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Hello Readers,
Since the last Newsletter, we closed another position for a very unexpected monstrous gain:
IMMERSION (6/5/02). Closed position 7/29/03 at $5.35 for a 158% GAIN.
Sometimes we catch one of these. Immersion more than doubled on news that the company and Microsoft had settled a lawsuit and IMMR will get $26 million form the software titan. It was a nice way to end July.
So, in the last issue, did we get too carried away by the near-term prospects of Dow 10K, Nasdaq 2200, and 500 on the Russell 2000? We think not. What we have seen for the last few weeks in the markets is a much-needed consolidation. The cause of this was a lot of talk about rising interest rates; however, the markets seem to be factoring this into its mass psychology. Even if rates do rise, it won’t be by much, and we believe that over the long haul equities will still be perceived as the better bargain.
Here are the headlines since the last Newsletter about companies in the Current Portfolio.
New York Health Care (BBAL) (3/20/97). Just when we are set to throw in the towel on this “golden oldie”, the company snags a few miracles. A study shows that Probactrix reduces diarrhea. Then, RedChip Research gave the stock a “buy”, which moved the price almost a dollar in the last few weeks.
Draxis Health (DRAX) (3/20/00). With all of the good news pouring out of DRAX lately, you’d think the stock should be much higher. First, the U.K. okayed their dog pill. Next, they sold their Pharmaceutica unit to Shire which could be worth $19 million. Then, DRAX licensed the European marketing rights for Anipryl to Ceva Sante Animale.
DOR BioPharma (DOR) (9/20/00). Enters into agreements for a $5.4 million private placement. This is still on the “Endangered List”, but, if these funds come to fruition, then DOR’s picture may look better.
Genetronics (GEB) (10/5/00). Another one we may soon remove from the “Endangered List” as it closes a $15.67 million preferred stock financing. We first want to see what the next balance sheet looks like.
RateXchange (RTX) (1/20/01). Company changes its name to MCF Corp. and new stock symbol is MEM, both are reflected in the Current Portfolio. Also, subsidiary ICD reaches the $1 billion mark in funds brokered for its clients.
CE Franklin (CFK) (5/5/01). 2nd QT results still show a pretty good balance sheet.
Arotech (ARTX) (6/5/01). Completes round of debenture conversions and warrant exercises totaling over $3.25 million.
Abraxas Petroleum (ABP) (10/5/01). Amends quarterly presentation of discontinued operations.
Airspan Networks (AIRN) (1/20/02). A slew of good news seems to have put the stock on the comeback trail. 2nd QT results were good and balance sheet still looks healthy. Company introduced major product line extensions for WipLL and major improvements in its wireless DSL system capability. China Unicom picks AIRN for deployments in key Guangzhou region and Shenyang.
VASCO Security (VDSI) (2/5/02). Belgian Ubizen to sell stock back to Vasco. 2nd QT numbers show good revenue growth and earnings, and a better cash position.
Mechanical Technology (MKTY) (3/5/02). Receives several awards and grants to advance micro fuel cell development.
Magic Software (MGIC) (3/20/03). Signs pact with Dutch company for iBOLT Integration suite. Announces partnership with iWay for the integration market. Gets a rave from Viacom.
Argonaut (AGNT) (4/20/02). Divests its HPLC column business. Comes out with a pretty upbeat quarterly report and balance sheet still looks to be very good.
Hemispherx (HEB) (7/5/02). Reports Ampligen prevents destruction of nerve cells and increases survival rates in Fiavivirus infection.
Rigel (RIGL) (7/20/02). Completes clinical trial of R112 in allergic rhinitis. Remember, this one’s on the “Endangered List”.
Millennium Cell (MCEL) (9/20/02). MCEL and Icelandic New Energy announce hydrogen fuel project. Company says 2nd QT results are on target with its expectations.
Viewpoint (VWPT) (11/20/02). 2nd QT numbers do nothing to remove this from the “Endangered List”. Also, balance sheet seems over-weighted in “Goodwill”. This one is still “wait and see”.
Interactive Intelligence (ININ) (12/5/02). IP PBX wins Editor’s Choice Award. New top analyst ranking for ININ. 2nd QT results show continue revenue growth and balance sheet still appears to be half-decent.
Cryo-Cell (CCEL) (5/5/03). The NASD sort of blind-sided us when it delisted CCEL on 7/24, but the company is appealing and a decision is expected by the end of October. Meantime, CCEL is now on the Bulletin Board.
Sonic Innovations(SNCI) (5/5/03). 2nd QT report shows continued revenue growth and company posts modest earnings. Balance sheet still looks relatively strong.
MIPS Technologies (MIPS) (5/20/03). End of FY report still shows what seems to be a very very healthy balance sheet. Also sees sequential growth in contract revenue.
Sequenom (SQNM) (6/5/03). 2nd QT shows revenues holding and losses being pared while balance sheet seems to remain quite strong.
Jacada (JCDA) (6/20/03). Quarterly results in line with First Call Consensus, and balance sheet still seems healthy.
Syntroleum (SYNM) (7/5/03). 2nd QT report reflects continued growth and mild earnings that may be attributable to a 68% reduction in negative cash flow during the first half.
Caliper (CALP) (7/5/03). Serono to use Caliper 250 Drug Discovery Systems for “smarter screening”.
Paradyne (PDYN) (7/20/03). 2nd QT results about as expected, and balance sheet still looks very strong.
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Our picks for this issue are two Internet software and service providers. One sells to corporate heavyweights while the other hones in on government business.
ART TECHNOLOGY GROUP, INC. (NASDAQ: ARTG) – $2.05. Twelve-month hi-low has been $2.62 – 74 cents. Based in Cambridge, MA, with about 550 employees, this Internet software provider has 73.1 million shares outstanding, $75.9 million in total current assets, $83.5 million in total assets, little debt, and $64.3 million in total liabilities. Institutional ownership is around 28%. Two analysts give the stock a “moderate buy” and one has it as a “hold”. http://www.atg.com
With the recent market runup it may be time to fish around for stocks that have had a good run, and now are seeing a moderate pullback. It also helps if the company has had some staying power along with some hefty current assets. Such appears to be the case with Art Technology Group, Inc.
Founded over ten years ago, with the stock topping at over $100 during the Net craze a few years ago, Art Technology Group basically provides software applications to businesses that offer online commerce and customer self-service. Their software enables consumer, retail, and financial services companies to market, sell, and provide services to their customers online. ARTG also offers its clients related professional services including support, educational, and implementation services; the company’s applications are designed to help businesses gather information about their online customers so as to provide them with better service.
The company’s software solutions are based on its ATG Relationship Management Platform. Stemming from this platform are solutions such as ATG Commerce and ATG Portal, which offer customized capabilities for building B2B, B2C, and B2E portals; along with ATG Scenario Personalization and ATG Data Anywhere Architecture. Included in ARTG’s exclusive customer list are American Airlines, Best Buy, J. Crew, Eastman Kodak, Ford Motor Credit, and P&G. In mid-July, ARTG inked a marketing and technology deal with IBM that enables the company to OEM IBM’s WebSphere Internet infra-structure software as part of its packaged solution offerings. Also, last month, the company announced that DinersClub has selected ATG Portal to facilitate the exchange of information among its franchises and agencies. In June, the USDA successfully completed the nationwide launch of ARTG’s new Electronic Commodity Ordering System.
For FY2002, ending 12/31/02, revenues were $101.4 million with $29.4 million in losses versus FY2001 revenues of $140.4 million and $156 million in losses. During the first six months of this FY, ending 6/30/03, revenues were $40.7 million with $3.29 million in net income. Yes, revenue has fallen off, but the losses appear to have been sharply pared.
ARTG looks to have reached the deep-water mark in its history, and its prospects seem brighter than they did a year ago, thanks to the IBM pact and repeat business from current customers.
Our 24-month target for the stock is $3.75 to $4.50.
For more information, call ARTG’s Jerry Sisitsky at 617-386-1158; jsisitsky@atg.com
NIC, INC. (NASDAQ: EGOV) – $3.50. Twelve-month hi-low has been $4.23 – $1.31. Located in Olathe, KS, with about 280 employees, this Internet software and services provider has 58.2 million shares outstanding, $37.46 million in total current assets, $74 million in total assets ($34.6 million is deferred long-term asset charges), little debt, and $19.48 million in total current liabilities. Institutional ownership is about 17%. Two analysts rate the stock a “hold”. http://www.nicusa.com
We have all heard the adage “follow the money”, and since governments account for roughly 20% to 25% of our GDP, why not pick a company like NIC, Inc. that is chasing this largesse. Formerly called the National Information Consortium that was founded about a dozen years ago, NIC, which has been on NASDAQ since August, 1999, is the only publicly-held company that focuses exclusively on serving the eGovernment market. Simply put, it builds and manages online solutions that help governments and citizens interact more efficiently. NIC maintains long-term eGovernment outsourcing contracts with 18 states and eight local governments. As the country’s leading provider of outsourced official government Web sites for states, counties, and cities, the company has developed a library of more than 1000 unique eGovernment applications. NIC offers governments three ways to pay for portals. The most popular is “self-funding”, currently the choice of 16 states. Through this method, NIC absorbs the costs to build the portal’s technical infrastructure and develop services. After the applications have been launched, the company and its government partners share a portion of the fees from the electronic transactions. The other payment options are “fee based” whereby governments pay NIC contractually-determined fees on a fixed time, fixed cost, or time/materials basis; and “hybrid” where governments pay NIC a mix of upfront revenues and additional monies from transactions. Recently, NIC reported that Idaho now garners nearly 50% of its real estate license renewals online. In June, the company helped both Arkansas and Utah launch new Web sites or enhanced portal designs.
For FY2002, ending 12/31/03, revenues were $47.5 million with $7.61 million in losses compared to FY2001 revenues of $37 million and $77.4 million in losses. During the 1stQT of this FY, ending 3/31/03, revenue was $12.5 million with net income of nearly $1 million. NOTE: The 2ndQT numbers and balance sheet data will be reported on 7/31/03, on or about the time that this Newsletter should be posted.
EGOV appears to have hooked into the government gravy train, which looks to be giving the company great growth and, recently, profitability. Also, with many governments crying poor mouth, of late, the company could also see even more major growth.
Our 20-month target for the stock is $6.25 to $7.00.
For more information, call EGOV’s Chris Neff at 435-645-8898; cneff@nicusa.com
Look for the 8/20/03 Newsletter to be posted on 8/18 or 8/19.
Thank you,
George