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Hello Readers,
Since the last Newsletter, we have closed five positions; three for some nice gains and two for losses, one of which was highly unexpected and very ugly.
GOAMERICA (9/5/06). Closed position 11/9/06 at $4.60 for a 53% GAIN.
Q COMM (3/5/06). Closed position 11/9/06 at 29¢ for a 88% LOSS.
MICROVISION (7/20/06). Closed position 11/2/06 at $2.95 for a 68% GAIN.
ICAD (5/20/06). Closed position 11/2/06 at $2.68 for a 60% GAIN.
MONOGRAM BIOSCIENCES (7/20/01). Closed position 11/2/06 at $1.65 for a 52% LOSS.
Surprise, Surprise. There still are moments when improved financial results help a stock, and that appears why GoAmerica had a nice run past our 50% threshold. Ditto for Microvision as it went on a tear after coming out with good earnings news and a joint development pact with an Asian electronics manufacturer. In the last Newsletter, we said that we would soon close ICAD, which also bounced up after news of positive quarterly numbers. After five years, we called it quits on Monogram Biosciences, which we placed on the “Endangered List” in the last Newsletter. And finally, during our ten years of publishing, and over 500 stock picks, for perhaps only the second time, a company decides to delist and go private; Q Comm claims it was because of filing expenses and all of the other added costs of being public, but the whole deal seems highly irregular.
So, the Democrats won and the Earth is still rotating, for now. The markets seem pleased that there will be gridlock in Washington and that nothing will get enacted to upset business. Although this is pie-in-the-sky thinking, enjoy it while it lasts.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Terabeam (TRBM) (11/5/06). Ugh! Company releases less than stellar numbers and the stock took a slight hit. It’s Tsunami product line is deployed to support Africa’s Malawi Interbank MalSwitch initiative.
Immunogen (IMGN) (10/20/06). Quarterly revenues about as expected; balance sheet still looks healthy. Announces promising results for cancer drug candidate.
Autobytel (ABTL) (10/5/06). Company and Dealix submit settlement terms. Revenues and earnings not what were expected; balance sheet still looks good. But, company announces a partnership with AOL, which juiced the stock a little. May sell two business units so as to focus on Internet and media; may be a good idea.
Hydrogenics (HYGS) (9/20/06). Quarterly numbers somewhat disappointing; balance sheet still looks strong. To provide hydrogen fueling station for urban transit demonstration in Brazil. Several other news items on fuel cell contract awards.
TVI Corp (TVIN) (9/5/06). Acquires privately held Signature Special Event Services, which basically doubles the size of its organization, for over $21 million. Quarterly results look positive; balance sheet still so-so.
Tellular (WRLS) (8/20/06). Fourth QT and year-end numbers show huge revenue increases; balance sheet still seems okay.
RiT Technologies (RITT) (8/5/06). Third QT numbers not great; balance sheet still appears to be okay.
Advanced Life Sciences (ADLS) (7/20/06). Quarterly balance sheet still seems to be quite healthy. Rodman & Renshaw initiates coverage.
NTN Buzztime (NTN) (7/5/06). Quarterly numbers not bad; balance sheet still looks good. Partners with consultant to help drive ad revenue.
Point Therapeutics (POTP) (7/5/06). Although balance sheet remains viable, this is making us a little nervous as company makes cost-cutting moves such as a 15% workforce reduction.
BSQUARE (BSQR) (6/20/06). Comes out with decent quarterly numbers; balance sheet still looks good.
Spherix (SPEX) (6/20/06). Reports pretty fair revenue growth. To begin testing of Naturlose toothpaste to fight gingivitis and plaque.
Curis (CRIS) (6/5/06). Third QT balance sheet still looks okay.
02Diesel (OTD) (5/20/06). Quarterly report shows slight increase in revenue and still heavy losses; balance sheet still seems okay.
Kintera (KNTA) (5/5/06). Quarterly numbers could have been better; balance sheet still looks okay. KNTA software selected by both the La Leche League and the University of Notre Dame.
Tri-S Security (TRIS) (5/5/06). Stock takes a slight tumble despite seemingly positive quarterly report; balance sheet still looks good.
Pharmos (PARS) (4/20/06). Quarterly balance sheet still looks healthy. Completes Phase 1 study of topical cream as a treatment for osteoarthritis pain.
Thermogenesis (KOOL) (4/5/06). Stock got a nice lift thanks to Democrats’ stand on stem cells. It was also helpful that recent numbers showed good revenue growth; balance sheet still appears to be very healthy.
Cytogen (CYTO) (3/20/06). Closes $20 million equity placement, and while this is good for the company, it usually has a short to mid-term negative impact on the stock. Will make a presentation on QUADRAMET at Hemotologist annual meeting on December 11. Recent balance sheet still looks very healthy and the new money should strengthen it even more.
TII Network (TIII) (3/20/06). Stock gets kicked in the teeth as quarterly profit falls, but remains in the black; balance sheet still looks good.
Lipid Sciences (LIPD) (2/20/06). Recent balance sheet still looks good. Teams with Animal Health Division of Eli Lilly.
Adherex (ADH) (2/20/06). Quarterly balance sheet fair to so-so, but this is still making us antsy.
Gateway (GTW) (2/5/06). Third QT numbers show 21% profit increase but revenue decline. Company will slash 100 jobs. Numerous releases and articles about product sales, etc.
8X8 (EGHT) (1/20/06). This one brings a smile to us because three months ago it had dropped to 50¢. Awarded new patent for its VoIP technology. Packet8 to be sold through Office Depot stores nationwide.
Ceragon (CRNT) (1/5/06). Gets a nice plug at the Motley Fool. Since it has hit a 50%-plus threshold, we will be closing it, soon.
Digital Angel (DOC) (12/20/05). Revenues drop a little and losses widen a little; balance sheet still looks good. Revises business strategy.
Fusion Telecom (FSN) (12/5/05). Quarterly numbers not great; balance sheet weakens. Company says it is bolstering its MidEast market presence. Exceeds 750,000 subscribers to its eFonica VoIP service and 10,000 paid to its premium offerings.
Memory Pharma (MEMY) (11/5/05). Recent balance sheet still looks fairly good.
Cognitronics (CGN) (10/20/05). Third QT numbers show year-over-year revenue growth and less losses; balance sheet still fair.
RAE Systems (RAE) (10/5/05). Quarterly results pretty upbeat; balance sheet still looks decent.
Nephros (NEP) (9/20/05). Third QT balance sheet so-so. This one is giving us a slight lump in the throat.
EntreMed (ENMD) (9/5/05). Starts Phase 2 trial with Panzem NCD in ovarian cancer. Recent balance sheet still appears to be very healthy. Preclinical data on MKC-1 showed positive activity on tumor cells.
ZiCorp (ZICA) (8/5/05). Licenses eZiText to Nintendo for war games console. Recent QT numbers so-so; balance sheet is a worry.
North American Scientific (NASI) (8/5/05). Gets FDA approval for breast cancer treatment. Introduces ClearPath device. CEO to step down.
Innodata (INOD) (7/5/05). Quarterly results could have been better; balance sheet still looks good.
Lime Energy (ELCY.OB) (7/5/05). Quarterly results posted. This one is on the “Endangered List”.
Vion Pharma (VION) (5/20/05). Reaches midpoint of patient accrual to Cloretazine Phase III trial. Third QT balance sheet appears healthy.
Applied Micro Circuits (AMCC) (11/20/04). Gets NASDAQ delisting notice thanks to delay in filing 10K report – we’re not overly concerned about this, just yet. Recent quarterly report shows strong revenue growth. Stock upgraded by CIBC World Markets. Showcases RAID 6 performance.
Nova Measuring (NVMI) (11/5/04). Third QT results not bad; same for balance sheet. Announces new management team.
Aviza Technology (AVZA) (10/5/04). To announce QT and FY year-end numbers on November 16, the day we post this newsletter.
Chordiant (CHRD) (9/20/04). Launches unified lending solution. Claims new enterprise solution streamlines fraud investigation and recovery for card holders. Lawsuit filed against company allegedly for back-dating options. To present at tech confab on November 16, the day we post this Newsletter. Several other releases.
AIXTRON (AIXG) (7/5/04). Quarterly report looks good; balance sheet still looks viable.
Network Engines (NENG) (6/5/04). Year-end FY numbers show pretty good revenue growth; balance sheet still looks strong.
Management Network (TMNG) (4/20/04). Says QT report will be delayed and that a special committee will review option practices. Doesn’t sound good. Stock downgraded from a “buy” to a “hold” by Kaufman Brothers.
Palatin (PTN) (4/5/04). A few weeks back, things looked hopeful for PTN but stock slides as clinical data on impotence treatment is unclear. Recent balance sheet still seems okay.
OpenTV (OPTV) (3/20/04). Third quarter numbers look good on the revenue side and losses narrow; balance sheet still looks good. And, we haven’t a clue as to why the stock remains stuck in its present trading range.
AVANT Immuno(AVAN) (12/5/03). Third QT balance sheet shows good cash position but a new long-term liability item that’s a rather large number.
Insmed (INSM) (11/5/03). Recent balance sheet still appears to be very healthy.
Our selections for this issue are a NASDAQ-traded biotech and a freight services provider that is listed on the AMEX.
ALFACELL CORPORATION (NASDAQ: ACEL) – $1.55. Twelve-month hi-low has been $4.99 – 73 cents. Based in Bloomfield, NJ, with about 15 employees, this biotech has 44.4 million shares outstanding, $11.58 million in total current assets, $11.82 million in total assets, little debt, and $2.6 million in total liabilities. Institutional ownership is around 18%. One analyst rates the stock a “strong buy”. www.alfacell.com
Usually when we pick a small biotech, we like to see a wide variety of drug candidates in their pipeline. This is not the case with Alfacell Corporation, which only has a few candidates, but they have lined up collaborations with some industry heavy hitters. It also helps that the company has a half decent balance sheet, thanks to a recent secondary offering that, for the meantime, is probably depressing the stock’s price.
Founded in 1991, and public for nearly ten years, Alfacell bills itself as the global industry leader and pioneer in developing novel ribonucleases (RNases), a family of proteins isolated from, of all things, the leopard frog. These new classes of RNase-derived therapeutics from this platform are for cancer and other diseases. Its lead drug candidate is ONCONASE, which ACEL claims has been successfully administered to over 850 patients with a wide variety of tumors, and is currently being evaluated in a Phase IIIb trial for unresectable malignant mesothelioma (UMM), a form of cancer that usually affects the pleura; this is a membrane that lines the chest cavity and the lungs. Incidentally, nearly 75% of all malignant UMM cases can be attributed to asbestos exposure. ONCONASE is also in a Phase I/II trial in non-small cell lung cancer (NSCLC).
Alfacell also develops regulatory proteins that are bioactive and have an effect on living cells and organisms, as well as having an impact on anti-cancer and anti-viral activity. The company has a number of scientific collaborations with industry partners and research institutions, such as the National Cancer Institute that is designed to develop new therapeutic applications for ONCONASE; an agreement with Novartis Institute for tropical diseases for evaluating AC-03-636 against dengue fever; and a collaboration with the West German Cancer Center for the development, characterization, and production of a novel fusion protein for nonHodgkins lymphoma.
The Phase IIIb trial for ONCONASE in UMM recently showed favorable safety and survival data, and there are now over 370 patients enrolled in the study. The company is anticipating an NDA submission to the FDA in mid-2007, pending positive data.
As we have said numerous times about small biotechs, expect almost zilch revenues and hefty losses, and Alfacell is no exception. For the FY ending 7/31/06, net losses were $7.81 million.
We suspect that the slightest piece of good news could set the stock on a nice roll.
Our 24-month target is $2.50 to $2.75.
For more information, contact ACEL at 973-748-8082; ir@alfacell.com
TARGET LOGISTICS, INC. (AMEX: TLG) – $2.20. Twelve-month hi-low has been $5.45 – $1.33. Located in Carson, CA, with about 256 employees, this freight services provider has 18.1 million shares outstanding, $33.32 million in total current assets, $48.52 million in total assets, little long-term debt, and $25.8 million in total liabilities. Institutional ownership appears to be almost nil. One analyst rates the stock a “strong buy”. www.targetlogistics.com
Occasionally, we pick a company with absolutely no sex appeal, but it has consistently made money year after year. Such is the case with Targeted Logistics, Inc. It’s stock priced is weighed down probably due to recent acquisitions, which “The Street” (whoever they are) views as a short-term negative; however, we tend to see these things a long-term positives.
Founded in 1970, and public for over ten years, Target Logistics, quite simply, provides freight forwarding and logistics services. TLG is a third-party logistics services company providing time-definite and value-added supply chain solutions to over 3000 accounts globally. It has a network of 34 offices throughout the U.S., including agency relationships in 20 cities. The company has a worldwide agent network with coverage in over 80 countries. Their services include international air and ocean transportation, cargo assembly, warehousing, and cargo insurance services. TLG’s principal customers include manufacturers and distributors of computers and other electronic equipment, computer software, wearing apparel, as well as the film, entertainment, and the broadcast industries.
Back in July, TLG acquired Discovery Air Cargo, a New York based freight forwarder. The company believes this acquisition will add $7 million to its revenue base. In early October, the company acquired Capitaland Express, an upstate New York freight forwarder based in Albany. Like the Discovery deal, terms of the buyout were not disclosed.
For the FY ending 6/30/06, revenue was $160.36 million with $2.7 million in net income compared to the previous year revenue of $138.39 million with $1.56 million in net income. During the first quarter of the current FY, ending 9/30/06, revenue was $43.44 million with $276,952 in net income. Also, during this FY, TLG foresees revenue between $185 million to $195 million with earnings per diluted share of 12 cents to 15 cents.
Call us dense, but at some point in time shouldn’t stock price reflect healthy revenue growth and earnings?
Our 24-month target for the stock is $3.50 to $4.00.
For more information, contact TLG at 310-900-1974.
Look for the December 5, 2006 Newsletter to be posted on 12/1 or 12/4.
Happy Thanksgiving,
George