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Hello Readers,
Finally! The election nonsense has ended and we have returned to real life, and, from, all appearances, a Bush Bull Market (do we dare say that?).
Helping things are rapidly declining oil prices (do we dare say that, also?).
So what does this mean for the picks in our Current Portfolio? Traditionally, this has usually been a slow time of year for closing positions. Should the markets continue their upward trend, then we can anticipate what should be a really good to great start for 2005. For the most part, the first four or five months of a new year, have been relatively active ones for our Portfolio positions.
Here are the headlines since the last Newsletter about companies in our Current Portfolio. Dates in parentheses are when we first recommended them.
Digital Power (DPW) (2/20/01). New quarterly numbers not overly bad, but give us no more reasons to look for better things in the future. So, after what seems like three hundred years, we have added this to the “Endangered List”.
Arotech (ARTX) (6/5/01). Stock got a little lift from some positive quarterly numbers. Simulation Division to launch “Milo”, a new interactive training simulator.
ViroLogic (VLGC) (7/20/01). New numbers. Remember, this is merging with ACLARA BioSciences.
Argonaut (AGNT) (4/20/02). Jewelcor Management calls for special shareholders meeting. New numbers show lousy P&L, although balance sheet still looks good. However, this is another one that gives us little hope, after close to three years, and, so, we place it on the “Endangered List”.
Generex (GNBT) (8/5/02). Raises $4 million through private placement. Introduces Glucose Spray. Reports on potent preclinical effect of novel melanoma peptide vaccine. Reports details of other studies.
Art Technology (ARTG) (8/5/03). Closes acquisition of Primus. J. Crew enhances online commerce with expanded use of ATG Platform. ATG customers Best Buy and Neiman Marcus win awards for excellence.
Targeted Genetics (TGEN) (10/5/03). Quarterly report stills shows a pretty good balance sheet as company reports clinical programs remain on track with results expected in the first half of 2005.
Trio-Tech (TRT) (10/20/03). Posts eye-popping quarterly report showing EPS, a $12.6 million backlog, and a decent looking balance sheet.
Insmed (INSM) (11/5/03). Raises about $8.7 million in direct placement of stock. Expands patent portfolio in treating diabetes. Releases quarterly report.
V.I. Technologies (VITX) (11/20/03). More releases about merger deal with Panacos. On “Endangered List”.
AVANT Immuno (AVAN) (12/5/03). Replaces shareholder rights plan. Opens vaccine manufacturing facility in MA.
Actuate(ACTU) (1/5/04). Several releases on partnering with various outfits.
Peerless (PRLS) (1/20/04). Announces availability of Peerless Print 7.
Crossroads (CRDS) (2/5/04). Will announce quarter and full-year numbers on November 29. Acquires application acceleration and monitoring technology.
Somera(SMRA) (2/20/04). As expected, quarterly numbers lousy, but balance sheet still appears very healthy. New Star analyst rankings.
Transgene (TRGNY) (3/5/04). Quarterly report still reflects a pretty good cash position.
OpenTV (OPTV) (3/20/04). Renews pact with iN DEMAND for two more years. Losses appear to be narrowing and balance sheet still looks very nice.
Socket Communications(SCKT) (3/20/04). Releases Windows XP Notebook and Tablet support for cordless hand scanner with “Fuzzy Logic”.
NexMed (NEXM) (4/5/04). Closes enrollment for 400 patient Femprox study. Reports 3rd QT results.
Palatin (PTN) (4/5/04). PTN’s novel small molecule Melanocortin Agonist demonstrates a decrease in food intake and body weight without causing side effects. Quarterly results look pretty good as does balance sheet.
AVI BioPharma (AVII) (4/20/04). Reports final results from Resten-NG AVAIL clinical trail and updates its cardiovascular restenosis program. New Star analyst rankings. 3rd QT still shows a decent-looking balance sheet.
Management Network (TMNG) (4/5/04). Quarterly numbers not bad and balance sheet still looks to be very healthy. New Star analyst rankings.
Glenayre (GEMS) (5/5/04). 3rd QT numbers okay while balance sheet still looks very very strong.
GoRemote (GRIC) (5/5/04). 3rd QT numbers reflect a rather hefty loss due to acquiring Axcelerant. Balance sheet still looks okay. Signs 16 new enterprise customers.
EMCORE (EMKR) (5/20/04). FY 2004 revenues increase 54% while losses narrow. New Start analyst rankings.
Network Engines (NENG) (6/5/04). Signs OEM pact with SurfControl. Posts year-end results, which were a mixed bag; balance sheet still appears very good.
Altair Nanotech (ALTI) (6/20/04). Reports third consecutive quarter of revenue growth and balance sheet looks good.
Genus (GGNS) (7/5/04). Aixtron misses forecasts, cuts outlook. Genus posts 3rd QT results.
Avanex (AVNX) (7/20/04). Shares get a good lift thanks to better sales and higher guidance.
Tripath (TRPH) (8/5/04). This one’s starting to become one of this year’s biggest disappointments as lawsuits keep piling on. Wait and see, for now.
Vitria (VITR) (9/5/04). Vitria and sunrise win silver at first annual EAI Forum awards. Selected by Korea Exchange Bank for next generation banking system. Enables real-time end-to-end order management at MasterBrand Cabinets.
Intraware (ITRA) (9/20/04). Zomax sells a portion of its investment in ITRA.
Chordiant (CHRD) (9/20/04). Unveils process-driven branch teller solution. Named to the FinTech 100, a ranking of service providers to the financial industry. Downgraded by JMP Securities.
Corio (CRIO) (10/5/04). On Command Video selects CRIO Applications on Demand 2005.
SCM Microsystems(SCMM) (10/20/04). Ships first 50,000 digital TV security modules to Turkish operator DIGITURK. 3rd QT numbers seem to be within previously announced guidance.
iGATE (IGTE) (10/20/04). Quarterly numbers look okay.
Nova Measuring(NVMI) (11/5/04). 3rd QT numbers show continued revenue growth.
Net2Phone (NTOP) (11/5/04). Signs cable telephony agreements with Bresnan Communications, Coditel Luxembourg, Coditel Belgium, and Est Videocommunication in France.
Our picks for this issue are another semiconductor and another biotech.
APPLIED MICRO CIRCUITS CORP. (NASDAQ: AMCC) – $3.45. Twelve-month hi-low has been $9.20 – $2.79. Located in San Diego, CA, with about 720 employees, this semiconductor has 308.1 million shares outstanding, $474.65 million in total current assets, $1.09 billion in total assets, of which $429 million is goodwill, little debt, and $71.15 million in total liabilities. Institutional ownership is around 56%. Two analysts give the stock a “strong buy”, six a “hold”, one a “moderate sell”, and one a “strong sell”. http://www.amcc.com
As evidenced above, analysts, like the rest of us, are all over the board as to where semiconductors/tech stocks are headed over the next year or two. We’re inclined to side with the bulls and add Applied Micro Circuits Corp. to the Current Portfolio. Even if we are off, the company’s balance sheet appears strong enough to carry it through potential rough patches.
Founded in 1979 and public since 1997, AMCC designs and markets products for the communications and storage equipment markets. Its products are used to transport, processing, switching, routing, and storage information. The company offers integrated circuit (IC) products as well as printed circuit board assemblies (PCBAs) for these markets. AMCC garners revenues in the communications market by selling IC products to such equipment makers as Alcatel, Ciena, Cisco, Fujitsu, Hitachi, Nortel, Lucent, and Juniper, to name a few. In the storage market, its revenues are generated through selling its host bus adaptor (HBAs) boards to OEMs like EMC, Network Appliance, and Sun Microsystems.
Over the last year or so, AMCC made what looks to be some key acquisitions. In October, 2003, it acquired JNI Corp., a provider of fiber channel hardware and software products that form critical elements of storage area networks (SANs). Then, this past April, the company acquired 3ware, Inc., a provider of high-performance, high-capacity serial advanced technology attachment (SATA) storage solutions for emerging storage applications.
AMCC does not lack in the news department. In October alone, the company: Announced integrating two generations of its network processing platform in Maranti’s CoreSTOR storage controllers. Launched PRS Q-80G, the latest member of the sixth-generation PRS switch fabric family. Addressed convergence of multi-protocol data networks with MISSION access and announced availability of AMCC StorSave platform. Unveiled its PowerPC 440SPe processor.
For FY2004, ending 3/31/04, net revenues were $131.17 million with $104.9 million in losses compared to FY2003 net revenues of $101.59 million and $745.54 million in losses. Don’t choke at all of the losses, just yet. The last few quarters seem better. During the first six months of FY2005, ending 9/30/04, net revenues were $128.47 million with $40.14 million in losses.
Expect current quarter revenues to be flat, sequentially.
This is a bet that the semiconductor industry gets new life sooner rather than later.
Our 24-month target for the stock is $5.75 to $6.50.
For more information, contact AMCC’s Debra Hart at 858-535-4217; dhart@amcc.com
STEMCELLS, INC. (NASDAQ: STEM) – $2.48. Twelve-month hi-low has been $4.87 – $1.24. Based in Palo Alto, CA, with about 25 employees, this biotech has 54.3 million shares outstanding, $24.4 million in total current assets, $29.6 million in total assets, and $10.19 million in total liabilities, of which $1.67 million is long-term debt. Institutional ownership is around 11%. http://www.stemcells.com
It looks as if stem cell research may be back in play, and we should mention that StemCells, Inc. just raised $22.5 million in equity financing, which should beef up its next balance sheet even more, along, of course, with some share dilution. Also, for those of us with “Red State” sensitivities we should stress that the company claims it is not developing embryonic stem cells for therapeutic use. So, what brought stem cells into play, again? Toward the end of October, it looked like Kerry was going to win and stem cell stocks went bonkers. Then, they had a sell off the day after elections. But, Californians voted a $3 billion bond issue to support stem cell research; this will be about $300 million yearly over ten years. Will home state companies be main beneficiaries?
Founded in 1988, and trading on NASDAQ since 1991, StemCells engages in research aimed at developing therapies that would use stem and progenitor cells to treat and possibly cure human diseases and injuries such as neurodegenerative diseases, including Batten’s, Parkinson’s and Alzheimer’s diseases and other metabolic genetic disorders; demyelinating disorders, such as Multiple Sclerosis; spinal cord injuries, stroke, hepatitis, chronic liver failure, and diabetes. The company’s programs are all directed toward using tissue-derived cells. STEM currently has active R&D programs in neural cells, liver stem cells, and pancreatic cells.
Billing itself as the only publicly traded company solely focused on stem cell R&D, StemCells has more than 40 U.S. patents and 100 non-U.S. patents, as well as 100 patent applications pending worldwide.
At the end of September, the NIH awarded several grants to STEM for research using the company’s human neural stem cells, mainly targeting Alzheimer’s and spinal cord injuries. In October, IT&E International Group and Correlate Technologies announced signing of a two-year agreement with StemCells for sale of its FDA compliance solution. With the addition of the $22 million in new funds, STEM feels it will have sufficient monies for a planned Phase I clinical trial for Batten disease as well as support for a planned filing in 2005 for a second IND application for another central nervous system indication.
With little revenue and a pile of losses, StemCells is pretty typical of a small biotech. In the first nine months of FY2004, ending 9/30/04, revenue was $103,000 with $10.4 million in net losses.
If ever there is a “stem cell play” this one should be near the top of the list. STEM has a nice arsenal of patents, and, thanks to recent financing, it has over $40 million in cash.
Our 24-month target for the stock is $4.25 to $5.00.
For more information, call STEM at 650-475-3100; info@stemcellsinc.com
Look for the December 5, 2004 issue to be posted on 12/1 or 12/2.
Happy Thanksgiving,
Thank you,
George