Taipan Online: Hotline

We started with San Diego-based Vical (VICL:NASDAQ) – a company mentioned right here in the Hotline last week in relation to it working on a new vaccine to combat a growing fear – the deadly avian bird flu. You may have seen news of an outbreak in Turkey and an emergency EU summit to discuss the issue and preparations to deal with it if it spreads across the region. As I mentioned last weekend, “We think it could grab some upward momentum from the avian bird flu epidemic,” as it’s one company currently working on a vaccine under a grant from the National
Institutes of Health.

Anyway, Vical was Erin Beale’s Taipan play from back on June 29, 2004, with an official entry price of US$5.75 and the stock took off on Tuesday on news that the company’s experimental HIV vaccine has entered the Phase II trial stage.

As Erin says: “Vical’s foremost research is on the Ebola virus, the potentially fatal disease native to Africa’s Congo River. Found sporadically in humans and primates like monkeys, gorillas and chimpanzees, Ebola is widely feared to become the next bio-terror agent. The virus can spread quickly among families via direct contact with secretions, and no standard treatment or vaccine exists.

“But Vical’s DNA delivery technology could also come into high demand
as NIH begins trials with a naked DNA flu vaccine which will use
converted core antigens along with envelope antigens.

“Since it focuses on DNA delivery technologies to prevent and cure
serious infectious diseases in both children and adults, it’s well on its
way to making a name for itself among the big pharma players.”

But as you know by now, gains is gains! And Tuesday’s big spike was too good for Erin to pass up and recommended cashing out on half your position at around US$6.72 – a 17% climb from the entry price – and holding the rest for potentially bigger gains.

It was a great call, as the stock sank some 20% on Wednesday.

* * * * * * * * * *

Own this super-safe India stock for only US$11.82 and watch it triple by June 2006…

You could own the next Berkshire Hathaway for less than US$12. This Indian company just bought one of the world’s best undersea cable lines at a US$2.87 billion discount.

It’s the primary Internet provider for India, with a 60% share of its home market – and with 33 million Internet users taking advantage of services, it’s only a matter of time before this company launches. Its 2003-2004 combined revenues were US$14.25 billion and still accumulating!

Click this link for the full India Report – and get rich off of the safest investment in the world!

http://www.agora-inc.com/reports/TRV/WTRVFA18/

* * * * * * * * * *

HEDGING FOR MORE HOUSING GAINS

Elsewhere, we managed to scoop some more gains from the ongoing “House Hedge” series.

Specifically, this involved the December 600 Calls (GHE LT) and the
March 540 Puts (HGX OH) – our two latest positions recommended to you right here in the Hotline just two weeks ago.

Let me refresh your memory on the plays:

“HEDGE: Buy the HGX December 600 Calls at or under US$6.” Our
official entry price was US$5.70 around the open on Monday, October 3.

“MAIN PLAY: Buy the HGX March 540 Puts at or under US$40.” Our
official entry price was US$34.40 around the open on Monday, October 3.

So here’s what “House Hedge” creator Bryan Bottarelli decided to do. For conservative investors, we advised you cash out on both plays. At the time, the December 600 Calls traded for US$1.10. Yes, that’s down from our entry price, but Bryan stresses that this is a cheaper, short-term “hedge” play that provides an insurance policy against our long-term hypothesis that the US housing market is set for a long-term downturn.

And as far as that goes, the gains on the March 540 Puts provided more than enough comfort. As the time of the alert, the last trade on those options was US$63.60 – an 85% gain on the position.

However, if you’re OK with a little more risk or are the adventurous type, Bryan advised selling just half your position and letting the rest ride, his theory being that you could ultimately make 100% gains from the basket of December Calls and March Puts. Accordingly, adjust your trailing stop on the HGX March Puts up to US$50.00.

Bryan is also working on a fresh series of HGX plays for later this month. Naturally, I'll bring those to you as soon as they're ready.

PDC ON HOLD

This just in from my Taipan colleague Ian Cooper:

“I just received this e-mail today regarding our position in Pioneer Drilling Company (PDC:AMEX), and thought I should answer it in case others had the same question.

“PDC is going down. Are you recommending we sell it?”

“In a word: ‘No.’ This was my recommendation in the current Taipan issue and we’re continuing to hold the underlying stock and the December 17.50 calls for the long haul.

“Banc of America just initiated a “Neutral” rating on the stock on October 10 and we’re still bullish given recent oversold conditions and a doji formation that may foretell the end of the recent downtrend.

“A PEG of only 0.23 as compared to the industry average of 0.55 also means PDC is grossly undervalued. We also remain confident that PDC is a prime takeover target. So continue holding for now.”

A REAL NICE CHUNK OF CHANGE

We move now to RealNetworks (RNWK:NASDAQ) - my pick from the March Taipan issue. Did you see its performance on Tuesday? Remarkable.

Having closed Monday at US$5.74, the stock enjoyed an amazing spike all the way up to a 52-week high of US$8.50 on the back of an announcement that Microsoft will pay the company US$761 million to settle an antitrust lawsuit. Trading in RNWK stock was actually halted for about two hours at 11 A.M. in anticipation of the news.

At Tuesday’s closing bell, it hit US$7.70 – up around 34.1% for the day. At the close on Friday, the stock was still holding steady around that level, finishing up 21 cents (2.8%) to US$7.62 – and handing you a 21.7% gain if you’re still holding shares.

It’s certainly been a long and arduous trek for RNWK since I got into the position at US$6.26 back on February 28. The stock slumped right down to the 20% stop-loss level around US$5, prompting me to issue an update saying I was giving it a bit more leeway down to US$4.80. It came perilously close! Since then it’s fought its way back, so I’m glad we held on.

Looking forward, the deal paves the way for new business ventures between RealNetworks and Microsoft, with RealNetworks gaining access to Microsoft products that will help it enhance its Real Player and Rhapsody services. In addition, Microsoft has pledged to promote RealNetworks’ products on its MSN website.

Stay tuned to the e-Dispatch and the Taipan email alerts for more news on this and any of our other positions. But for now, enjoy your newfound gains with RNWK.

If you have a moment and managed to turn a profit from RNWK or any of the plays mentioned above, we’d be grateful if you’d drop us a line here and let us know: taipan@taipangroup.com

Bon weekend!

Martin Denholm

Executive Editor, Taipan

MMM

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Viva Vical... Hedging For More Housing Gains... A Real Nice Chunk of Change for RNWK - and Taipaners...

Viva Vical...
Hedging For More Housing Gains...
A Real Nice Chunk of Change for RNWK - and Taipaners...