Abbott Labs (ABT) recent acquisition of Solvay is a lead indicator for a new wave of acquisitions of Biotech companies by Large Pharmaceutical companies like Pfizer (PFE), Bristol Myers (BMY) and Novartis (NVS) according to Serge Depatie, portfolio manager for NatCan Investments.  One target that Mr. Depatie thinks will make a good acquisition is Orexigen (OREX) which is focused on obesity treatments.

As part of our recent Exclusive 70 page Biotechnology Report we spoke with David A. Katz and Steve Pisarkiewicz of Matrix Asset Advisors. Although they admit to being underweight in health care they have been adding some healthcare companies as of late;

Mr. Katz: On a relative basis, they are now starting to look a lot more attractive. The stocks we like are also businesses that are not going to be as punished by the Obama Administration’s healthcare program, but have been selling as if they were also damaged goods. So our focus has been on growing businesses that are not going to be dam­aged, yet we’re getting them at damaged prices. We’ve mentioned Zimmer earlier; another would be Genzyme (GENZ), which makes life-sav­ing drugs. Typically, ultra orphan products are fairly highly priced, but they save people’s lives. Genzyme’s a company that’s had some company-specific problems and manufac­turing problems and FDA issues, which has left it at about 14 times earnings, when normally it would sell north of 20 times earnings. We are confident that management has been beaten down so much that they are starting to do a better job. They will either produce, or market forces will move them to bring in a new management team. The price is simply too compelling. As we mentioned earlier, we’ve gone from significantly underweighted in healthcare to now underweighted, and our expectation is we will build some positions if the stocks remain at the current prices over the next few months.

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Caterpillar CAT (NYSE) today announced its CEO succession plan for the retirement of current CEO, James W. Owens.  The company has picked an insider, Douglas R. Oberhelman, to succeed Owens.  According to the firm’s press release,

The Board of Directors of Caterpillar Inc. (NYSE: CAT) elected Douglas R. Oberhelman to the offices of Vice Chairman and Chief Executive Officer – Elect, effective January 1, 2010. Oberhelman, 56,

currently serves as Group President of Caterpillar with responsibility for the company’s engine and gas turbine businesses, human services, rail services and remanufacturing divisions

…. Announcing the succession plan at this time allows Oberhelman to concentrate on aligning resources for the future and defining critical success factors for Caterpillar’s leadership going forward. He will serve as Vice Chairman and Chief Executive Officer – Elect until the June 2010 Caterpillar Board of Directors meeting, at which time he will be elected Chief Executive Officer and a member of the Board of Directors, succeeding James W. Owens, 63. Owens will continue to serve as Chairman of the Board and Chief Executive Officer until July 1, 2010. He will remain as Chairman of the Board through October 31, 2010, when he will retire in accordance with the company’s long-standing mandatory retirement policy and be succeeded by Oberhelman at that time…

Expect a relatively smooth transition going forward.  More firms need to take heed and examine what Caterpillar has done on CEO succession.

As part of our Biotechnology Report we spoke with Serge Depatie of Natcan Investment Management Inc.  In the report Mr Depatie reports on the swings of volatility in the global healthcare market. He also gives his view on investment trends in the industry;

Mr. Depatie: An important trend we’re seeing is the, I would say, rejuvenation of biotech drugs in antibody classes. Monoclonal antibodies had a big market expansion in the mid to later 1970s to 1980s, and these drugs are being reformatted in a less toxic and more efficient manner. We’re going to see a new wave of these biotech drugs, which should help the larger players to start off with and also to some extent the small biotechs. The leading player is Amgen (AMGN) there and it acts as a flagship to the industry. They have a new drug called denosumab for pre­vention of bone cancer, which represents potentially over a $5 billion market, which would basically reinvigorate the company and send it on a growth path again. If this drug works, and all in­dications are good and as the expectations become high and the stock appreciates well, it should pull all boats in the sector, in that other companies will also do well. We definitely have increased our activity in the biotech sector in the last year.

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Immersion Corporation IMMR (NASDAQ) which develops hardware and software for simulating tactile experiences — such as the feel of an object or the jolt of an explosion during a video game — in order to enhance on-screen events saw its CEO, Clent Richardson, leave today.  The company has been at risk of being delisted from NASDAQ.  Just the other day NASDAQ,

granted an exception to Rule 5250(c)(1) of its listing standards to enable Immersion’s Common Stock to remain listed on NASDAQ while it completes its internal investigation and restatement of its historical financial statements.

Immersion has appointed former CEO, Victor Vegas as the interim CEO.

Keep an eye on the moves Viegas takes and who the board settles on to take the CEO position.  There may be more here than meets the eye.

Steve Rattner, the former car czar in the Obama administration who was directly responsible for forcing Rick Wagoner out as GM’s CEO, has written a piece in Fortune that is getting a great deal of coverage.  In a word Rattner, who was not car industry specialist, depicts GM’s management and Rick Wagoner as follows:

In my relatively few interactions with chairman and CEO Rick Wagoner, I found him to be likable, dedicated, and generally knowledgeable. But Rick set a tone of “friendly arrogance” that seemed to permeate the organization.

Certainly Rick and his team seemed to believe that virtually all of their problems could be laid at the feet of some combination of the financial crisis, oil prices, the yen-dollar exchange rate, and the UAW.

It seemed completely obvious to us that any management team that had burned through $21 billion of cash in a year and another $13 billion in the first quarter of 2009 could not be allowed to continue. Equally important, GM’s February viability plan was more “business as usual” and not the aggressive new approach that we felt was essential.

There is nothing all that surprising in the story but rather it was just depressing.  Let’s hope GM and other firms with similar problems can use the article as a means for making some real changes to make their respective companies and management more competitive.

We recently spoke with Neil Wickham President of Wickham Investment Counsel, Inc. Mr. Wickham identifies Canadian stocks that have growth and value potential and have significant reasons for being in the marketplace. He likes to be able to hold a stock for two years or more. He has always used free cash flow return on enterprise as a key measure of value but he also uses a number of other metrics like debt/equity ratios, debt coverage, average growth over a five-year period, average growth expected etc. When asked about opportunities in the market over the last six months he had this to say;

Mr. Wickham: Mainly we bought more bank stocks where we felt we needed them and we bought some utility stocks as I mentioned. Enbridge (ENB) is one of the stocks, TransAlta (TAC), those kinds of stocks. Enbridge is a pipeline company. We’ve bought some TransCanada (TRP) it’s a pipeline as well. TransAlta is essentially an electricity generating company. Those are the basic kinds of utilities. Our old friend Bell Telephone, its name is BCE Inc. (BCE), which in my view has been a dog for the last 30 years, has finally come around and it looks pretty good now. It’s a telephone company and it’s finally doing some things that are more modern and operating in a smarter way. They used to be one of the least progressive operators out there but they have changed an awful lot. Now it’s a reasonably attractive buy where most of my life I wouldn’t have bought it. It’s a change.

Are we beginning to see some change in the top management environment?  Throughout the current recession we have seen most public companies stay with their top management even as their firms continued to show weak results.  Just lately, we have begun to see some companies that have fared poorly lately experience changes at the top.  In my previous post, I examined the change at Nokia after poor performance.  Now we have the announcement that Eric Claus the CEO of the Great Atlantic and Pacific Tea Company (known as A&P) GAP (NYSE) will be leaving his position immediately.  Claus’ departure comes as the company’s performance continues to slide.  While the change might not be considered a huge surprise it comes without a real successor ready to take Claus’ position.  In the interim, A&P will be run  by Executive Chairman and former CEO, Christian W.E. Haub.    According to a story in the Wall Street Journal byKelly Nolan and Veronica Dagher,

Haub is also partner and co-CEO of Tengelmann Warenhandelsgesellschaft KG, A&P’s largest shareholder.

We may start to see more and more changes at the top of companies that fail to perform up to expectations.

For more:

Bloomberg

Marketwatch

APP.com

As part of our Online And Direct To Consumer Retailing Report we spoke with Hamed Khorsand Analyst BWS Financial Inc. where he talked about E-commerce Investment Themes and his decision to downgrade Amazon to a sell;

Mr. Khorsand: From a business perspective, they (Amazon:AMZN) are doing everything right, and they’ve always done everything right. They have the best brand, they’ve always maintained the best pric­ing and the customer is always happy. Our “sell” rating has nothing to do with what management is doing, our “sell” rating has to do with what the market is doing, and the market is putting the astro­nomical valuation on the stock. And the fundamentals are starting to deteriorate compared to what expectations are

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Jim Kim of Fierce Finance provided a brief update on Bank of America’s search for a CEO to replace outgoing CEO Ken Lewis.  Kim examines the latest news that Robert Diamond, Barclay’s CEO, took his name out of the running.  He also reviewed the two internal candidates supposedly under consideration, Brian Moynihan and Greg Curl, two candidates I have already written about earlier and who I think should not be selected.  Apparently according to Kim the buy-side community favors the appointment of an outside candidate.  The article also provides a link to a video of CNBC commentator Charlie Gasparino discussing BofA’s search.