05/13/11 QCOR trade

Firstly, let me just say that I am biased against this company as it was the 1st company that I ever traded and also my 1st loss trading stocks. I frankly don’t understand how or why a company with 1 product, that’s been around since the 1950’s, is off-patent, can keep growing at the rate they are. None the less they are growing and have been profitable for at least the last 3 years and the stock price continues to rise higher. So clearly I am missing something about this story.

The compounded quarterly revenue growth rate for the past 7 quarters (calculated from 8 quarters of data) is 7.11% and only 3.08% for the past 10 quarters (calculated from 11 quarters of data). Assuming a 28.42% annual growth rate of both Revenues and Earnings here are some valuations for QCOR.

Price to sales: 12.99
PSG (Price to sales growth): 4.57
P/E: 39.11
PEG: 1.38

QCOR

Here are some notes I took while listening to the latest Conference Call.

  • Firstly the stock is up 14.4% in the last week and up 20.2% in the last month. Their main business is the sale of Acthar for MS.
  • They bought back 1 million shares in Q1.
  • Only 500 neurologist are prescribing Acthar.
  • Nephrotic Syndrome study published, will help sales force in promoting it to doctors.
  • Steadily growing number of new and repeat customers of Acthar.
  • They have doubled their sales force in Q1.
  • 4,000 nephrologists in the US.
  • In November new data will be presented at the annual nephrology meeting.
  • Phase 4 study now underway, company sponsored study.
  • Expect a specific release of an analysis of other off-label indications for Acthar.
  • We are consistently executing on our “sell more Acthar strategy”.
  • They don’t have a “poison pill”.
  • If shareholders reject the new employee stock options plan, they will use that cash to pay a dividend.
  • Employee options vest over 4 years.

Why I will short Questcor Pharmaceutical (QCOR) today.

I am going to fade the Stocktwits. Secondly, I am also feeling a bit bullish today on the over all market so I will buy some UPRO.

I will short $2,500 of QCOR with the option to short an additional $2,500 at my discretion and will try to capture 10% points of profit. Risk management: exit trade if it moves 5% against me.

On UPRO I will buy $2,500 shares with the option of buying another $2,500 shares intra-day. I will be looking to make 3% on this trade and will exit the trade if it moves 1% against me.

Update:

Average entry price on UPRO is $83
5/13/2011    10:08 AM    30    $83.60    $2,508.00    $83.60
5/13/2011    12:07 PM    31    $82.42    $2,555.02    $83.00

Short entry price on QCOR is $22.95
5/13/2011 11:05 AM     111     $22.95     $2,547.45     $22.95

Bought Some FAZ crack as well today entry $42.96. The XLF was breaking down, and Goldman continues to get pounded.

5/13/2011 1:36 PM     58     $42.96     $2,491.68     $42.96

P&L for the day:
UPRO –
bought 30 shares for $83.60 = $2,508 plus $4.99 commissions.
bought 31 shares for $82.42 = $2,555.02 plus $4.99
total = 2555.02+2508= $5,063.02 ; divided by 61 shares = 5063.02/61= $83.00 average entry price.
Closing price was 81.78 ; P&L = (81.78-83)*61= -$74.42

QCOR –
shorted 111 shares at $22.95 = $2547.45 plus $4.99 commissions.
closing price was 22.71 ; P&L = (22.95-22.71)*111= $26.64

FAZ –
bought 58 shares at $42.96 = $2,491.68 plus $4.99 commissions.
closing price was 43.15 ; P&L = (43.15-42.96)*58= $11.02

Totals (-4.99*4)+(-74.42)+26.64+11.02= -56.72
Although for some reason Investopedia says that I was down 56.74 today, that I lost an extra 2 cents. I have no idea why. Oh well, I’ll figure it out later.

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