Position in Coal of Africa initiated

Position reinitiated yesterday afternoon in Coal of Africa (CZA) on anticipation of UK full market listing in Q2 and a fall back in the share price from the previous sell level of 142p.  Revenue is expected to rise dramatically as production ramps up to 15 million tonnes of coal. Prices remain firm for coking and thermal coal on rising Asian demand.

Portfolio review of the week March 20th 2010

After 8 days of gains in the U.S. and a strong move upwards in the U.K., it was not surprising that the S&P 500 finally moved down. I remain cautious on the market at this level and am using the strength as an opportunity to sell down some positions. My ISA is now 60% in cash, after unit trust purchases bought in November has shown near 20% gains.

GW pharma (GWP) - An exceptional week for GWP as the company announced that all aspects of safety, quality and efficacy had been resolved for the UK/Spanish licence applications for multiple sclerosis drug, Sativex. The stock moved up from around 100p to finish the week at 121p. Though tempting to take profits, there is significant news flow yet to come from the company. A milestone payment from Bayer Schering of £10 million will be triggered on the UK licence approval in May. A further milestone payment of £2.5 million will be due from Almirall (GW's European partner) on Spanish approval, due Q3 (£8 million was paid in 2009). Results from the clinical study in cancer pain have been confirmed for Spring 2010. It is likely that global distribution deals for Asia and Latam will be announced at the interims in May.

The regulatory announcement this week is a ground breaking event for GW pharma. Sativex approval in Europe is  now assured. Given the company was founded in 1998 to develop Sativex, the end of a 12 year road is now in sight. Although reimbursement issues are yet to be resolved, the strength of the commercialisation partners (Bayer Schering and Almirall), will no doubt ensure that any issues are resolved.

Falkland Island Oil drillers (Desire Petroleum DES, Falkland Oil and Gas FOGL, Borders and Southern BOR) - After double digit increases in the Falkland Island oil explorers on Monday, the shares fell away during the rest of the week. News from Desire Petroleum's Liz field where the Ocean Guardian rig is drilling is expected any day. Most of my positions are held in controlled risk CFDs (contracts for difference) which limits downside on any bad news. Positive news from Liz, will drive these shares, particularly Desire petroleum, up at least 30% and possibly a lot more. Though risky, the risk/reward is enticing with the downside protected.

ITV (ITV) - ITV continued to tread water and finished the week at 54p. The only news was the size of Adam Crozier's pay and performance package which is geared to a recovery in the share price.

ARM Holdings (ARM) - A short was initiated this week and this finished on a small profit for the week. It was encouraging that despite large gains in the semiconductor stocks during the week, ARM did not participate in this rally. The rationale for the short in ARM and SSL were explained on a post during the week.

SSL International (SSL) -  A short initiated at 780p was down a couple of percent, with the stock closing at 792p yesterday.

Ithaca Energy (IAE) -  The North sea focused oil explorer moved up from 108p on Monday to finish the week at 134.5p, a gain of 24%. A position initiated on Tuesday was unfortunately closed too early at 124p and illustrates the caution needed when selling stocks into a positive momentum move especially when the stock is dual listed. Moves on the Canadian TSX, where commodity stocks powered up this week, drove the share price appreciation on this side of the Atlantic.

Micron Technology (MU) - Position closed at $10.14. The stock finished at $9.90 last night. Micron has rebounded strongly from around $8 in the last month and therefore an opportunity was taken to sell off on the rise.

Intel (INTC) -  An overnight position was taken on Intel which generated a 3% gain. No longer holding.

Markets finally slip after 8 days of gains

After 8 days of gains in U.S. stocks, they closed lower on Friday, with worries about the state of the Greek bail out returning and a retreat in the energy and commodity sectors. The Dow Jones Industrial Average, closed down 37 at 10,742, but was up 1.1% on the week and registered its 3rd weekly gain. The FTSE 100 initially move up to 5,685, levels not seen since 2008 in afternoon dealings, but the index closed at 5,650, up only 8 as the U.S. market moved into reverse.

After an an upbeat trading update from Lloyds Banking Group (LLOY) that the company will be profitable on a combined businesses basis in 2010, its shares moved up 8% to just over 60p. The company is 41% owned by the U.K. tax payer and the price is fast approaching the 74p the government paid to bail out the bank. Royal Bank of Scotland gained nearly 6% to 44.45p (close to the 50p government investment price), and Barclays rose almost 2% to 359.6p.There are rumours that Alistair Darling, the Chancellor, will announce that the Treasury will start selling these bank assets perhaps as soon as the Budget next week.

What next for Sativex cannabis spray?

Following today's RNS and WebCast relating to GW Pharma's cannabis spray, Sativex, the following steps are anticipated. The drug has now reached day 150 of the decentralised regulatory process (DCP) without any major issues, the only outstanding minor point is the Patient Leaflet:

1. Completion of regulatory documentation for decentralised application (patient information leaflet) with UK as RMS (Reference Member State) and Spain as CMS (Concerned Member State) - April 2010?

2. Closure of decentralised phase April-May 2010?

3. Grant of national licences in UK and Spain (following agreement on local labelling and packaging)- 30 days is standard approval - June 2010
4. Launch in UK - June 2010 (Q2 - company state high confidence of Q2 launch)
5. Start of Spanish reimbursement discussions - June 2010
6. Launch in Spain - September 2010 ( 3 months consultation on pricing)

7. Start of mutual recognition process in other European markets with UK as Reference Member state - July 2010?

8. Grant of mutual recognition in other major European markets (6 month approval normal) - Q1 2011 (possibly end 2010)

In parallel reimbursement discussions will be going on. The company will have submitted a price to the UK's Department of Health and unless there have been significant disagreement, Sativex will be reimbursable on the NHS from product launch. NICE (the National Institure of Clinical Excellence) may assess the drug later and boost uptake with the PCT's (Primary Care Trusts) in England and Wales, since budget holders will have guidance on usage.  In the meantime prescribers may use the drug as they wish and it will be paid by the NHS. In Scotland, the SMC (Scottish Medicines Consortium) needs to pre-approve drugs before launch, but the company should have this well in hand. In Spain, GW's partner Almirall will in discussions with the Spanish Ministry of Health after licence approval, and this is usually a 3 month process. U.K. approval will bring in £10 m from Bayer Schering , and in Spain Almirall will pay £2.5 m on pricing and regulatory approval.

Questions and answers from today's WebCast:

Q. What indication has been approved?

A. Symptomatic improvement  in symptoms of MS who have failed on other anti spasticity medications. 

Q. What territories are planned for Mutual Recognition?

A. GW and Almirall are putting together a list. Major commercial markets included. NICE preparation in hands of Bayer Schering, Market access team who have significant expertise.

Q. Any plans to expand label?

A. No, comfortable with indication.

Q. Is cancer pain trial on track for Spring. 

A. Yes

Q. What are launch logistics?

A. Sufficient launch stock. Manufacturing licence issued in 2009. Launch batches delivered into distribution chain on approval announcement.

Q. Is there capacity to cater for global demand?

A. Yes, capacity will be ramped up using 3rd parties.

Q. What are licensing plans outside Canada, UK, Europe and U.S..

A. Ambition to use the European approval as basis for filing in other parts of world. Distribution partners being discussed e.g. Australia,  Latin America, Africa.Update on rest of world at Interims in May.

Q. What is situation on Spain pricing?

A. Spanish Ministry of Health and Almirall will be in negotiations. Expect 3 months, maybe more.

Q. When are milestone payments due?

A. Milestone payments on reg. and pricing approval in Spain. Licence approval UK

Q. When is Canadian spasticity indication due?

A. Canadian reg. submission for spasticity filed end 2009. H2 2010 outcome. 

Q. Have you considered issue of pricing differentials in different countires?

A. Partners make decision on price. UK will be public domain once Almirall start price discussions. 

Faith in GW Pharma's Sativex drug pays off!

GW Pharma (GWP) released the following RNS this morning which is outstanding news. They key sentence is "The regulatory process has now reached "Day 150" of the decentralised procedure and both the UK and Spanish regulators have concluded that there are no major quality, safety or efficacy issues remaining to be resolved." This means that the efficacy concerns that stopped the previous decentralised European application has been addressed with the regulatory authorities. The company is now at a documentation phase relating to the PIL (patient information leaflet) and packaging artwork. Fantastic news as this is Contrarian Investor UK's  largest holding! 




UK AND SPANISH REGULATORS CONFIRM NO MAJOR ISSUES OUTSTANDING 
Regulatory Process Now at Advanced Stage. Approvals Expected Q2 2010 
Porton Down, UK, 18 March 2010: GW Pharmaceuticals plc (GWP:AIM) today provides an update on the progress of its regulatory submission for Sativex Oromucosal Spray for the treatment of the symptoms of spasticity due to Multiple Sclerosis. The regulatory submission was filed in the UK and Spain under the European decentralised procedure in May 2009, with the UK acting as the Reference Member State. The regulatory process has now reached "Day 150" of the decentralised procedure 
and both the UK and Spanish regulators have concluded that there are no major quality, safety or efficacy issues remaining to be resolved. Resolution is now required only of points of clarification related to finalisation of wording on the patient information leaflet. We expect this document to be reviewed by the regulators in the coming weeks. Once the regulators have agreed final wording on the patient leaflet, the decentralised procedure can close and the process will enter its final phase. This final phase, known as the national phase, takes place separately in the UK and Spain and its purpose is to finalise local wording on product packaging and related documents. GW therefore expects regulatory approval in the UK and Spain during Q2 2010. Dr Stephen Wright, GW's R&D Director, said, "This is a major milestone in the regulatory process for Sativex, and for GW's future prospects. We look forward to working with the regulators towards a successful completion of this process and to supporting our marketing partners as they prepare for product launch. This progress with Sativex also provides further validation of GW's cannabinoid platform and the significant long term promise of GW's portfolio of cannabinoid medicines." 
Sativex will be marketed in the UK by Bayer Schering Pharma, and in the rest of the European Union by Almirall S.A. Upon UK regulatory approval, GW expects to receive a GBP10m milestone payment from Bayer. A further GBP2.5m milestone payment is payable by Almirall following both regulatory and pricing approval in Spain. Following approval in the UK and Spain, submissions for approval will made in additional European countries during 2010 under the mutual recognition procedure. 

U.K. FTSE 100 finishes at 21 month high

The FTSE 100 finished at 5,645, up 24 points for the day and the highest level for 21 months as commodity stocks went higher on the weak dollar and Goldman Sachs predicted strong demand for raw materials. Ben Bernanke's statement that U.S. interest rates were likely to remain low for some time, has pressurised the dollar and driven commodity prices higher as their price in set in U.S. dollars.

Markets trade at highs and Contrarian Investor UK trims holdings

The DOW Industrials are currently up over 50 points, up for a seventh straight day, and trading at a 17month high. The FTSE 100 is up also up 38 points. Stocks are on the move up again amid optimism over the Federal Reserve sticking with its low interest rate stance for the foreseeable future and as expected, the Bank of England confirming that its Monetary Policy Committee voted unanimously in favour of keeping U.K. interest rates unchanged at its meeting earlier this month. Also, the U.S. Producer Price Index declined 0.6% in February, its largest drop in seven months. Taking out food and energy costs, the index gained 0.1%.  In the U.K., the number of people claiming unemployment benefits fell unexpectedly last month with those claiming Jobseeker's Allowance dropping by 32,300 to 1.59m in February, the biggest monthly fall since 1997 and against forecasts of a rise of 8,000. The jobless rate now stands at 7.8%. However, long-term unemployment, which includes those out of work for over a year, jumped by 61,000 to 687,000.

Finally commodity stocks were on the rise, Goldman Sachs issued a research note forecasting a surge in global demand. 

Against this background of euphoria, the traditional defensives (pharmaceuticals, tobacco and utilities) are being sold off. With over a week of daily rises, the stampede into the markets doesn't seem to be abating. Contrarian Investor U.K. is using this strength to sell more positions with the final tranche of Micron Technology and the Intel position bought yesterday being closed off this afternoon. The market may have more steam in it, but I am happy to hold some cash on the sidelines for now. As well as economic concerns, the Iranian Nuclear saga looks to be coming to a head and there is risk of an escalation of tension in the Middle East if Israel adopts a hard line, perhaps even risking Military action. As oil moves over $80, any such tension in the Middle East will push oil well over $100, which will undoubtedly stifle this muted global economic recovery. Then there are all the sovereign debt problems which are not going anywhere fast. Time to take a contrarian view, and move into a defensive stance for now.

New Intel position on rumours of earnings forecast revision

A long position in Intel Corp (INTC) was initiated yesterday as the company's shares moved up nearly 4% to $22. There has been speculation that Intel is preparing to pre-announce a positive upward revision of earnings for the current quarter and forecast for the remainder of 2010 on the sustained recovery in semiconductor demand. The company's Q1 earnings were scheduled for release on April 13th.

At the Q4 results, the company forecast Q1 revenue's of $9.7 billion, with potential upside of $400 million, with gross margin of 61%, plus or minus two points. Analysts estimate earnings of 37 cents on $9.79 billion in revenue with a top range forecast of 40 cents.

Ithaca Energy position closed after today's 12% rise

After a near 17% rise in two days, the position in Ithaca Energy was closed late this afternoon. A case of day trading but "A profits, not a profit until you've banked it"!

New position in Ithaca Energy initiated on strong production outlook

Ithaca Energy Inc.(IAE) listed on the UK AIM and Canadian TSX markets, is an independent oil & gas company with exploration, development and production assets in the UK sector of the North Sea. On February 19th, the company announced that the Galaxy II heavy duty jack-up rig had spudded and commenced drilling at the Stella appraisal well location in block 30/6. Results from this well should be available by June.

Major additions to reserves were reported at the end of 2009 though additional geological and geophysical study work conducted during the second half of 2009 in the Central North Sea:

i) The evaluation of Stella (Ekofisk) and Harrier discoveries has added significant additional 2P reserves.

ii) Block 29/10b was awarded to Ithaca (now 100% equity interest) in the 25th UKCS Licensing Round. The block contains the Hurricane discovery which has been attributed Probable reserves.

iii) 2P Gross reserves for Stella (Andrew) have not changed pending the appraisal well result. Combined 2P reserves for the GSA now amount to 25.52 mmboe representing ~70% of the total 2P reserves for the Company. 

Other reserve changes have been made throughout the portfolio and are summarised below:

i) In March 2009 the Company announced the successful drilling of the Carna prospect and Proved reserves for this discovery have been ascribed to Ithaca.

ii) The Jacky field was brought on line in April 2009 and has performed well above expectation. Previous assessed Proved reserves (December 31 2008 adjusted for Dyas transaction) for Jacky before first production were 0.68 mmboe net. Ithaca net production for 2009 was 0.97 mmboe; the latest assessment confirms 1.37 mmboe of remaining Proved reserves net to Ithaca.

iii) Ithaca acquired the Beatrice field in November 2008 and has achieved steady daily production increases over the last 12 months. Further work designed to access additional reserves is planned for 2010 and this has been taken into account by Sproule. Previous assessed Proved reserves (December 31 2008 adjusted for Dyas transaction) for Beatrice were 0.84 mmboe net. 

iv) production for 2009 was 0.33 mmboe; the latest assessment confirms 1.65 mmboe of remaining Proved reserves net to Ithaca.

Wellington West Capital Markets, has said that Ithaca can be expected to generate $100-million in cash flow during 2010 from the North sea and is capable of increasing net production to 16,000 barrels of oil a day by 2013 from 4,700 barrels this year. The company has the benefit of an experienced management team who have considerable expertise in the North sea, and a strong balance sheet being debt free.

Ithaca is currently trading at 116-120p up 7% for the day, with a 52 week range of 24p-117p. Brokers are expecting pre-tax profits of £28 million this year, putting the company on a p/e of 8 for 2010. Position initiated at 114p on Monday.

Lehman Brothers & Dick Fuld - just too much greed

A couple of months ago, I read the book, Larry McDonald's "a colossal failure of common sense", which told the story of the last days of the Wall Street investment bank, Lehman Brothers. It was an enlightening insight about the greed in the board room of this financial institution and particularly the antics of Chief Executive, Dick Fuld who presided over the collapse of the 158 year old firm in September 2008 as the house of cards created by the real estate boom came to a grinding halt. In 2007, Fuld received $22m in remuneration, as the performance of the company was flattered by the growth in CDO's (collateralised debt obligations), the parcelling of debt used to reduce the risk of mortgage defaults which went badly wrong in 2008.

This weekend my interest was peeked by stories in the press about he court-appointed examiner's findings who was mandated to examine the background and causes of Lehman's failure. Anton Valukas, concluded in his 2200 page report that there were grounds for "colorable claims" against Fuld, the bank's auditor Ernst & Young and three successive chief financial officers - Chris O'Meara, Erin Callan and Ian Lowitt - for presenting a misleading picture of Lehman's finances in its accounts. A series of temporary asset sales, using an off balance sheet trick called "repo 105" were used to artificially boost Lehman's balance sheet. By the fourth quarter of 2007, it had placed $38.6 bn of assets through repo 105, in q1 2008 $49.1 bn and over $50 bn by the second quarter of 2008. According to Valukas, Fuld, O'meara, Callan and Lowitt certified misleading financial statements.

Whether Fuld and his other cronies will ever be held accountable for his ploys is uncertain but the whole sorry story highlights the unadulterated greed of many senior Wall Street bankers prior to the financial meltdown in late 2008 and early 2009. Profit growth was the priority, without any concept of risk containment and ultimately tax payers have had to step in and save the day. If the Federal Reserve had not stepped in to pump billions into the system through TARP (toxic asset relief programme) and a series of bail outs (e.g. AIG), the whole financial system may have collapsed in early 2009, with unimaginable consequences. Will the world learn from these lessons? I guess, capitalism has its pros and cons but "light touch" regulation seems to have been pressure tested and ultimately failed. That is not to say that instruments such as derivatives or short selling should be banned, but a degree of control is needed to ensure that the financial institutions of the world are not left to their own devices because next time the outcome may be very different and very destructive.

Falkland Oil drillers in demand today on rumour mill

Desire Petroleum (DES) up 11.5% , Rockhopper (RKH) up 10.7% this morning with consistent buying and in the case of DES 4 million traded already. Could be rumours from Ocean Guardian rig or just the usual volatility of these shares. We will find out in the next week or so!

The Independent Small Talk has a small mention today:

Desire primed for Falklands oil announcement

It could all kick off in the Falkland Islands at the end of this week.

No, we're not talking about another military scrap over the islands' sovereignty, as in 1982, but according to sources, Thursday or Friday is the first time that the Aim-listed Desire Petroleum could announce that it has found oil in the territorial seas to the north of the Falklands.

The group's exploratory drilling has caused one huge diplomatic spat between Argentina, which claims ownership of the islands, and the UK. Desire has been unusually quiet about the drilling programme, largely because it wants to keep its head below the parapet. However, if the drilling has gone as well as the company dared to believe, we should all learn about it soon. Analysts expect that, realistically, it could take another couple of weeks for the group to tell the market how it has got on.

Desire is drilling in an area that other giants such as Shell tried to find oil in more than a decade ago and left empty-handed, and analysts put the group's chances of success at no more than about 20 per cent.

Earlier this month, the US Secretary of State, Hillary Clinton, called on the UK to open discussions with Argentina on the possibility of any future drilling.

Source: http://www.independent.co.uk/news/business/sharewatch/small-talk-lse-looks-to-tackle-problem-of-aim-investor-relations-1921542.html

Shorts initiated on ARM holdings and SSL International

Shorts placed this morning on ARM Holdings (ARM) at £2.25 and SSL International (SSL) at £7.75.

FIVE U.K. STOCKS WITH POTENTIAL FOR SHORTING

Contrarian Investor UK have been looking for stocks on the U.K. market which look overvalued and are candidates for a shorting strategy and here is my top 5 watch list. The FTSE All share is now up nearly 10% in the last month and 53% for the last 12 months and has tracked the move upwards on the U.S. Dow and S&P 500 (the S&P is up 10.5% in the last month). The strength in the overall market and generally bullish tone makes picking some overbought shares a tempting proposition as I feel that there is scope for a set back, albeit minor, in the next few weeks. Contrarian Investor UK uses Contracts for Difference (CFDs) through Igmarkets to enable stocks to be shorted i.e. with a hope that the price of a stock will go down in the future. However, spread betting using platforms such as IG index is also another easy potential online platform which allows buying as well as selling of individual shares and indices.

1. SSL International (SSL)
At £7.75 (52 week range £4.26- £7.89), health and personal care company, SSL trades on a price/earnings of 24 (based on earnings to year end March 2010) and a forward p/e for 2011 of 19 (based on earning of 40p per share in 2011). Garry Watts, its chief executive, has set a goal of increasing its earnings per share by 50pc over the three years to March 2012.

SSL's share price has been premium priced for years because of persistent rumours that Reckitt Benckiser will acquire the company to get its hands on its Durex and Scholl brands. But Reckitt's CEO Bart Becht is known for his prudence when its comes to acquisitions. Although Reckitt's paid a full price for both the Boots Healthcare International and Adams Therapeutics businesses, a takover of SSL for £9-10 would be difficult to justify given 1)it is unlikely that RB could accelerate the growth of SSL power brands too much faster given SSL has done a good job in delivering strong growth over the last 5 years 2) there is a portfolio of second line brands which were acquired during the 1990's particularly in Over the Counter (OTC) medicines which add significant complexity to the business and limited earnings e.g. Meltus, Cuprofen. Though these could be sold on, why pay a premium price for these brands? 3) SSL's organisation is relatively lean and therefore unlike the Boots acquisition, cost saving measures would not come as easily.

SSL has been busy beefing up its East European presence and now has strong growth prospects in Russia and other markets. It increased its presence in the Russian condom market by raising its stake in its BLBV joint venture in February. The company now generates about 85pc of its revenues from outside the UK. However, there are still significant risks in these markets as economic growth is still muted. The share price does not have the benefit of a good dividend, currently SSL yields 1.3%.

Although SSL's management has been doing a lot of the rights things over the last 5 years e.g. focusing growth on brands like Durex, emerging markets expansion, the high expectations for earnings growth in 2011 and 2011 and takeover rumours which justify the premium rating can easily fall apart if there is a glitch in any of its key markets. Investor's Chronicle featured SSL as a sell this week, and I agree with their assessment.

2. Reckitt Benckiser Group (RB.)
I have covered my reservations about healthcare and household company, Reckitt on a previous Contrarian Investor UK article published on Sunday 14th February (http://contrarianinvestoruk.blogspot.com/2010/02/reckitt-benckiser-certainly-not-good.html). At £35.11 (52 week range £24.96-35.45), the p/e is relatively undemanding at 18 and has a 2.9% dividend yield but my key concern remains the earnings impact of a generic competitor to opoid abuse drug, Subuxone in the U.S.. Suboxone accounts for 18% of group operating profits and around 10 percent of group profits. In the U.S. the drug accounts for half of the pharmaceutical divisions earnings and the North American operation represents two-thirds of total pharma sales.

3. ARM Holdings (ARM)
Chip designer, ARM (ARM or NASDAQ ARMH) currently trades at £2.27 (52 week range £0.98-2.32), rising from £1.95 over the last month alone as rumours have swirled around that Qualcomm (QCOM) is considering a bid. The company trades on a demanding 2010 p/e of 32.7 and 2011 of 27.5 as the company is seen to be geared to the huge growth in smart phone demand. The Cambridge-based firm had at least one of its chips in 90pc of all smartphones sold last year.

But directors have recently been selling the stock. For example, Tudor Brown (Chief Technical Officer and one of the founders) sold over £1 million of stock on March 9th. On March 11, RBS downgraded the stock despite the positive outllook for semiconductor stocks on valuation grounds and the Qualcomm rumours seem unlikely given competition concerns and a negative reaction from mobile manufacturers. Despite the positive fundamentals of the business, the share price seems to have gone a little over board and ARM therefore represents a good short at anything close to £2.30.

4. Rightmove 
Online estate agency, Rightmove (RMV) has had a tremendous share price move, rising from a low of £2.25 in March 2009 to its current £6.58, a rise of nearly 300% and not far from its 52 week high of £6.77. A renewed positive sentiment in the U.K. housing market has helped lift the shares and driven revenues back up as properties come onto the market for sale and hence Estate agents to use Rightmove as an advertising vehicle. It trades on a forward p/e of 19.7 and yields about 2%. Underlying operating profit for the 12 months to 31 December rose 2% to £41.9m on revenue down 6% to £69.4m. Pre-tax profit fell 1% to £37.8m from £38.2m.
Revenues for the second half of 2009 were 7% higher than in the first half and, by the end of 2009, monthly revenues had moved back toward their pre-crash peak. Costs were slashed by 17% to £27.5m as the company cut 16% of its admin staff during 2009. Broker Numis has upgraded full-year 2010 profit estimate to £52m from £50m and 2011 forecasts rise to £60m from £55m. Giving a 2011 forward p/e of around 16.

Of course these earnings estimates are dependent on a continued turn around in the U.K. housing market.The number of first-time buyers who expect to enter the housing market in 2010 has declined, which is concerning. The company's Q1 2010 Consumer Confidence Survey, which measures the public's property market views, revealed that the number of projected first-time buyers for the 12 months ahead has dropped for the third consecutive quarter. Only 26% of those who expect to buy in the next 12 months will be first-time buyers, a drop from 28% in Q4 2009 and 31% in Q3 2009. 

5. Astra Zeneca (AZN)
I have written about my negative stance on Astra Zeneca back in January (http://contrarianinvestoruk.blogspot.com/2010/01/astra-zeneca-azn-cheap-or-not.html) and my thoughts have not turned for the better after the failure of Recentin (cediranib) to reach its primary end point in the Horizon III clinical trial. Eight patents on drugs that represent 60 percent of Astra Zeneca's current sales are due to expire by 2016 and drugs like Recentin are desperately needed to fill the whole left by major patent losses on drugs such as Crestor and Pulmicort. Altough Astra trades on a forward p/e of only 7 and has a 5% dividend yield, patent expiries make earnings in 2011 and beyond hazy and the company has said as much. Heavyweight cost cutting is being done to try and stem the tide but success in the laboratory is needed and unfortunately Astra has been plagued by clinical trial failures on promising new molecules over the last 10 years. If AZN moves much beyond £30 (currently £29.22), this represents a good short opportunity and a move back towards its highs of £31 would make it an excellent shorting trade.

Portfolio review of the week March 13th 2010

GW Pharma (GWP) - Very quiet week for GW Pharma on very low trading volumes and share price holding at around £1.00. Continuing to hold sizeable position.


Falkland Islands Oil drillers (Desire Petroleum DES, Falkland Oil and Gas FOGL, Borders and Southern BOR) - The prices of the Falkland Oil explorers continued to drop this week on lack of news causing investor apathy, speculators moving their money elsewhere or  shorters in action. The investment thesis for these shares has not changed since the spudding of the first well in February. Actual results from Desire's drilling prospect on the Liz field in the North Falklands basin is keenly awaited. It is expected that Desire's Ocean Guardian Rig should have an indication of oil/gas finds in the next 1-2 weeks. These shares are a binary bet on what happens on Liz. Either Desire will go to less than 50p or we will see a move several pounds higher its that simple. CFD's with guaranteed stops have been placed on BOR and FOGL to limit any downside.


ITV (ITV) - Again little movement in ITV this week, closing at 52p on lack of any news.


Prudential (PRU) - Short term long position taken in PRU earlier in the week which was closed yesterday as the price moved over £5.50. Contrarian Investor UK likes the PRU Asian story but the surge in the markets on both sides of the Atlantic over the last couple of weeks makes me nervous and I have reluctantly decided to take profits given the move from £5.00 to £5.53 in little less than a week, after the falls from over £6 precipitated by the huge rights issue to fund the AIA acquisition (AIG's Asian unit).


Micron Technology (MU) - After a move up from around $8 to over $10 over the last 2 weeks or so on continued positive sentiment on memory chip prices and consumption levels, I have taken profits in half my position at $10.17. Micron closed last night at $9.97 and I continue to hold 1000 shares.