• George and Tim discussed Presidential race and the possible effects on the market.  (Note:  Fed’s easy policy is the biggest driver of the markets – that and Europe; not the President).
  • Tim then discussed why George is “spot on” with his concerns about the Obama Administration’s policies.  Tim cited the anemic recovery coming out of 2008 – 2009 as compared to the post-Depression recovery:
    • Note:  GDP actually has little / no correlation with the equity markets historically. 
      • 1929 – 1933 GDP Declines:  -11.97%; -16.12%; -23.27%; -3.92%
      • 1934 – 1937 GDP Growth Rates:  17.02%; 11.06%; 14.32%; 9.67%
      • 1938 Recession GDP Decline:  -6.31%
      • 1939 – 1941 GDP Growth Rates:  7.08%; 9.98%; 24.95%  
      • 2008 & 2009 GDP Growth Rates:  1.87%; -2.22%
      • 2010 – 2011 GDP Growth Rates:  3.76%; 3.98%; 2012 on par for similar / lower growth
  • Tim briefly touched on employment – here are some numbers of note: 
    • Employment is still bad despite < 8% unemployment number; 14.97% is the “real” unemployment rate (up from 14.96% last month) vs. the 7.8% headline number.  Real unemployment = Unemployed + Part-time Workers + Marginally Detached Workers (those willing, but that have just given up looking)
    • That means that the number of part-time workers and people that have just given up actually increased month over month from August to September.  The numbers here have steadily worsened since March of 2012 – things are worse!! 
    • Headline numbers are down at around 8% from 2010 levels of > 9.5%, but are still are far worse than “good” readings of 4% – 5% in normal, healthy economic conditions.  No pats on the back should be given to anyone here!!
  • Finally, George asked Tim for a specific idea that could benefit the listening audience.  Tim gave Teva Pharmaceutical Industries, Ltd.  See the details of the pick below:

GENERIC PHARMACEUTICAL PLAY

Teva Pharmaceutical Industries, Ltd. (TEVA)         NASDAQ                $40.34 as of Monday’s close (10/8/12)

Beta: 0.34

  • Leading generic pharma based in Israel; its drugs help with MS, sleepiness, Parkinson’s, cancer-related pain, musculo-skeletal conditions, bronchial spasms, Leukemia, blood treatment, emergency contraception, menopause, infertility, urinary incontinence.
  • Cheap valuation:  forward P/E of 6.97; PE/Growth of 0.90 (<1 desirable); enterprise value ($47.68 billion) > market capitalization ($35.02 billion); price to book ratio of 1.53 (< 3 being “cheap”); and price to sales ratio of 1.73 (< 5 being cheap)
  • Clean balance sheet:   (.61 Debt/Equity & 1.42 Current Ratio)
  • Positive cash flow:   $2.68B levered free cash flow annually

Pattern development:  Broke out of a pennant formation to the upside at the end of September; ideally the stock would have come down and successfully tested the upper edge of the former pennant formation – it failed on that test.  However, it did come down and successfully test the uptrend line support (thus far).

Nearest support:  The uptrend line support at $39.76; stop out of longs on any close below $39.76.

Upside target:  TEVA will have some resistance at $41.81, $42.50 and then $43.06.  However, my ultimate upside target (over the next several months will be at least $44.25.

Upside / downside ratio:

To first resistance:  $1.47 to $0.58

To ultimate trade target:  $3.91 to $0.58

These are trading ideas only and are for informational purposes only.  They are not offers to buy or solicitations to sell any security.  Investing in the financial markets involves risk of loss.  Do not invest any money in any financial product or security without understanding the costs and risks associated with the investment.  Information provided is the author’s opinion only and does not constitute any guarantee of performance or future direction of any security or market.  The information provided is believed to be accurate, but the markets are fluid and the data and trade ideas / recommendations are subject to change at any point.  Please consult with your own financial advisor prior to executing any trades based on this or any information provided on this website. T2 Technalytics, Inc., Timothy A. Thielen, George Jarkesy and/or the George Jarkesy Show shall not be held responsible for any losses incurred by anyone investing or trading off of this report.