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Happy 2005!
Since the last Newsletter, we closed two more positions for some nifty gains, and we suspect that both of them could climb even higher.
STEMCELLS (11/20/04). Closed position 12/28/04 at $4.24 for a 71% GAIN.
AXM PHARMA (12/5/04). Closed position 12/22/04 at $3.55 for a 53% GAIN.
Since we picked StemCells about seven weeks ago, the stock had been in black, and, last week, soared on news about a cat cloning and that South Korea is now allowing expanded stem cell research and that a Scottish biotech group ma5y soon be cloning human embryos. On rare occasions a pick is in the Current Portfolio for less than three weeks, and, then takes off, such as AXM Pharma, which broke our 50%-plus threshold on a slew of good news.
Worth repeating: In the letter you all received that contained your password it states that if a pick has a gain of 50% or more, it is safe to assume that we will soon be closing the position. To see which positions have been closed between Newsletters just check the Track Record page.
We have one major fear about the 2005 market – it’s looking TOO GOOD! Oops, there’s our fatalistic Philly-sports-fan mindset in full throttle, again. But, who cares? Let’s just live for the moment. The Russell 2000 was up 17% last year and hit a new all-time high. How much higher can it go? Potentially, a LOT! We haven’t seen this much enthusiasm for small stocks in over 20 years.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Generex (GNBT) (8/5/02). Terminates dormant joint venture with Elan; this will help to increase the company’s net worth by $14.3 million via a preferred stock conversion.
Art Technology (ARTG) (8/5/03). This one had been in the doghouse for eons, but got new life when it announced its integration of Primus and forecast higher 2005 sales.
Insmed (INSM) (11/5/03). Completes NDA for SomatoKine for treatment of growth hormone insensitivity syndrome. Company sued by Tercica in U.S. Court over patent infringement rights but INSM disclaims the charges.
Active Power (ACPW) (11/20/03). Ships first CleanSource XR unit.
AVANT Immuno (AVAN) (12/5/03). Stock gets a nice bump because its experimental cholera vaccine has the potential to help the quake victims, but, keep in mind that the vaccine is still in Phase II clinical trials.
Actuate (ACTU) (1/5/04). To release 4th QT and FY2004 results on February 10.
Crossroads (CRDS) (2/5/04). Quarterly and year-end results nothing to cheer about, but balance sheet still looks pretty good.
Open TV (OPTV) (3/20/04). Oppenheimer gives the stock a “buy”.
NexMed (NEXM) (4/5/04). Raises $7 million through private placement.
AVI BioPharma (AVII) (4/20/04). Announces NEUGENE Antisense collaboration with the Walter Reed Army Institute of Research.
GlowPoint (GLOW) (5/20/04). Leading business law firm incorporates GLOW’s “All You Can See” video calling plans across 12 U.S. locations. Teams with DyLogic on video technology partnership.
Network Engines (NENG) (6/5/04). Global technology consulting firm replaces customers’ web proxy servers with NENG’s NS6300 firewall appliance. NENG execs to present at investor conferences on 1/6 and 1/13.
BindView (BVEW or BVEWE) (6/5/04). Completes SEC filings for NASDAQ compliance.
GENUS (GGNS) (7/5/04). Aixtron, which is taking over GGNS, restates accounts as it prepares U.S. listing.
Tripath (TRPH)( 8/5/04). More class action suits filed. Remember, this one’s on the “Endangered List”.
Vitria (VITR) (9/5/04). To release 4th QT and year-end numbers on 2/15. This is nearing our 50%-plus threshold.
Intraware (ITRA) (9/20/04). Quarterly numbers not great, but extends SubscribeNet service with Business Objects, expands the service with iRise, extends agreement with PeopleSoft, and inks agreements with Primavera and Kenai Systems.
Trikon (TRKN) (10/5/04). Strengthens position in bulk acoustic wave resonator deposition.
Corio (CRIO) (10/5/04). SBA goes live with Corio on federal financial system.
Net2Phone (NTOP) (11/5/04). Liberty Media exchanging NTOP holdings for shares in NTOP’s parent company IDT Telephone.
Advancis (AVNC) (12/20/04). To begin pediatric Amoxicillin PULSYS Phase 3 trail.
Our picks for the first issue of 2005 are a software developer and a maker of HDTVs, both trade on the NASDAQ.
B.O.S. BETTER ONLINE SOLUTIONS LTD. (NASDAQ: BOSC) – $3.50. Twelve-month hi-low has been $5.75 – $1.51. Located in Misgav, Israel, with about 50 employees, this software/services company has 4.2 million shares outstanding, $9.42 million in total current assets, $15.84 million in total assets, $2.81 million in current liabilities, and $2.4 million in long-term liabilities. http://www.boscorporate.com
Over the years, we have had a fondness for Israeli companies for the simple reason they have done well for us. Those we have closed were for very nice gains, and, yes, we still have several in the Current Portfolio, which, at some point, should work out. So, we add another one, B.O.S. Better OnLine Solutions Ltd., that happens to have a decent-looking balance sheet and has been making what appear to be strategic acquisitions.
Founded in 1990 and trading on NASDAQ since 1996, B.O.S., or BOScom, as it is also known, develops and markets cross-enterprise communication and networking solutions. Marketed under the BOSaNOVA brand name, BOScom’s products are in use by over 20,000 companies worldwide. BOSC has three main product lines: Communications offers VOIP innovative convergence migration solutions that leverage a company’s existing equipment infrastructure; Connectivity provides solutions for IBM midrange-to-PC and LAN connectivity and GUI emulation, and printing solutions that are operating system-independent; and Software Utilities that provide solutions for document design, distribution and management for a wide range of operating systems including mainframe and UNIX.
B.O.S. has been implementing an expansion strategy through acquisition; since last September, they have taken majority stakes in two other Israeli companies. In November, BOSC purchased 63.6% of the outstanding shares of Odem Electronic Technologies 1992, a distributor of advanced electronic and electromechanical components to the defense, telecommunication, and imaging industries. Odem currently represents over 30 major international suppliers such as Texas Instruments and Honeywell. In September, B.O.S. acquired the majority of the assets of Quasar Communication Systems, a manufacturer and seller of cellular communication gateways that eliminate interconnection charges between cellular and landline networks. Quasar currently has over 150,000 gateways installed in 40 countries, and their clients include cellular operators, alternative carriers, corporate clients, and government institutions.
For FY2003, ending 12/31/03, revenue was $5.72 million with $396,000 in losses. During the first nine months of this FY, ending 9/30/04, revenues are $4.04 million with $1.23 million in losses; much of the losses are attributed to R&D and M&A expenditures which we will see through the 1stQT of FY2005.
With the acquisitions of Quasar and Odem, BOSC seems to have made things pretty interesting.
Our 24-month target for the stock is $6.50 to $7.00.
For more information, contact BOSC’s Nehemia Kaufman at +972-4-9907555; IR@boscom.com
BRILLIAN CORPORATION (NASDAQ: BRLC) – $3.45. Twelve-month hi-low has been $12.40 – $1.49. Based in Tempe, AZ with about 85 employees, this HDTV maker has 6.9 million shares outstanding, $16.26 million in total current assets, $38.65 million in total assets, little debt, and $3.8 million in total liabilities. Institutional ownership is around 42%. Two analysts rate the stock a “hold”. http://www.brilliancorp.com
Time for one of those companies that had a rocky 2004, but has had a few recent developments that could make it or break it. Put Brillian Corporation into the Current Portfolio.
Spun off from Three-Five Systems in 2003, Brillian designs and develops large-screen, rear-projection, high-definition televisions (HDTVs) utilizing the industry’s first (and its only provider) Gen II liquid-crystal-on-silicon (LCoS) microdisplay technology. The company markets its HDTVs for sale under the brand names of retailers, including consumer electronics retailers, retail stores, PC manufacturers, and high-end A/V manufacturers. It has established a manufacturing model using third party contract manufacturers to produce its HDTVs which incorporate the LCoS microdisplays that the company makes. BRLC also offers a line of LCoS microdisplay products and subsystems that OEMs can integrate into HDTV products, home theater projectors, and what are called near-to-eye applications, such as head mounted monocular or binocular headsets and viewers for industrial, medical, military, commercial, and consumer uses.
Between January 6 – 9, Brillian will showcase its new six-megapixel 1080p HDTV at the Consumer Electronics Show, in Las Vegas, in exclusive interviews. Now, onto the make or break scenario that popped up in mid-December, which was a two-part deal with JDS Uniphase. Part one was that BRLC sold “certain assets”, that were not detailed, to JDSU for $5.1 million in cash, money that Brillian could use. More important was part two of the pact. The company licensed JDSU’s technology for the production of “light engines”, and it plans to set up a production line and start making them with JDSU’s help. Light engines are key components of HDTVs, and they are also why Brillian took a major hit, recently. JDSU could not get the light engines it needed to get its TVs to market earlier in 2004 and lost a lot of major retail business.
Now, Brillian will move the problem in-house, and, if successful, BRLC believes it can get some TVs to market during this quarter, and many more next quarter. Since JDS Uniphase is helping Brillian, there may be some plausibility to those projections.
For FY2003, ending 12/31/03, revenue was $2.19 million with $18.74 million in losses. During the first nine months of this FY, ending 9/30/03, revenue has been $2.34 million with $16.56 million in losses.
With the JDSU pact this has become a whole new world for Brillian. Can they perform on time and as expected? May be worth a bet.
Our 20-month target for the stock is $5.50 to $6.50.
For more information, contact BRLC at 602-389-8888; investor-relations@brilliancorp.com
The January 20, 2005 Newsletter should be posted on 1/17 or 1/18.
Have a Happy Holiday!!
George