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Hello Readers,
Since the last issue, we closed two more positions, both for some nice gains.
PINNACLE DATA SYSTEMS (3/5/04). Closed position 4/27/04 at $3.88 for a 61% GAIN.
SATCON TECHNOLOGY (12/5/03). Closed position 4/16/04 at $3.92 for a 60% GAIN.
Pinnacle Data Systems worked the way we all dream a stock should work. Hold it for six or seven weeks, have the company announce great earnings, and watch the stock soar over 60% in a few short days. SatCon went on a mild tear on 4/16, which could have meant something big was coming, but, in a sloppy market, why wait for the news; take the gain.
So, what’s botching the markets? To an extent, we can blame higher energy prices, higher interest rates, and what the media says is an unstable situation in Iraq. However, we still feel that the major hangnail is the uncertainty over the November elections, and that’s puzzling, given all of the recent good economic news and earnings reports. One would think that Bush should be a shoo-in. Here’s a crazy thought: If Dubya begins to get a five to 10 point margin over JFK in the polls, look for the markets to come roaring back.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
CE Franklin (CFK) (5/5/01). Releases pretty good 1st QT numbers.
Arotech (ARTX) (6/5/01). Subsidiary completes U.S. Army driving simulator installations in South Korea and Germany.
ViroLogic (VLGC) (7/20/01). Will be releasing quarterly numbers on May 3, the day this Newsletter is posted.
VASCO Security (VDSI) (2/5/02). Says newest version of its authentication server will be available sometime this quarter. Latest numbers show fifth consecutive quarter of profitability and balance sheet still looks good. NOTE: Stock was making a nice move, but, despite good earnings news, the recent market swoon took a toll on the stock price. This was indicative of many of our picks over the last ten days: pretty good numbers and other upbeat news, but the downward pressure of the markets caused prices to sag.
Argonaut (AGNT) (4/20/02). Quarterly numbers not great, but balance sheet remains real viable.
Generex (GNBT) (8/5/02). Receives excellence in technology award for creating a technology that delivers insulin non-invasively.
Cryo-Cell (CCEL) (5/5/03). Awarded exclusive cord blood participation in American baby sampling program.
Art Technology (ARTG) (8/5/03). Movielink selects new components of ATB platform to expand web storefront initiatives. Quarterly numbers are not real good, but balance sheet still looks very healthy.
Targeted Genetics (TGEN) (10/5/03). Completion of $25 million in new financing gives balance sheet much-needed meat.
Active Power (ACPW) (11/20/03) New analyst rankings. Quarterly numbers not bad; balance sheet still looks real solid. Achieves 15-minute runtime milestone. Largest wireless provider in Czech Republic selects ACPW technology.
AVANT Immunotherapeutics (AVAN) (12/5/03). Receives additional DOD contract for clinical testing of plague component for oral anthrax/plague vaccine. Recent balance sheet still looks very healthy. Four AVAN vaccines highlighted at recent vaccines conference.
Actuate (ACTU) (1/5/04). Releases pretty good quarterly numbers and balance sheet still appears very sound; signs over 20 resellers in first quarter of reseller partner program. Stock upgraded by JMP Securities. Extends its scalability on SAP BW.
Analysts Intl. (ANLY) (2/5/04). 1st QT gives profitable results and revenues are above guidance; balance sheet still looks solid.
Somera Communications (SMRA) (2/20/04). Has slight revenue shortfall in first quarter, but balance sheet still appears healthy.
Oplink Communications (OPLK) (2/20/04). 3rd QT of FY04 shows revenue growth and improved results from continuing operations.
OpenTV (OPTV) (3/20/04). Showcases new iTV services. Says launch of Modelstream Plan sets new standards for interactive TV content creation.
Socket Communications (SCKT) (3/20/04). Reports 1st QT of profitability on record revenue of $6.7 million. Stenograph selects SCKT’s cordless technology for wireless court reporting.
NexMed (NEXM) (4/5/04). Announces fifth patent allowance for Femprox.
Management Network Group (TMNG) (4/20/04). Showcases advanced wireless data billing and VoIP conferencing solutions.
Our picks for this Newsletter are two more NASDAQ companies that provide services to the communications industry.
GLENAYRE TECHNOLOGIES, INC. (NASDAQ: GEMS) – $2.32. Twelve-month hi-low has been $4.30 – 90 cents. Based in Duluth, GA, with about 330 employees, this network provider has 66.5 million shares outstanding, $124 million in total current assets, $133.3 million in total assets, little debt, and $43.12 million in total liabilities. Institutional ownership is around 38%. http://www.glenayre.com
A company that has a good-looking balance sheet and that has been improving its bottom line makes us a little excited. That is why we are adding Glenayre Technologies, Inc. to the Current Portfolio. PLEASE NOTE: The company will release its next QT numbers on May 4, right after we have posted this Newsletter, but we do not foresee any major changes to the balance sheet.
Founded nearly 40 years ago and trading on NASDAQ since 1990, Glenayre bills itself as a leading global provider of network-based messaging and communications systems and software that enable such applications as voice messaging, multimedia messaging, and other enhanced telephony services. These next-generation services include voice dialing; voice navigation of voice, fax and email messages; voice-powered access to Internet content; one-number services; voice, fax, and email integration; peer-to-peer messaging; mailbox out-dialing; and one-touch call return over both traditional and IP networks. The company’s product suite operates on its Versera Dynamic Architecture, which is a fully integrated modular platform.
Glenayre’s customers are communications service providers (CSPs), including wireless and fixed network carriers, as well as broadband and cable service providers. So far, more than 200 of them, supporting 51 million subscribers in over 60 countries, have deployed GEMS services. Nortel, Nextel, Verizon, and U.S. Cellular accounted for about 65% of the company’s 2002 revenues.
In March, the company announced a licensing agreement with ISC Technologies. In February, Metrocall Ventures invested in a licensee of Glenayre electronics paging infrastructure technology. Also, in that month, the company announced its new Versera MessageMe message delivery service, an application that allows wireless and wireline subscribers to send voice mail messages to an email address.
For FY2003, ending 12/31/03, revenues were $40.79 million with $1.6 million in net income compared to 2002 revenues of $49.6 million and $7.75 million in losses. Although revenue growth has fallen over the last year, Glenayre expects it to start rebounding during the current quarter due to new products being offered to customers.
This is another bet on whether or not telecoms will continue their new-found growth spurt.
Glenayre appears healthy enough to ride it out for a while.
Our 24-month target for the stock is $4.25 to $5.00.
For more information, call GEMS at 770-283-1000.
GRIC COMMUNICATIONS, INC. (NASDAQ: GRIC) – $3.00. Twelve-month hi-low has been $9.00 – $2.50. Located in Milpitas, CA, with about 250 employees, this Internet service provider has 39.6 million shares outstanding, $34.25 million in total current assets, $91 million in total assets, little debt, and $10 million in total liabilities. Institutional ownership is around 19%. Two analysts rate the stock a “moderate buy” and one as a “hold”. http://www.gric.com If you think broadband is about to blow wide open and you like companies with good balance sheets, then you know why we have added GRIC Communications, Inc. to the Current Portfolio.
Founded in 1994 and trading on NASDAQ since 1999, GRIC bills itself as a leading provider of secure managed broadband and global access solutions for enterprises and service providers. The company provides remote Internet access, managed security services, both virtual private network (VPN) and remote end-point security, as well as mobile broadband services for customers requiring mobile office communications capabilities worldwide. The combination of GRICtraveler server software, GRICMobileOffice client software and its settlement services allow GRIC customers to provide their end-users with low-cost access to the Internet worldwide by dialing local numbers.
GRIC’s customer base includes more than 1600 corporate customers and 10 of the world’s top 14 service providers. Its global TierOne Network encompasses more than 40,000 wired and wireless access points in about 170 countries. This includes almost 7400 mobile broadband access points, primarily in hotels.
A few weeks ago, GRIC formed a strategic alliance with Getronics whereby that company will make available to its enterprise customers GRIC’s portfolio of solutions. In March, the Kyocera Asia Pacific Pte Ltd, Singapore implemented the GRIC mobile office solution. Also, in that month, GRIC announced it had inked a reseller agreement with Hitachi Information Systems. Then, in February, the La Petite Academy selected GRIC to securely connect its 656 academies across 36 states.
For FY2003, ending 12/31/03, revenues were $41.2 million with $1.9 million in losses versus 2002 revenues of $34.7 million with $16.8 million in losses.
In February, GRIC issued revenue guidance below analysts’ expectations, which may account for the current stock price. The company cited the continued instability of the service provider market, but maybe GRIC is being overly cautious?
Our 24-month target for the stock is $5.50 to $6.00.
For more information, contact GRIC at 408-955-1920; investor@gric.com
Look for the May 20, 2004 Newsletter to be posted on 5/17 or 5/18.
Thank you,
George