales of Fanapt equal to 8 percent on annual net sales up to $200 million, and 10 percent on annual net sales above $200 million. Titan incurs no ongoing expenses associated with this potential future income. Global sales from this class of drug exceeded $20 billion in 2007. In other words Titan will be getting paid millions and possibly billions of dollars over the next 5 to 10 years to do absolutely nothing. Talk about a cash cow!


See chart for TTNP.PK:

As you can see from the chart above, Titan spiked after the FDA announcement. Then, for about a week and half it appears that the market was trying to weigh if the company's new valuation was justified. Over the past week the stock has begun to explode upward. So, it appears obvious that the market still believes the stock us undervalued.


There are several things that can take place to continue to push TTNP.PK's price higher:

- Vanda doesn't currently have enough money to move forward with the launch of Fanapt. As a result, anything that they can do to improve their position in making this happen will push TTNP.PK's stock up (ie. partnership with big pharma, buyout from big pharma, secondary offering to raise money, etc.).

- Titan could now be a buyout target. Companies with lots of cash should be willing to buy Titan at a premium for the strong possibility of huge future earnings at absolutely no expense.

- Probuphine is a bit of a wildcard. It appears that there are some patent issues keeping it from getting off the ground. If somehow this is resolved favorably, the stock could again see a sharp move higher.

- With Titan currently being on pink sheets, they could consider re-listing on one of the major exchanges. Several months ago, they were delisted from the American Stock Exchange. However, it is not likely they will do so because management still seems to be in cost cutting mode. I think Titan believes that they can achieve a significant increase in share price without it.


At Titan's closing price Friday 5/22/09 of $1.30/share, the company has a market cap of a little more than $75 million. When considering the potential revenue from Fanapt over the next 5 to 10 years, many believe the current valuation is still far too cheap. I believe the current momentum of the stock will push the share price to at least $1.70 in the next week or two. I highlight $1.70 as a price point because that is where TTNP.PK peaked the first day after the FDA approval was announced. Many investors blindly bought in around this price and it should act as a temporary level of support for the stock. I wouldn't expect the stock to move much beyond this point until one of the catalyst listed above take place. Only with these occurrences would I be confident in saying the stock will comfortably move beyond $2.00 a share. Because the stock has already had a nice run, you could gamble and hope for a pullback closer to a $1.00, but don't count on it. If such action does take place, expect it to be met with ferocious buying. Word continues to spread about this gem of a stock. I've failed you by not posting about it at $0.70/share when I had a chance. However, now is better late than never because I feel there is still excellent profit potential for investors. Titan Pharmaceuticals, potentially the next perfect stock.

5/12/09 - Combination of Oil and Natural Gas Makes Callon Petroleum (CPE) Perfect

It's now time for another perfect stock post. Most of you follow the market closely so I'm sure that over the past month or two you have noticed the strong move being made by oil. More recently, natural gas has begun to follow the same path. I've been looking for a perfect stock in this sector for weeks, but something has always made me shy away from making a selection. However, after an earning release by a particular company last night, I can no longer make that claim. Typically, my perfect stocks are fast risers with a "perfect" stock shelf-life of no more than a month. This stock is a little different though. I am fairly certain it will at least double from here, but it may be more of a slow grinder. Unlike most of the other stock's I've recommended, it could be good for a 3 month hold if things don't change fundamentally. Today's perfect stock is Callon Petroleum Company (CPE).

Callon Petroleum is engaged in the exploration, development, acquisition and production of oil and gas properties. The Company’s properties are geographically concentrated primarily offshore in the Gulf Coast Region both onshore and offshore.


As I've mentioned in the introduction, oil and natural gas have been on fire recently. Nothing tells the story better than a chart so see below for visuals of the impressive turnaround in the two commodities:

Oil began it's reversal a few months ago, but natural gas has turned the corner only a few weeks ago. Most of the credit for the turnaround goes to China because of their stimulus and massive energy needs. As natural gas continues it's reversal, you can be assured that more and more money will flow into the sector. The main beneficiaries from the standpoint of share price appreciation will be the low float stocks furthest from there 52 week highs. CPE has a float of less than 10 million shares and currently sits at $2.93/share with a 52 week high of over $28/share.


On 5/12/09 the company reported Qtr. 1 2009 net income of $2.4 million, or $0.11 per share, significantly exceeding analysts consensus, which was a net loss of $0.07 per share. The biggest reason for the upside surprise was due to Callon's successful hedging strategies. For example, in spite of depressed oil prices averaging around $43/barrel for the quarter, their realized oil price was over $60/barrel. The stock moved 30% today in response to the report. Because the price of oil and natural gas continues to find higher trading ranges, it is reasonable to believe that next quarter's earnings will be even better.


See the chart of Callon Petroleum below:

As you can see, this stock bottomed in March and has been on a steady climb ever since forming a (very bullish) cup handle. After a stock has a major run, the earnings report often determines if the momentum is stopped or if the trend continues. I believe the favorable report catapults CPE further along its current path.

Catalyst to move CPE higher:

I've already mentioned the significance of the earnings report, but I see several other factors that will move the stock up:

- Expect analyst upgrades and institutional buying. They'll wait for a nice pullback and then they will "back up the truck". Look for both to happen in the next couple of weeks.

- Expect Insider buying. There has been no insider buying or selling since the end 2008. Now that the insider "quiet period" is over and it is fairly clear that prices are on the rise, look for management to begin accumulating shares again.


In conclusion, oil and natural gas stocks are highly dependant upon commodity prices. As the economy recovers and more money is printed, it is no surprise that the depressed prices of 4 or 5 months ago would be a distant memory. I believe oil may level out at this level, but natural gas has a ways to go. This should keep the sector moving in a positive direction and reward those companies with strong management and results. Be patient with CPE. After an already large move, you may or may not hit your target right away, but slow and steady can also make you a lot of money. Callon Petroleum Company(CPE) is the next perfect stock.

5-4-09 - Combining Two Hot Sectors Makes Gold Horse Intl (GHII.OB) Perfect

Today was an explosive day in the stock market. Most every stock was up and certain sectors have been on quite a run. With so many stocks significantly coming off of their bottoms, it will be tougher and tougher to find perfection, but I really feel that this next stock is an easy double from here. This stock is definitely in the right space as it happens to combine in my opinion the two hottest sectors in the market right now: China and Real Estate. It had a big day today, but I think there's still a lot left in it. In this post I'll float back into pennyland and show that the next perfect stock is Gold Horse International (GHII.OB).

Gold Horse International is engaged in three business sectors in China: construction, residential and commercial real estate development, and hotel management. The stock was taken down steadily and is just beginning to see the light of day despite great earnings.


In the wake of the economic downturn, the Chinese government has vowed to do everything possible to stimulate its economy. Part of that stimulus plan is to foster construction and real estate. 4 trillion RMB is being released to encourage affordable housing, rural development and infrastructure projects. GHII.OB is set up perfectly to capitalize on these measures.


GHII.OB's 2008 revenue was around $67 million, which yielded an eps of $0.10. The company has already completed 2 quarters in 2009 and has provided guidance of $90 million for the year. Book value is $0.43/share. These financial indicators are impressive for a stock currently sitting at $0.13/share.


Check out GHII.OB's 1-year chart below:

As you can see, GHII.OB traded over $1.00/share less than a year ago. After consolidating for months, today's 44% move looks to be the start of a breakout.


I've already mentioned that Chinese stocks are hot right now. With the promising China manufacturing numbers that were release today regarding expansion for the first time in 9 months, I predict that you could see some crazy stock run-ups the next few weeks in Chinese stocks that could rival what we saw in late 2007.

Also, 5/18/09 is a major investment conference focusing on Chinese companies in New York. With all the money that's still waiting on the sidelines, this could be a great opportunity for Gold Horse to lock in some big money ownership, which will inevitably push up the stock price.


Stocks have made a tremendous run and we look to be primed for DOW 9000. As we inch closer to that number, look for many stocks to give up some gains soon as profit taking occurs. However, GHII.OB is nowhere close to being overbought and appears to still have room for at least a double based on this blog's strict criteria. Gold Horse International (GHII.OB) the next perfect stock.