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New Year’s Greetings,
We had hoped to salute this Newsletter with “Happy New Year!”, but, as we enter 2008, there are a lot of BIG IFS hanging over the markets. And, again, we all know what they are, by now. The mortgage/credit mess continues to unfold with a new shoe dropping almost every day. Oil is nearing $100 and looks poised to go higher. The Fed is not accommodating the markets. Then, there is Hillary and whoever the other guy will be. And lately, leaders are being killed off in the Middle East.
As we have echoed for over the last month, our Current Portfolio is the worst it has ever been in our nearly eleven years of publishing. The simple reason being that small stocks have been totally trashed since August. To be trite, a lot of babies have been thrown out with the bath water. So, again, we ask ourselves the question, “Is it time to do some bottom fishing?”. We suspect it may be soon, because, at some point, the carnage will end. Let’s see how the markets trade during the first few weeks of January, which is usually a market barometer for the year.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them. AND, as with the last Newsletter, there are not many updates because of the holidays.
Hollis-Eden Pharmaceuticals (HEPH) (12/20/07). Announces Cystic Fibrosis Foundation Therapeutics selects TRIOLEX (HE3286) as a next-generation oral anti-inflammatory drug candidate. And yes, this sort of news should have sent the stock higher, but in this market, well….
Sunesis Pharmaceuticals (SNSS) (11/5/07). Company and the Multiple Myeloma Research Consortium form collaboration to study SNS-032 in multiple myeloma.
American Technology (ATCO) (10/5/07). Receives initial LRAD and LRAD-R orders from India-based oil and gas companies. Receives opening $1.1 million LRAD-R order for critical infrastructure protection project in the UAR. Expects to report improved FY2007 revenue and operating results. Once again, this is all pretty good news, but the stock went down a little, probably because of the market climate.
XATA (XATA) (9/20/07). Agrees to acquire GeoLogic for $17.5 million, of which 87% will be in the form of cash and only 2% in the form of common stock. GeoLogic provides MobileMax wireless technology aimed at the trucking industry.
Wave Systems (WAVX) (9/5/07). Named reader trust finalist in 2008 SC Magazine awards program.
SIGA Technologies (SIGA) (8/20/07). Gets an upbeat mention in a Motley Fool article.
Radcom (RDCM) (7/20/07). Signs agreements for $2.5 million private placement, of which $1.65 million will come from company’s chairman.
Alliance Fiber Optic (AFOP) (7/20/07). Roth Capital gives the stock a “buy” rating.
Heska (HSKA) (7/5/07). Amends agreement with AgriLabs.
Pharmacyclics (PCYC) (6/20/07). Stock gets clocked pretty badly as FDA rejects Xcytrin for treating lung cancer brain metastases.
Alphatec (ATEC) (6/20/07). Acquires exclusive worldwide license for innovative pedicle screw technology.
Xenonics (XNN) (6/5/07). Reports FY2007 results, which were about what the company forecast; balance sheet still looks fair. Gets additional $1.4 million purchase order for its NightHunter illumination systems.
Oncolytics (ONCY) (6/5/07). Completes patient enrolment in U.K. Phase 1a/1b combination REOLYSIN/radiation clinical trial.
UQM Technologies (UQM) (2/5/07). Company’s newly introduced 150 kW propulsion system selected for advanced hybrid bus development project by Flint, MI Transportation Authority.
Lantronix (LTRX) (12/5/06). Receives NASDAQ notice regarding minimum bid price rule; this doesn’t seem like a worry, for now. IntelliBox recognized as a Top 30 technology innovation by Security Sales & Integration Magazine.
WJ Communications (WJCI) (12/5/06). Like Lantronix above, this, too, receives NASDAQ notice, which, for now, doesn’t seem worrisome. If the market carnage continues, we may see some more of these notices.
YM Biosciences (YMI) (11/5/06). Announces that Nimotuzumab colorectal cancer trial first cohort is closed to accrual.
Hydrogenics (HYGS) (9/20/06). Selected to provide hydrogen generation system to Air Liquide Canada to support BC Transit’s Hydrogen Highway.
02Diesel (OTD) (5/20/06). Dutton Associates gives the stock a “speculative buy” rating. This is still on our “Endangered List”.
Pharmos (PARS) (4/20/06). President/COO resigns. This is on the “Endangered List”.
Lipid Sciences (LIPD) (2/20/06). Request to list on NASDAQ Capital Market approved. Concludes enrollment in HDL therapy clinical trial.
Digital Angel (DOC) (12/20/05). Merger with sister subsidiary Applied Digital should be completed by the time you read this. New entity will retain Digital Angel name and trade on NASDAQ under symbol DIGA.
North American Scientific (NASI) (8/5/05). Announces extension of loan agreements to February 1. This is on the “Endangered List”.
B.O.S. (BOSC) (1/5/05). Announces advanced negotiations for acquiring assets of Dimex Systems Ltd.
Nova Measuring Instruments (NVMI) (11/5/04). To present at Needham 10th Annual investor confab on January 10.
Aviza Technology (AVZA) (10/5/04). Will present at Needham conference on January 9.
Our picks for this Newsletter both trade on NASDAQ. One provides services in the entertainment industry, while the other is a well-known entity in the real estate business.
HOLLYWOOD MEDIA CORPORATION (NASDAQ: HOLL) – $2.70. Twelve-month hi-low has been $4.75 – $2.24. Based in Boca Raton, FL, with about 200 employees, this entertainment marketing company has 33.9 million shares outstanding, $65.98 million in total current assets, $101.7 million in total assets($30.24 million is Goodwill), little debt, and $39.34 million in total liabilities. Institutional ownership is around 67%. One analyst rates the stock a “strong buy” and one has it as a “hold”. www.hollywood.com
Our thinking here is that even if we are in some sort of economic downturn, or even a recession, people will still want to be amused, so, with its pretty good-looking balance sheet and an established business, Hollywood Media Corporation is added to the Current Portfolio.
Founded in 1993, and public for over six years, Hollywood Media, or for brevity’s sake HOLL, provides information, data, news and other content, and ticketing services covering the entertainment, Internet, and media industries in the U.S., U.K., and Canada. It operates in five segments:
Broadway Ticketing is comprised of Broadway.com, 1-800-BROADWAY, Theatre Direct International (TDI), and U.K.-based Theatre.com. These services sell live theater tickets and related products and services covering shows on Broadway, off-Broadway, and in London’s West End theater district. Ad Sales includes Hollywood.com and CinemasOnline. Hollywood.com generates revenue by selling advertising on its website, and also receives commission revenue for advertising sold by its ad team on MovieTickets.com while CinemasOnline maintains websites for theaters and cinemas in exchange for the right to sell advertising on such sites. Cable TV Division includes Hollywood.com Television (HTV) and Broadway.com Television (BTV), which are free VOD channels offering information on the entertainment industry. Intellectual Properties Business includes a book development and book licensing business owned and operated by their 51% subsidiary, Tekno Books, which develops and executes book projects, frequently with best-selling authors, such as Dean Koontz, Tom Clancy, Robert Ludlam, and Scott Turow. MovieTickets.com, which we suspect has been used by most of you, is an online ticketing service owned by a joint venture formed by the company and several major movie exhibitor chains and HOLL currently owns 26.2% of equity.
During November, Broadway performances were cancelled for 19 days because of the stagehands’ strike and this will probably impact the earnings report for the quarter, however, HOLL says that the ticketing business has now returned to double-digit sales growth. In early December, the company announced a new partnership with Visa. Also, at that time, HOLL entered an online ticketing partnership with Starplex Cinemas, a Dallas-based chain operating 23 theaters and 216 screens nationwide.
For FY2006, ending 12/31/06, revenue was $115.89 million with $9.52 million in net income. During the first nine months of FY2007, ending 9/30/07, $92.84 million with net income of $3.59 million.
This is one of those ‘what’s there not to like’ companies.
Our 24-month target on the stock is $4.50 to $5.00.
For more information, contact HOLL’s L.Melheim at 561-998-8000; ir@boca.hollywood.com
MOVE, INC. (NASDAQ: MOVE) – $2.40. Twelve-month hi-low has been $6.69 – $2.30. Located in Westlake Village, CA, with about 1660 employees, this Internet information provider has 155.4 million shares outstanding, $220 million in total current assets, $302 million in total assets, little long-term debt, and $186.4 million in total liabilities. Institutional ownership is around 84%. Two analysts rate the stock a “strong buy”, three a “moderate buy” and two have it as a “hold”.
For the last few months, we have wondered if there may be some “mortgage crisis” plays. After all, a lot of the mortgage companies are trading in the penny stock range, but do we dare touch them? How many more bad loans will they ‘discover’? Well, Move, Inc. seems to make some sense. It’s a service people and professional realtors will need in bad times, as well as good ones. It also has a pretty decent-looking balance sheet. Our one concern is the number of outstanding shares, but since the company has a good cash position, we aren’t expecting new financing, anytime soon. Let’s just also hope they are not thinking about a reverse split.
Founded in 1993 as InfoTouch and later known as Homestore.com, and public since 1999, Move offers real estate listings and other content-related information on the Internet. The company’s Real Estate Services segment provides various advertising and software services, including enhanced listings, display advertising, customer relationship management applications, and Web site development and hosting. Its products include REALTOR.com that offers a suite of services, tools, and content of the real estate transactions; Top Producer, a Web-based application that features client management, appointment and task scheduling, Internet lead distribution and follow-up, prospecting automation, comparative market analysis, customer presentations, and mobile data synchronization; and Move Rentals and Move New Homes, which indexes Web sites featuring rental and new home listing content, and present the indexed listings to consumers based on their search criteria, as well as offers services to enhance, promote, and supplement the listings.
The company’s Move-Related Services segment provides advertising products and lead generation tools on its Web sites. Its products include Welcome Wagon, which is nearly 80 years old and offers merchants the chance to reach movers through targeted direct mail services; Retail advertising that provides display ads, text links, sponsorships, and directories to advertisers; Homeplans, which offers consumers and builders the ability to select, modify, and purchase new home designs and project plans; and Moving.com that provides consumers with quotes from moving companies, truck rental outfits, and self-storage facilities, and other move-related information.
In mid-December, Hitwise, a leading online competitive intelligence service, ranked REALTOR.com as the top real estate search term used in the real estate industry. Earlier that month, Move signed a new exclusive three-year content distribution pact with MSN, replacing the 2003 agreement.
For FY2006, ending 12/31/06, revenue was $290.38 million with $22.1 million in net income. During the first nine months of FY2007, ending 9/30/2007, revenue was $220.22 million with a net loss of $4.2 million.
Obviously 2007 won’t be as good as 2006, and 2008, well, who knows? Move appears to have the cash to withstand the current real estate upheaval and is one company that many should keep using.
Our 24-month target for the stock is $4.00 to $4.50
For more information, contact MOVE’s Mollie O’Brien at 805-557-3846; mollie.obrien@move.com
Look for the January 20, 2008 Newsletter to be posted on 1/16 or 1/17.
Happy New Year,
George