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Hello Readers,
Since the last Newsletter, we have closed two more positions, both for some nice gains.
TELULAR (8/20/06). Closed position 11/24/06 at $3.65 for an 82% GAIN.
CERAGON (1/5/06). Closed position 11/16/06 at $5.73 for a 51% GAIN.
In early November, Telular came out with some very nice-looking financials, which juiced the stock and the run intensified during Thanksgiving week; the 82% gain was an early Christmas present. Last Newsletter, we said we would close Ceragon, and we did.
So, what is still propelling the markets? How about moderate economic growth, interest rates holding steady, and relatively “cheap” energy prices; however, the latter could kill the buzz. But, as we have been saying for the last few months, why harp on the unexpected, let’s just enjoy the present.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we recommended them.
Alfacell (ACEL) (11/20/06). Study reinforces potential utility of ONCONASE in non-small-cell lung cancer.
Terabeam (TRBM) (11/5/06). Subsidiary announces multiple deployments of gigabit wireless links using the new FCC e-band millimeter wave spectrum. Also, its products were chosen for the fifth consecutive year to support Microsoft tech-ed conferences and for Inaugural Convergence 2006.
Immunogen (IMGN) (10/20/06). Stock gets a nifty boost when brokerage Cantor Fitzgerald gives the stock a “buy” rating.
Autobytel (ABTL) (10/5/06). Article at Motley Fool questions company’s viability; gives both the good and the bad points. That same day, company announces that it had signed a national marketing pact with Van Tuyl/Automotive Group, the nation’s largest privately-owned auto dealer group.
Hydrogenics (HYGS) (9/20/06). Coverage initiated on stock by CIBC World Markets.
TVI Corp (TVIN) (9/5/06). Receives $300,000 order for pandemic preparedness products from the Veterans Affairs Healthcare System of Ohio.
The SCO Group (SCOX) (8/20/06). Ships upgrade to SCOoffice server 4.2. Judge throws out appeal.
RIT Technologies (RITT) (8/5/06). Joins the Dynamic Spectrum Management (DSM) consortium, which is a multi-disciplinary forum to develop next-generation wireline DSL technology to bring fiber-like data rates to copper infrastructure.
Advanced Life Sciences (ADLS) (7/20/06). Company is written about at TheStreet.com in an article titled “New Antibiotic Awaits Fate”. To present at BMO confab on December 6.
Curis (CRIS) (6/5/06). To present at Wall Street Analyst Forum Investor Conference on December 7.
02 Diesel (OTD) (5/20/06). Closes private placement with Energenics.
Kintera (KNTA) (5/5/06). To present at Cowen and Company Internet Conference on December 7.
Pharmos (PARS) (4/20/06). To present at BMO Capital Markets healthcare confab on December 7.
Cytogen (CYTO) (3/20/06). Receives patent covering oral drug delivery agents.
Gateway (GTW) (2/5/06). The usual dozen or so news stories about, or mentioning, the company. Gets PC contract with the Poudre Valley Health System.
MIND C.T.I. (MNDO) (2/5/06). Announces new win and follow-on orders.
8X8 (EGHT) (1/20/06). Brokerage downgrades the stock from a “buy” to a “neutral”. Why? Doesn’t seem to make sense. Company forges alliances with both Systemax Partners and Broadband National.
Dynacq Healthcare (DYII) (1/20/06). Year-end fiscal results show big drop in revenues and increased losses; balance sheet still looks healthy.
Castelle (CSTL) (1/5/06). Integrates its network fax servers with Equitrac cost recovery and print management solutions.
Digital Angel (DOC) (12/20/05). Royal Malaysian Air Force places order for SARBE Rescue Beacons.
Memory Pharma (MEMY) (11/5/05). Completes enrollment for MEM 1003 Bipolar trial. Receives milestone payment from Stanley Medical Research Institute.
Westell (WSTL) (10/20/05). Northland Communications names ConferencePlus for worldwide conferencing services.
Zi Corp (ZICA) (8/5/05). Stock keeps heading downward and last balance sheet wasn’t great, so, we are placing this on the “Endangered List”.
Innodata (INOD) (7/5/05). Named to EContent 100 for second straight year.
B.O.S. (BOSC) (1/5/05). Quarterly results show revenue drop but big paring in the losses; balance sheet could look better.
Applied Micro Circuits (AMCC) (11/20/04). Further expands into Mac market; introduces Mac Pro Workstation support for external storage solution.
Nova Measuring (NVMI) (11/5/04). Starts cost reduction initiative; to cut 8% of jobs and take a $300,000 charge in the 4th QT.
Aviza Technology (AVZA) (10/5/04). Year-end report pretty upbeat; balance sheet still looks okay.
TMNG Global (TMNG) (4/20/04). Faces potential NASDQ delisting due to delayed filings; doesn’t appear to be cause for alarm, just yet.
Open TV (OPTV) (3/20/04). Chosen by China’s Star Communication Network to provide latest generation middleware and PVT technology.
Chordiant (CHRD) (9/20/04). Must restate financials due to errors in option accounting.
Our picks for this issue both trade on NASDQ; one is networking solutions provider and the other is a semiconductor equipment provider.
LANTRONIX, INC. (NASDAQ: LTRX) – $1.48. Twelve-month hi-low has been $2.88 – $1.25. Located in Irvine, CA, with about 150 employees, this networking solutions provider has 59.26 million shares outstanding, $35.07 million in total current assets, $46.97 million in total assets, little debt, and $30.35 million in total liabilities. Institutional ownership is around 32%. One analyst rates the stock a “strong buy”. www.lantronix.com.
There are times when based upon the charts and improving financials, and expectations thereof, that we feel a stock is “due”. So is the case with Lantronix, Inc. as we add it to the Current Portfolio.
Founded in 1989, and public for nearly five years, Lantronix develops and markets networking solutions that include integrated hardware and software devices, as well as software tools to develop related customer applications. These solutions deliver what the company calls Net Intelligence, helping business remotely manage network infrastructure equipment and rapidly network-enable their physical electronic devices. The company offers three categories of products: device networking solutions that offer a range of embedded and external devices networking solutions that allow makers of electronic and electro-mechanical devices to add network connectivity, manageability, and control; IT management solutions that offer off-the-shelf appliances, such as console servers, servers and power control products that enable IT professionals to remotely connect, monitor and control network infrastructure equipment and large groups of servers using out-of-band management technology; and non-core products, which include visualization solutions, legacy print servers, and other miscellaneous products.
Lantronix most recent device server technology is represented by its XPort, a thumb-sized RJ-45 connector port which it claims can be embedded in any product to provide connectivity. XPort can put up Web pages, send emails, is IP-addressable, and can be linked over the Internet.
In October, the company expanded its industrial device networking with a rugged version of its top selling UDS1100 device server, this is now designed for harsh environments and industrial protocol support. Also, in that month, Lantronix announced that it was expanding investment in industrial device networking. And, in September, it launched its next generation WiBox that wirelessly networks existing equipment in minutes.
For the FY ending 6/30/06, revenue was $51.94 million with $3.04 million in losses compared to the previous FY revenues of $48.5 million and $7 million in losses. During the first quarter of this FY, ending 9/30/06, revenue was $12.51 million with $651,000 in losses. We like the fact that LTRX seems to be making constant headway in paring the losses. During this entire FY, the company expects revenues to range between $58 million and $60 million with profitability and increased cash balances.
This is one of those “call us brain dead” but shouldn’t this stock be a lot higher?
Our 24-month target for the stock is $2.75 to $3.25.
For more information, contact LTRX’s Kristine Hernandez at 949-450-7240; kristine.hernandez@lantronix.com
WJ COMMUNICATIONS, INC. (NASDAQ: WJCI) – $2.00. Twelve-month hi-low has been $3.12 – $1.27. Based in San Jose, CA, with about 200 employees, this semiconductor equipment provider has 66.6 million shares outstanding, $40.72 million in total current assets, little debt, and $27.34 million in total liabilities, of which $12.5 million are long-term liabilities. Institutional ownership is around 3%. One analyst rates the stock as a “moderate buy” and one has it as a “hold”. www.wj.com
Lately, we have adding some boring, or non-sexy, companies to the Current Portfolio and WJ Communications, Inc. is another one. Like most of the others, it has a half-decent balance sheet, good revenue growth, and appears to be losing much less money.
Founded in 1957 as Watkins-Johnson Company, and public for about five years, WJCI is a radio frequency (RF) semiconductor company providing RF product solutions to communications equipment companies and service providers. WJ designs and manufactures for both current and next generation wireless and wireline networks, and radio frequency identification (RFID) systems. Its RF products primarily consist of semiconductors, including amplifiers, mixers, RF integrated circuits, transistors, chipsets, and multichip modules; and RFID readers and reader modules, primarily UHF RFID readers. The company’s wireless integrated assembly products include base station RF front ends, diagnostic and support equipment, and repeaters, which are used in wireless infrastructure equipment, such as cellular base stations. WJ claims it is the only company today that can offer “System-to-Silicon”.
Some of WJ’s customers include Andrew Corporation, LG Electronics, Richardson Electronics, Celestica, Lucent, Samsung, Ericsson, Motorola, and Siemens.
Last month, WJ launched what it says is the industry’s first 28V InGap HBT (GaAs) power amplifiers for 3G wireless infrastructure applications. In mid October, the company unveiled what it claims is the industry’s first Gen2 RFID reader chipset that is targeted for consumer and enterprise mobile devices. In September, South Korea certified WJ for its RFID UHF WJR7090 reader module, which is now approved for sale in that country.
For FY2005, ending 12/5/05, revenue was $31.59 million with $21 million in losses. During the first six months of the current FY, ending 10/1/06, revenue was $37.4 million with $5.4 million in losses. Looks like a nice improvement on both the top and bottom lines, so far.
As we alluded above, WJ is not Mr. Excitement, but with what appears to be vastly improved financials, coupled with some “industry firsts”, the company seems headed in the right direction.
Our 24-month target for the stock is $3.25 to $3.75.
For more information, contact WJCI at 408-577-6268; ir@wj.com
Look for the December 20, 2006 Newsletter to be posted on 12/18 or 12/19.
Thank you,
George