Thursday, June 19, 2008

Value revealed, and another deal

Even though we're heading into the summer doldrums on Wall Street, it's a good time to scout for values. One such example is Finisar (common 5.5% of portfolio, calls 1.1%), which I've owned in various amounts over the past few years. Their fiscal year ends April 30th, so they recently entered fiscal year 2009 (FY 2009). Based on analysts' estimates, this puts their projected P/E ratio at:

FY 2009: 10.6
FY 2010: 7.8

So while there is uncertainty regarding continued momentum in the optical sector, any slowdown seems to have already been priced into the stock. And since they recently projected improved profitability in the coming quarters, this seems like an undervalued stock. It may take a while for long term investors to see it, though, especially when considering the confusion the Finisar/Optium merger may produce with regard to the combined valuation.

In other news, Alnylam (common 3.9% of portfolio, calls 2.7%) inked yet another deal, this time with Kyowa Hakko for the Asian rights to ALN-RSV01. Their previous deal with Takeda had excluded this compound. They'll get $15M upfront, with the possibility of getting another $78M down the road, plus royalty payments. The stock is not reacting so far this morning, but this deal is yet another incremental positive.