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Hello Readers,
Since the last Newsletter, we closed five more positions; three for gains and two for losses.
AETRIUM (1/5/09). Closed position 10/14/09 at $2.97 for a 65% GAIN.
SANTARUS (11/20/07). Closed position 10/8/09 at $3.70 for a 55% GAIN.
THESTREET.COM (4/5/09). Closed position 10/8/09 at $2.97 for a 52% GAIN.
NOVA MEASURING (11/5/04). Closed position 10/8/09 at $2.72 for a 26% LOSS.
HANA BIOSCIENCES (5/5/07). Closed position 10/8/09 at 60 cents for a 67% LOSS.
For the last few months, Aetrium moved steadily upward on no real earth-moving news and finally pierced our 50%-plus threshold. Actually, the same spoke true of Santarus and TheStreet.com. We finally closed Nova Measuring for the simple reason that it had been in the Current Portfolio way too long, and did not appear it was going to move much more over the next five years; and we also closed Hana Biosciences for a loss.
The most astute comment we have recently heard is “the only tree that ever kept growing was the one in Jack and the Beanstalk”. Translation? This market has become way too wacky, and, if the Fed insists on keeping rates at near-zero, it will be creating its third bubble in ten years – the first being the tech bubble, the second was in housing, and the next one appears to be in equities. Stocks have not been trading on the fundamentals. They have primarily been bought because people can only get 1% to 2% on a bank CD.
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 substantial.
Avanir Pharmaceuticals (AVNR)(10/5/09). Zenvia shows promise for MS-related pain. Company to get new patent for Zenvia that’s good through 2025.
Solta Medical (SLTM)(10/5/09). Gets FDA 510(k) clearance of new Fraxel re:store dual laser system.
BioSante Pharmaceuticals (BPAX)(9/20/09). Completes merger with Cell Genesys.
Drugstore.com (DSCM)(9/5/09). To announce 3rdQT results on October 20.
Adept Technology (ADEP)(9/5/09). To demonstrate Quattro s650h robot at Japan machinery show October 20-23.
Performance Technologies (PTIX)(7/20/09). To release 3rdQT results on October 27.
Salary.com (SLRY)(7/5/09). Sets earnings call for November 5.
USA Technologies (USAT)(6/5/09). Surpasses $5 million a month in processed cashless transactions.
Ligand Pharmaceuticals (LGND)(2/20/09). PROMACTA awarded 2009 Prix Galien for best biotechnology product.
Market Leader (LEDR)(12/20/08). To release quarterly results October 27.
The Orchard (ORCD)(11/20/08). Teams with Intergroove to give top independent artist and labels physical distribution in Europe.
Oilsands Quest (BQI)(10/20/08). Provides bitumen resource estimate update and results of annual meeting. StockPreacher.com issues trading outlook on company.
Akeena Solar (AKNS)(10/20/08). Andalay AC System recognized as a 2009 Breakthrough Product by Popular Mechanics. To present at the annual Piper Jaffray solar symposium on October 28. Schedules 3rdQT results for October 22.
SCM Microsystems (SCMM)(10/5/08). New CHIPDRIVE Time Recording 6.0 available. SCM and Dai Nippon Printing expand cooperation to address Japanese IT security. Ships smart card readers to support Spanish government eID program.
Planar Systems (PLNR)(9/20/08). Sets 4thQT and FY earnings call for November 17.
Insure.com (NSUR)(9/5/08). Sells its domain name and related assets for $16 million, which may be a record price for a domain name. Says its will change corporate name to LiveQuotes, Inc.
Energy Focus (EFOI)(6/5/08). Army and Air Force place $256,000 LED lighting order with company. Finalizes terms for its $3.5 million rights offering.
Bridgeline Software (BLSW)(6/5/08). Receives three awards for outstanding achievement in website development.
Microvision (MVIS)(5/20/08). Inks large customer for its laser Pico projector.
Ziopharm Oncology (ZIOP)(5/5/08). Stock makes nifty turnaround on news that cancer drug shows promise in Phase II trial.
Biolase (BLTI)(4/5/08). Wins Deloitte Tech Evolution Award.
ActivIdentity (ACTI)(3/5/08). 4TRESS AAA server for remote access enables secure telecommuting for H1N1 flu-affected employees. Unveils new device administration and security capabilities for its Credential Management System.
Amicas (AMCS)(1/20/08). Launches major new version of Radiology Information System.
Nanophase (NANX)(1/20/08). Sets earnings call for October 28.
Move, Inc (MOVE)(1/5/08). Sets earnings call for November 5. Move and Builder Homesite launch Builders Digital Experience, a new home marketing venture.
Linktone (LTON)(11/5/07). Enters into mobile video pact with China National Radio Mobile Media.
American Technology (ATCO)(10/5/07). Plans to report second consecutive year of record FY revenues; sees sales growth in FY 2010.
XATA (XATA)(9/20/07). To launch next-gen Fleet Management tools in for-hire market.
Alliance Fiber Optic (AFOP)(7/20/07). Sets earnings confab for October 21.
TTI Telecom (TTIL)(3/5/07). Announces special shareholder meeting for November 17.
Endologix (ELGX)(1/20/07). Sued by Cook Medical over stent grafts, which company says is without merit.
Lantronix (LTRX)(12/5/06). Receives NASD minimum bid notice. Launches XPort Pro, world’s smallest Linux networking server.
YM Biosciences (YMI)(11/5/06). Offers to merge with Cytopia, an Aussie cancer-focused development company.
The Inventure Group (SNAK)(3/5/06). Sets earnings results for October 21.
8×8 (EGHT)(1/20/06). To present at 39th annual TechAmerica confab on November 3. Sets earnings call for October 28. Inks government teaming pact with Level 3.
RAE Systems (RAE)(10/5/05). Introduces AreaRAE for atmospheric monitoring in oxygen depleted work sites.
Our picks for this Newsletter are a life sciences company and a maker of diversified electronics, both trading on NASDAQ.
HELICOS BIOSCIENCES CORPORATION (NASDAQ: HLCS) – $2.66. Twelve-month hi-low has been $3.54 – 21 cents. Based in Cambridge, MA, with about 70 employees this life science company has 64.7 million shares outstanding, $16.21 million in total current assets, $19.14 million in total assets, and $9.23 million in total liabilities, of which $3.36 million is long-term debt. Institutional ownership is around 17%. One analyst has the stock as a “hold”. www.helicosbio.com
Yes, there are times when the balance sheet is not quite what we like to see, but the company recently has had what appears to be breakthrough news, as is the case with Helicos BioSciences Corporation. It should be noted that Helicos plans to raise another $10 million through a secondary offering, which should add some heft to the balance sheet.
Founded in 2008, and public for less than three years, Helicos focuses on genetic analysis technologies for the research, drug discovery, and clinical diagnostic markets. The company’s products are based on its proprietary True Single Molecule Sequencing (TSMS) technology, which enables the analysis of genetic material by directly sequencing single molecules of DNA or single DNA copies of RNA. Its Helicos genetic analysis platform consists of HeliScope single molecule sequencer; Heliscope analysis engine, an image analysis computer tower; associated reagents, which are chemicals used in the sequencing process; and disposable supplies. The company’s Helicos genetic analysis system is used for various applications in the areas of studying the human genome, disease association studies, cancer research, pharmaceutical research and development, infectious diseases, autoimmune conditions, clinical diagnostics, and agricultural research. Its customers include genome sequencing centers, biotech and pharmaceuticals, and academic medicals centers and research institutions.
At the end of September, Helicos caught a lot of attention when it announced that its TSMS technology was used to directly sequence individual RNA molecules in a recent study that the company said will appear in a future issue of Nature Magazine. Helicos claims that TSMS is the only commercially available method that can directly sequence RNA molecules without copying their complementary DNA, which can be difficult and create errors. Also, at around the same time, Helicos announced a scientific collaboration with Correlagen Diagnostics, which plans to use the Helicos genetic analysis system for high-content genetic tests based on resequencing broad panels of genes involved in disease areas such as cardiology, endocrinology, neuropsychiatry, and immunology.
Helicos is pretty typical of most small biotech R&D companies in that it has little revenues and mega-losses. For example, in the quarter ending 6/30/09, revenue was $371,000 with $6.3 million in losses.
We can’t help but think there is more here than meets the eye.
Our 24-month target for the stock is $4.50 to $5.00.
For more information, contact HLCS’ Susan Shepard at 617-264-1850.
QUALSTAR CORPORATION (NASDAQ: QBAK) – $1.95. Twelve-month hi-low has been $2.99 – $1.35. Located in Simi Valley, CA, with about 80 employees, this maker of diversified electronics has 12.3 million shares outstanding, $29.12 million in total current assets, $36.59 million in total assets, little debt, and $2.1 million in total liabilities. Institutional ownership is around 28%. Two analysts have the stock as a “hold”. www.qualstar.com
Not all companies have a real sexy story, and Qualstar Corporation is one of them. Yes, the company’s revenues were hit over the past year, like many others, but some new areas show some promise. It also helps that they have a pretty good-looking balance sheet.
Public since 1984, and trading on NASDAQ for nearly nine years, Qualstar makes and sells automated magnetic tape libraries used to store, retrieve, and manage electronic data primarily in network computing environments. Tape libraries and power supplies comprise Qualstar’s two operating segments. Its tape libraries consists of cartridge tape drives, tape cartridges, and robotics to move the cartridges from their storage locations to the tape drives under software control. The company also offers ancillary products related to these tape libraries, such as tape media, tape magazines, cables, bar code labels, and fiber channel adapters. Qualstar’s tape libraries provide data storage solutions for organization requiring backup, recovery, and archival storage of critical data. The company sells switching power supplies that are used to convert alternate line voltage to direct current for use in electronic equipment, such as telecommunications equipment, servers, routers, switches, wireless systems, and gaming devices.
Qualstars’ products are compatible with operating systems, including UNIX, Windows, and Linux. Its tape libraries are also compatible with a range of storage management software packages, such as those supplied by Computer Associates, EMC, IBM, Symantec, CommVault, and BakBone Software. The company offers tape libraries for two tape drive technologies, LTO and AIT.
The rising product star at Qualstar may be its N2Power technology, which saw a 38% rise in this product’s revenues year-over-year. N2Power’s latest green packaging technology is the XL375 series that supposedly delivers more power in less space, while reducing wasted input power and lowering cooling requirements. Its patented design leaves the heat in the load, not in the power supply, reducing power consumption and improving reliability.
For FY2009, ending 6/30/09, revenue was $17.89 million with $2.56 million in losses compared to FY2008 revenue of $21.46 million and $753,000 in losses.
As we said, Qualstar has been hit by the recession just like many others, but the company has shown an ability, over the years, to bounce back.
Our 24-month target for the stock is $3.50 to $3.75.
For more information, contact QBAK’s William Gervais at 805-583-7744.
Look for the November 5, 2009 Newsletter to be posted on 11/2 or 11/3.
Thank you,
George