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Hello Readers,
Since the last Newsletter, we closed another position, for a very nice gain.
THERMA-WAVE (5/5/05). Closed position 6/23/05 at $2.50 for a 76% GAIN..
Therma-Wave shot up on news that it had retained Needham & Co. to advise the company on its strategic financial objectives. We suspect, as probably others did, that TWAV may be looking for a buy-out as one option, and, yes, a 76% gain feels pretty good.
In the previous Newsletter, we were lamenting the impact that $50 oil could have on the markets; now we need to worry about $60 oil!! And then, throw in another Fed rate hike. Despite it all, we still could come away with a decent summer rally, because most every other indicator appears to be promising.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Arotech (ARTX) (6/5/01). Bags several more government contracts. This is on the “Endangered List”.
Generex (GNBT) (8/5/02). Releases a slew of upbeat news about new money raised and clinical trial results, but stock goes nowhere. Still on the “Endangered List”.
Art Technology (ARTG) (8/5/03). Enhances ATG Commerce. American Eagle Outfitters selects ATG Catalog search technology. ATG technology also chosen by UK Commission for Public and Patient Involvement in Health.
Insmed (INSM) (11/5/03). Tercica and Genentech drop injunction filing. Stock upgraded by CE Unterberg Towbin.
Actuate (ACTU) (1/5/04). ACTU BIRT receives “Ready for IBM Rational Software” validation.
NexMed (NEXM) (4/5/04). Coverage initiated by Rodman & Renshaw.
Palatin (PTN) (4/5/04). Settles claim in drug license dispute with Competitive Technologies. PTN will pay about $2 million in cash/stock.
AVI BioPharma (AVII) (4/20/04). Submits IND for NEUGENE Antisense drug targeting hepatitis C virus.
Glowpoint (GLOW) (5/20/05). Teamed up with Sony to provide broadcast services for the 2005 NBA draft. Set to join the new Russell Microcap Index.
Network Engines (NENG) (6/5/04). Sets earnings release for July 21. Signs three new channel partners.
AIXTRON (AIXG) (7/5/04). Is again within the 10 BEST confirmed by VLSI customer satisfaction survey.
Avanex (AVNX) (7/20/04). Gets a bad article in The Motely Fool and we must concur with it. AVNX is now on the “Endangered List”.
TriPath (TRPH) (8/5/04). Announces new flat-panel TV design wins with several manufacturers in Taiwan and China.
Intraware (ITRA) (9/20/05). First QT results okay; balance sheet still looks good. Company wants to do a 1 for 10 reverse split; these are not usually good for current shareholders.
Trikon (TRKN) (10/5/04). More registration filings concerning merger with Aviza Technology.
Net2Phone (NTOP) (11/5/04). Talk about unpleasant surprises. IDT, NTOP’s controlling shareholder, plans to acquire the rest of the company at $1.70 a share, which means, if that offer holds, we will be closing this at over a 50% loss. It’s not final yet, but it is appearing that IDT will be getting what looks to be a good deal rather cheaply.
Applied Micro Circuits (AMCC) (11/20/05). Several releases about various products. AMCC Multilane connectors named connectivity product of the year by Storage Magazine.
B.O.S. (BOSC) (1/5/05). Completes private placement offering that will garner $2.2 million.
InsWeb (INSW) (1/20/05). Launches major online insurance agent lead program.
Savient Pharma (SVNT) (2/5/05). Joins Russell 3000 and new Russell Microcap indexes. Provides update on closing of sale of Global Biologics to Ferring.
Mindspeed (MSPD) (2/20/05). Mindspeed and Firmix speed design of PBX equipment based on Comcerto VoIP processors and Asterisk software.
Tumbleweed (TMWD) (3/5/05). Unleashes Mail Gate antispam appliance. Coverage initiated by CE Unterberg Towbin. Secures major Federal defense, intelligence and civilian contract wins.
E-LOAN (EELN) (3/5/05). Joins Russell indexes. Surpasses $25 billion milestone.
Loudeye (LOUD) (4/5/05). Granted patent for digital encoding technologies.
Verticalnet (VERT) (4/5/05). MasterBrand Cabinets expands use of VERT Spend Manager.
Vion Pharma (VION) (5/20/05). Coverage initiated by Wedbush Morgan.
Sirenza Microdevices (SMDI) (6/5/05). Another one of our picks joining the new Russell Microcap index.
Commerce Energy (EGR) (6/5/05). Selects Triple Point for power and gas supply and risk management. Signs contract with Quest Asset Management for electric services. Reports year over year financial improvement and restates 2nd QT.
Tele Systems (TSYS) (6/20/05). Introduces “TCS VoIP Verify”. Expands prepaid wireless service patent portfolio.
Our picks for this Newsletter are another energy-type play and an Internet software and service provider.
ELECTRIC CITY CORPORATION (AMEX: ELC) – 92 cents. Twelve-month hi-low has been $1.98 – 81 cents. Based in Elk Grove Village, IL, with about 25 employees, this electrical equipment company has 41.8 million shares outstanding, $4.6 million in total current assets, $7.19 million in total assets, and $5.9 million in total liabilities, of which $152,000 is long-term debt. Institutional ownership is around 27%. One analyst rates the stock a “strong buy” and another has it as a “hold”. http://www.elccorp.com
Okay, the balance sheet isn’t as solid as we’d like, but we can’t help but think that companies like Electric City Corp. that profess to save energy should have a nice ride sooner rather than later. And, we can breathe a little easier since the company raised around $5.6 million through equity funding at the end of April (this is not reflected in the current balance sheet).
Founded in 1998 and public for over five years, Electric City develops, manufactures, and integrates energy savings technologies and building automation systems, as well as developing negative power systems. Operating through two segments, the company has close to 1,000 customer installations. The Energy Technology segment markets the energy saving technologies primarily to commercial and industrial customers for applications in commercial buildings, factories, and office structures, as well as street lighting and parking lot lighting. ELC’s products consist of the Energy Saver, the Global Commander, and LightMaster energy conservation technologies. It also independently develops scalable, negative power systems under the trade name Virtual “Negawatt” Power Plan (VNPP), which ELC claims is the electric industry’s first known competitive, dispatchable, measurable and verifiable demand response system. The company recently announced its first VNPP development – a 50 megawatt negative power system for ComEd in northern Illinois.
ELC’s Building Control and Automation segment provides integration of building and environmental control systems for commercial and industrial customers. Leading firms that hold investments in ELC include Cinergy, CIT, Morgan Stanley, and Security Benefit. Earlier investors included Duke Energy and El Paso.
In early May, Electric City finalized acquiring Maximum Performance Group, a provider of web-based, real-time energy asset management solutions. Maximum’s customers include Duane Reade Drugs, P.C. Richard & Son, and Modell’s Sporting Goods.
For FY2004, ending 12/31/04, revenue was $2.4 million with $5.16 million in net losses. During the 1stQT of FY2005, ending 3/31/05, revenue was $741,274 with a net loss of $334,800; if these results had included the VNPP now under development with ComEd, this would have been ELC’s best quarter since 2000, according to the company.
ELC had a rough couple of years, but with its first VNPP now underway, and with the recent acquisition of Maximum Performance, the company may see better days. Let’s hope they get their stock price to over a dollar, soon, so as not to face de-listing hassles.
Our 20-month target for the stock is $1.50 to $2.00.
For more information, contact ELC at 847-437-1666; info@elccorp.com
INNODATA ISOGEN, INC. (NASDAQ: INOD) – $2.85. Twelve-month hi-low has been $10.07 – $2.30. Located in Hackensack, NJ, with over 7400 employees, this Internet software and service provider has 22.7 million shares outstanding, $30.96 million in total current assets, $36.88 million in total assets, little debt, and $9.8 million in total liabilities. Institutional ownership is around 12%. One analyst rates the stock a “moderate buy”. http://www.innodata.com
And so, we look for another one with a decent-looking balance sheet that could be a turnaround situation and Innodata Isogen, Inc. seems to fit. The company has already said that the second quarter won’t be anything to cheer about, but it expects the second half of 2005 to be better.
Founded in 1988 and public for over a dozen years, Innodata claims to be a leading provider of editorial outsourcing services. It provides digital assets services and solutions that encompass the manufacture of content, as well as the design, implementation, integration, and deployment of the systems used to manage the content. In sum, the company provides outsourced content services and content-related IT professional services. The company’s outsourced content services focus on fabrication services and knowledge services. Fabrication services include digitations and data conversion services, content creation and extensible markup language services. Knowledge services include content enhancement, hyperlinking, indexing, and general editorial services. INOD’s IT services hone in on the design, implementation, integration, and deployment of systems used to author, manage, and distribute content.
Innodata serves organizations in four content-rich segments: Publishing, media, and information services; culture and education; government; and global enterprise. Some of the company’s customers include The Federal Reserve, U.S. Post Office, The New York Times, Lexis Nexis, Xerox, Nortel, Primerica, Lockheed-Martin, The Smithsonian, University of Virginia, and Hamilton Sundstrand.
Innodata is one of those quiet companies that doesn’t crank out many news releases, except for quarterly financial reports. For FY2004, ending 12/31/04, revenue was $53.9 million with $7.85 million in net income. During the first QT of 2005, ending 3/31/05, revenues were $11.19 million with $299,000 in net income.
Innodata has had a rough first half of 2005. We’re counting on the company to see an improvement for the balance of the year.
Our 24-month target for the stock is $5.50 to $6.00.
For more information, contact INOD’s Al Girardi at 201-488-1200, ext. 5392;
agirardi@innodata-isogen.comm
Look for the July 20, 2005 Newsletter to be posted on 7/18 or 7/19.
Have a Happy Fourth!
George