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Happy 2011 Readers!
Since the last Newsletter, we closed eight more positions; five for gains and three for losses.
ACHILLION PHARMACEUTICALS (3/5/10). Closed position 12/23/10 at $3.64 for a 58% GAIN.
PEREGRINE PHARMACEUTICALS (11/5/10). Closed position 12/23/10 at $2.35 for a 55% GAIN.
CLEARFIELD (6/5/10). Closed position 12/20/10 at $4.38 for a 70% GAIN.
AETERNA ZENTARIS (6/20/10). Closed position 12/20/10 at $2.00 for a 53% GAIN.
DURECT CORP (4/20/09). Closed position 12/20/10 at $3.67 for a 53% GAIN.
HELICOS BIOSCIENCES (10/20/09). Closed position 12/13/10 at 16 cents for a 94% LOSS.
OXIGENE (10/20/09). Closed position 12/23/10 at 22 cents for a 83% LOSS.
NTN BUZZTIME (7/5/06). Closed position 12/23/10 at 39 cents for a 73% LOSS.
For the last few months, Clearfield, Durect, Achillion, and Peregrine all had been moving upward, and, then, as if they were all part of a singulary, they all popped through our 50%-plus target, and all surged on no apparent news. AEterna Zentaris shot up when the FDA okayed the company’s protocol on the growth hormone study. And we closed Helicos, OxiGene, and NTN Buzztime for losses.
If you ask us where the markets will end in 2011, we, like you, have not a clue. However, we do know that, thanks to the Fed’s suicidal QE2 policy and the 2% payroll tax cut we mentioned in the last Newsletter, the economy should perk up. That means the markets should see some great upsides, but also expect some gut-wrenching downdrafts as investors begin to have even more angst over government debt.
Here are the headlines since the last Newsletter about companies in our Current Portfolio; dates in parentheses are when we first recommended them. We are not giving updates about companies on the “Endangered List” unless we feel the news to be very significant.
Trident Microsystems (TRID)(12/20/10). To host investor briefing and webcast at CES 2011 on January 6.
Cereplast (CERP)(12/20/10). Secures $5 million in growth capital.
RELM Wireless (RWC)(11/5/10). Successfully completes testing of P25 trunking interoperability on competitor’s infrastructure.
BluePhoenix Solutions (BPHX)(10/20/10). Awarded $1 million IT modernization contract by a U.S. insurance group.
Threshold Pharmaceuticals (THLD)(8/5/10). Announces promising early Phase 1 clinical trial results in patients with advanced leukemias.
Rexahn Pharmaceuticals (RNN)(7/20/10). Awarded patent in Japan for RX-0047.
NAPCO Security Technologies (NSSC)(7/5/10). CEO says that bad economy is boosting security business.
Adolor (ADLR)(5/5/10). Ends drug development alliance with Pfizer.
China Direct Industries (CDII)(4/5/10). Stock gets a nice pop on decent FY numbers; balance sheet still looks good.
Novavax (NVAX)(4/5/10). Receives FDA clearance to launch Phase 1 RSV vaccine clinical trial.
Solta Medical (SLTM)(10/5/09). Ships one millionth tip for thermage and fraxel devices.
BioSante Pharmaceuticals (BPAX)(9/20/09). Raises $16.9 million in secondary offering.
Performance Technologies (PTIX)(7/20/09). Announces expense reduction program of up to $4.5 million.
BioClinica (BIOC)(8/5/09). Announces share repurchase program. GlaxoSmithKline standardizes on BIOC Trident IWR solution.
Bridgeline Digital (BLIN)(6/5/08). End of FY results not bad, not great; balance sheet still seems okay. Says number of iAPPS licenses sold soars by 145%.
Hollywood Media (HOLL)(1/5/08). Sells Broadway ticketing business.
Move, Inc (MOVE)(1/5/08). To present at investor conferences at the Citi annual global on January 5 and at the Needham Growth on January 13.
Linktone (LTON)(11/5/07). Results of annual shareholders meeting. Announces $20 million investment in senior secured notes of Aerospace Satellite Corp. Holding B.V.
Our picks for this Newsletter are an AMEX-listed gold miner for you gold bugs, and one of the most well-known of the NYSE-listed telecomms.
GREAT BASIN GOLD LTD. (AMEX: GBG) – $2.94. Twelve-month hi-low has been $3.32 – $1.55. Based in Vancouver, BC, Canada, and in South Africa with about 230 employees, this gold-miner has 408.4 million shares outstanding, $60.1 million in total current assets, $741.91 million in total assets, and $323.44 million in total liabilities, of which $203.38 million is long-term debt. Institutional ownership is around 47%. Two analysts rate the stock a “strong buy” and one as a “moderate buy”. www.greatbasingold.com
This is one of those rare times when we throw the fundamentals out of the window. About a month ago, Great Basin Gold, Ltd. was one of four or five gold-mining companies recommended in a Barron’s article about gold stocks. Recently Deutsche Bank predicted $1600 gold by year’s end and Goldman Sachs called for $1690 gold. It is now hovering at $1400 an ounce.
Founded in 1986, and public for over ten years, Great Basin Gold acquires, explores and develops gold properties and is now focusing on two gold mines, which are the Hollister gold project located on the Carlin Trend in Nevada and the Burnstone gold mine located in the Witwatersrand Basin goldfield of South Africa. The company claims to be in late-stage development in what are known as the world’s two most well-known gold producing regions with a resource base of 13 million ounces in the measured and indicated category. Great Basin Gold is also conducting early-stage exploration on a number of other prospects, mainly in Tanzania and Mozambique.
At the end of November, the Federal Mine Safety and Health Administration (MSHA) ruled that a potential pattern of violations exists at Hollister and set out a process by which the mine may work with the agency to avoid any further sanctions. In other words, the mine is on a safety watch list. However, the company is confident that it will prevail since most of the violations are alleged violations. The good news here is that the MSHA action may have prevented the stock from going a lot higher. So, once these issues are resolved, then the stock could play catch-up rather quickly.
Since Great Basin Gold is mostly an exploratory company, losses far exceed revenues. For example, at the end of the 3rdQT for the current FY, ending 9/30/10, revenue was $12.23 million with $23.72 million in losses.
This is strictly a play on the price of gold. If you believe the world is on the brink of financial ruin and/or that those major bankers are right about the future price of the metal, then this may be worth a shot. A rising tide lifts all ships, as the saying goes.
Our 24-month target for the stock is $5.00 to $5.75.
For more information, call GBG at 604-684-6365.
SPRINT NEXTEL CORPORATION (NYSE: S) – $4.23. Twelve-month hi-low has been $5.31 – $3.10. Based in Overland Park, KS, with about 40,000 employees, this wireless telecomm has 3 billion shares outstanding, $8.59 billion in total current assets, $55.42 billion in total assets, and $37.33 billion in total liabilities, of which $20.29 billion is long-term debt. Institutional ownership is around 88%. Seven analysts rate the stock a “strong buy”, two as a “moderate buy”, 15 as a “hold”, one as a “moderate sell”, and two as a “strong sell”. www.sprint.com
And yes, Sprint Nextel Corporation is another one where we have thrown our usual regard for fundamentals out of the window. Besides the two dozen analysts who have the stock as a “buy” or a “hold”, what really caught our eye was that David Einhorn is buying the stock. Some of you know him as the head of the $7 billion hedge fund Greenlight Capital, but most remember him as the guy who made the historic short call on Lehman in 2008 when everyone thought he was crazy.
Founded in 1899 under various predecessors, and public for nearly 30 years, Sprint Nextel offers wireless and wireline products and services in the U.S., Puerto Rico, and the U.S. Virgin Islands. Its wireless segment provides wireless mobile voice and data transmission services on networks that utilize CDMA and iDEN technologies as well as offering fourth generation (4G) wireless services. These include Internet access and messaging, email services, wireless photo and video offerings, and mobile entertainment applications. The wireline segment provides wireline voice and data communications services, including domestic and international data communications using various protocols, such as multiprotocol label switching technologies, Internet protocol (IP), asynchronous transfer mode, IP-based frame relay, managed network services, VoIP, and traditional voice services.
Back to Einhorn. He thinks the company has had a tumultuous past, which is an understatement, but is poised for a turnaround, citing improved churn, reputation, handset offerings, and customer service. He also stresses Sprint Nextel’s vast spectrum and thinks that the company can gain market share from such as a vast network; in short, Einhorn thinks this is a real estate play in spectrum.
For FY2009, ending 12/31/09, revenue was $32.26 billion with $2.44 billion in losses. During the first nine months of FY2010, ending 9/30/10, revenue was $24.26 billion with $2.54 billion in losses.
At first blush, this one isn’t for the feint of heart, but we like the fact their are two dozen analysts behind the stock, and also that Einhorn guy.
Our 24-month target for the stock is $7.50 to $8.00.
For more information, contact S at 703-433-4000.
Look for the January 20, 2011 Newsletter to be posted on 1/17 or 1/18.
HAPPY NEW YEAR!
George