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HAPPY NEW YEAR READERS,
Since the last Newsletter, we closed another position for a gain.
ARQULE (12/5/08). Closed position 12/19/08 at $4.63 for a 52% GAIN.
We hated closing ArQule at only a 52% gain because, in a better market, it probably would have done much better. The stock got a nice lift on news of a licensing pact with Daiichi Sankyo who paid the company a $60 million cash upfront licensing payment.
We wish to be more enthusiastic as 2009 starts, but the realities dictate restraint. A lot of gurus have said we have seen the bottoms, based upon past charting histories. Trouble is they all seem to have overlooked some starking contrasts. In other troubled times we had a housing industry, a car industry, and a banking system. Right now, these barely exist. So be wary of the bulls, for at least the next several months. Yes, the market may get that “Obama Bounce”, but it very well may be short-lived. The one thing that could really start a new bull market at this point is massive tax cuts, but we haven’t heard anything come out of Washington, yet.
Here are the headlines since the last Newsletter about companies in our Current Portfolio, which has been slammed to smithereens over the last year. Dates in parentheses are when we first recommend them. Also, starting with this Newsletter we will no longer give updates about companies that are on the “Endangered List” unless we feel the news is significant.
AXT (AXTI) (12/20/08). To present at the Needham Growth Stock Conference on January 6.
Orbcomm (ORBC) (12/5/08). Will also present at the Needham confab on January 6.
Akeena Solar (AKNS) (10/20/08). Lowers 2008 revenue growth guidance to 25% – 30% from previous 30% – 40%. Still sounds okay to us, especially with Obama’s planned green initiatives.
Planar Systems (PLNR) (9/20/08). Announces Clarity Margay II for European marketplace.
Endeavour Silver (EXK) (9/5/08). Closes CA$3 million in two private placements.
Insure.com (NSUR) (9/5/08). Unveils the most and least expensive popular cars to insure in 2009.
Applied Energetics (AERG) (7/5/08). Announces the full-value conversion of $7.4 million of long-term auction-rate securities to cash.
Neurobiological Technologies (NTII) (7/5/08). Stops enrollment in stroke drug trial after announcing Viprinex does not pass interim futility analysis. This is making us nervous, but let’s see what the next balance sheet looks like.
Energy Focus (EFOI) (6/5/08). Provides energy saving EFO LED lighting solutions for shipboard use. Chosen for DARPA SBIR to develop berth lighting system that addresses sailors’ sleep schedules.
Bridgeline Software (BLSW) (6/5/08). Although annual FY2008 revenues grow 91% and customer base grows 82%, losses are miserable due to a one-time cash related impairment charge of $9.8 million; cash position on balance sheet weakens.
GlobalScape (GSB) (5/20/08). Releases Mail Express plug-in for Microsoft Outlook.
Kopin (KOPN) (4/20/08). To present at the Needham Growth Stock confab on January 7.
BioLase Technology (BLTI) (4/5/08). No, we don’t know why the stock has tanked even further. Announces first nationally televised laser root canal procedure to be broadcast January 8. To present at the Needham conference on January 7.
ActivIdentity (ACTI) (3/5/08). Soleil and Stanford Research give the stock a “buy” rating.
Catalyst Pharmaceutical (CPRX) (12/20/07). Merriman Curhan Ford gives the stock a “buy” rating.
Santarus (SNTS) (11/20/07). Coverage initiated by Piper Jaffray. Announces strategic collaboration with Cosmo for U.S. rights to Budesonide MMX and Rifamysin SV MMX.
Nucryst Pharmaceuticals (NCST) (10/5/07). Calls a special shareholder meeting for February 12.
SIGA Technologies (SIGA) (8/20/07). Completes manufacture of ST-246 registration batches.
A.P. Pharma (APPA) (8/5/07). Revises target date for APF530 NDA to the end of this February.
Xenonics (XNN) (6/5/07). FY2008 revenue doubles to $10.2 million with major paring in the loss column; balance sheet looks so-so.
Oncolytics Biotech (ONCY) (6/5/07). Names new COO. Completes patient enrollment in two U.K. REOLYSIN combination therapy clinical trials.
VocalTec (VOCL) (4/20/07). Sells 4 of its 11 patents for $7 million which should help its balance sheet. This is on the “Endangered List”.
Hydrogenics (HYGS) (9/20/06). Delivers electrolyzers to Hychico for hydrogen generation from renewable resources in Patagonia, Argentina.
8×8 (EGHT) (1/20/06). Company’s Virtual Office business phone service now part of the Intel business exchange certified solutions showcase.
Westell Technologies (WSTL) (10/20/05). Cengage Learning selects ConferencePlus for worldwide conferencing services.
Zi Corporation (ZICA) (8/5/05). Signs major multi-language text input deal with Chinese telecommunications giant ZTE. Board confirms recommendation that shareholders reject Nuance takeover offer, while Nuance extends offer for shares. This is on the “Endangered List”.
Network Engines (NENG) (6/5/04). To present at the Needham Growth Stock confab on January 8. Expands storage product line with new high-capacity SAN subsystem that offers TEMs and ISVs “unmatched” flexibility and scalability.
Our picks for this Newsletter are a instrument maker and a manufacturer of communications equipment, both listed on the NASDAQ.
AETRIUM, INC. (NASDAQ: ATRM) – $1.80. Twelve-month hi-low has been $6.14 – 81 cents. Based in North St. Paul, MN, with about 70 employees, this instruments maker has 10.6 million shares outstanding, $23.76 million in total current assets, $26.13 million in total assets, little debt, and $1.58 million in total liabilities. Institutional ownership is around 22%. One analyst rates the stock a “strong buy” while another gives it a “moderate buy”. www.aetrium.com
Even though Aetrium, Inc. is seeing less revenues than it did a year ago, the company still has a decent balance sheet and future possibilities. Also, this may be one that could soon see a ‘dead cat’ bounce.
Founded in 1982, and public for over 15 years, Aetrium designs and manufactures electromechanical equipment used in the handling and testing of integrated circuits (ICs). Its products are used in the test, assembly, and packaging segment of semiconductor manufacturing; and, yes, we know that this is not a good time to be buying semiconductor-related companies. The company offers two principal equipment product lines – test handler products and reliability test equipment. Aetrium’s test handler lines include gravity feed test handlers that incorporate thermal conditioning, contacting, and automated handling technologies to provide automated handling of ICs during production test cycles. It also offers change kids to adapt its test handlers to different IC package configurations or to upgrade installed equipment. The company’s reliability test equipment provides semiconductor makers with structural performance data to help evaluate and improve IC designs and manufacturing processes.
For FY2007, ending 12/31/07, revenue was $27.99 million with net income of $6.69 million. During the first nine months of the current FY, ending 9/30/08, revenue was $14.36 million with $74,000 in net income. Obviously, the global economic slowdown has had an impact on capital expenditures by Aetrium’s customers. However, the company believes that because of its broadening customer base it should outperform most industry conditions.
For now, we’re going with the company’s assessment of its future. It seems to have the type of balance sheet that should withstand shocks. Also, the stock price appears to be cheap.
Our 24-month target for the stock is $3.25 to $3.50.
For more information, contact ATRM’s Doug Hemer at 651-773-4274.
ENDWAVE CORPORATION (NASDAQ: ENWV) – $2.20. Twelve-month hi-low has been $7.69 – $2.00. Located in San Jose, CA, with about 200 employees, this maker of communications equipment has $71.42 million in total current assets, $82.52 million in total assets, little debt, and $10.85 million in total liabilities. Institutional ownership is around 62%. www.endwave.com
The best we can do in this sort of investing climate is to keep finding companies with strong-looking balance sheets and hope they can survive the bumpy ride. Endwave Corporation looks as if it could be capable of doing that.
Founded in 1991, and public for just under ten years, and formerly known as Endgate, Endwave designs and manufactures RF modules that enable the transmission, reception, and processing of high-frequency signals in next-generation wireless telecommunications networks, defense electronics and homeland security systems. It operates in two business segments: commercial telecom and defense/security.
Endwave’s commercial telecom unit has supplied hundreds of thousands of high-frequency modules for microwave point-to-point radio products that provide “backhauling” of broadband voice, data, and video traffic within cellular transmission networks. Products include integrated transceivers, amplifiers, synthesizers, oscillators, up and down converters, frequency multipliers, and microwave switch arrays. The company’s defense and security segment addresses the defense community including advanced satellite communications for “intelligent battlefield” (now, there’s a true oxymoron) initiatives, electronic warfare (EW) platforms using conventional and advanced phased-array radars, and signal intelligence (SIGINT) for a host of military and government end-use applications. Also, in the homeland security market, Endwave provides hardware that enables intrusion and perimeter alarms for the armed forces, atmospheric monitoring equipment for airports, and check-point personnel portal scanners for weapons, explosives, and contraband detection.
The company’s full product suit of RF subsystem solutions are available for operation up through 100 GHz. It has more than 42 issued patents covering core technologies, including semiconductor and proprietary circuit designs.
For FY2007, ending 12/31/07, revenue was $56.47 million with $5.4 million in losses. During the first nine months of the current FY, ending 9/30/08, revenue has been $48.44 million with $3.7 million in net losses.
The company appears to be headed toward better revenues in this FY than during 2007, probably due to better sales in its defense/security unit, which, for now, seems like a good place to be.
Our 24-month target for the stock is $3.50 to $4.00.
For more information, contact ENWV at 408-522-3100.
Look for the January 20, 2009 Newsletter to be posted on 1/16 or 1/19.
Happy New Year!
George