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Hello Readers,
As we said in the last Newsletter, this market has disregarded fundamentals and value, and is taking its marching orders from the world’s central bankers. In short, this is getting a lot scary. Regardless of how much money the bankers dole out, Spain, Greece, Ireland, Portugal, and Italy still need to do more budget magic, and, oh yes, pay back all of that borrowing at some point. And, oops, we almost forgot a country, the United States.
The markets over the last month have mostly been about big and mid-cap stocks. For the most part, small stocks have been withering in the summer heat. Our Current Portfolio has been marking time, and we seem to be stuck in another one of those droughts, similar to April and May, when it seemed near impossible to close any positions.
Here are the headlines since the last Newsletter about companies in the 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.
Novatel Wireless (NVTL)(8/5/12). Quarterly numbers meet estimates; balance sheet still looks pretty good.
pSivida (PSDV)(8/5/12). Within days of posting this pick in the last Newsletter, the company announced a $5.36 million secondary offering, which put pressure on the stock price.
Overland Storage (OVRL)(7/20/12). SnapServer DX series with SSD options is now available.
Aviat Networks (AVNW)(7/20/12). Partners with AT&T Government Solutions for DHS business. Quarterly numbers beat guidance; balance sheet still looks strong.
Athersys (ATHX)(7/5/12). Recent balance sheet looks good. Gives product updates in recent quarterly report.
Vermillion (VRML)(6/20/12). Balance sheet still looks good.
Avanir Pharmaceuticals (AVNR)(6/5/12). Announces listing of additional NUEDEXTA patent in FDA Orange Book. Reports pretty good revenue numbers; balance sheet still looks strong.
Capstone Turbine (CPST)(5/20/12). Sales increase but earnings disappoint; balance sheet still looks good. Ardour Capital downgrades company.
Senomyx (SNMX)(5/20/12). Quarterly numbers about as expected; balance sheet still looks good.
Bacterin International (BONE)(5/5/12). Quarterly numbers look pretty good; balance sheet still seems okay.
Five Star Quality Care (FVE)(5/5/12). Quarterly numbers show revenue growth and profits; balance sheet still looks healthy.
Zogenix (ZGNX)(4/20/12). Quarterly numbers about as expected; balance sheet still seems okay. Company repays outstanding loan.
Air Media Group (AMCN)(4/20/12). Quarterly report shows steady revenue growth and less losses; balance sheet still looks strong.
Axcelis Technologies (ACLS)(4/5/12). Second quarter numbers show marked improvement over 1stQT; balance sheet still looks good.
Mattson Technology (MTSN)(4/5/12). Ships paradigmE Etch System to a major semiconductor.
Echo Therapeutics (ECTE)(3/20/12). Balance sheet still looks okay. Announces $20 million financing with Platinum-Montaur Life Sciences. Coverage initiated by Ascendiant Capital. Announces positive clinical trial results of Symphony tCGM System.
Ballard Power Systems (BLDP)(3/20/12). Quarterly revenue below expectation but expects accelerated growth over the next few quarters; cash reserves still look good. Acquires assets from Ida Tech.
Majesco Entertainment (COOL)(3/5/12). Launches several new gaming programs and updates.
Complete Genomics (GNOM)(2/20/12). Quarterly numbers could have been better but company claims a backlog of 4600 revenue generating genomes; balance sheet still looks strong.
ECOtality (ECTY)(11/5/11). EV Project offers free Blink chargers to EV drivers and commercial host sites in Chicago, Atlanta, and Philadelphia. Recent QT report shows huge increase in revenues; balance sheet could use more cash.
BioMimetic Therapeutics (BMTI)(9/20/11). Latest numbers show good revenue growth and less losses; balance sheet still looks strong.
Cover-All Technologies (COVR)(7/20/11). Recent numbers show good revenue growth; balance sheet could use more cash.
Gleacher & Company (GLCH)(6/5/11). Quarterly number could have been better; ditto for balance sheet.
Idera Pharmaceuticals (IDRA)(6/5/11). Balance sheet still looks okay but company will soon need a cash infusion.
NeoStem (NBS)(5/20/11). Balance sheet not great but will soon be strengthened by a secondary offering of $7 million and from another $12.3 million from the sale of its ownership in Erye. Reports Data Safety Monitoring Board recommends continuation of PreSERVE AMI Phase 2 trial.
Energy Recovery (ERII)(5/5/11). Releases some pretty good-looking quarterly numbers; balance sheet still looks strong.
GSE Systems (GVP)(4/20/11). Quarterly numbers look good, as does balance sheet.
Jamba, Inc. (JMBA)(3/20/11). Releases upbeat quarterly report; balance sheet still looks healthy.
Oculus Innovative Sciences (OCLS)(3/5/11). Latest numbers show good revenue growth; balance sheet still looks okay. Announces licensing of Microcyn-based products in Mexico, South and Central America and Caribbean countries to More Pharma Corp. with $5.1 million upfront payment.
Real Goods Solar (RSOL)(1/20/11). Latest numbers how moderate revenue growth and increase in losses; balance sheet still seems okay. Names new CEO.
Sprint Nextel (S)(1/5/11). The usual several dozen stories and releases.
Pixelworks (PXLW)(11/20/10). Introduces PW868L/LH Topaz-lite display processor for value projectors.
RELM Wireless (RWC)(11/5/10). Records its best quarter in three years; balance sheet still looks good.
Inovio Pharmaceuticals (INO)(10/20/10). Balance sheet still looks okay.
ProPhase Labs (PRPH)(10/5/10). Recent numbers so-so; balance sheets still seems viable.
CombiMatrix (CBMX)(8/20/10). Latest balance sheet could use beefing up as company says prenatal testing grew 77% in first half.
Rexahn Pharmaceuticals (RNN)(7/20/10). Completes exploratory Phase I clinical study of RX-3117 in cancer patients.
Alpha Pro Tech (APT)(7/20/10). Posts pretty good 2nd QT numbers; balance sheet still looks good.
NovaBay Pharmaceuticals (NBY)(4/20/10). Balance sheet still looks okay.
Novavax (NVAX)(4/5/10). Balance sheet still looks strong.
Qualstar (QBAK)(10/20/09). To release QT results on August 16, the day we post this Newsletter.
Performance Technologies (PTIX)(7/20/09). Recent numbers disappoint; balance sheet still looks good.
GlobalScape (GSB)(5/20/08). Latest numbers not great; balance sheet still looks good.
Our picks for this Newsletter are a provider of wireless LAN network solutions and a semiconductor, both NASDAQ-listed.
MERU NETWORKS, INC. (NASDAQ: MERU) – $3.28. Twelve-month hi-low has been $10.61 – $1.42. Based in Sunnyvale, CA, with about 400 employees, this provider of wireless LAN network solutions has 17.73 million shares outstanding, $51.7 million in total current assets, $58.18 million in total assets, and $42.18 million in total liabilities, of which $2.98 million is long-term debt. Institutional ownership is around 39%. One analyst rates the stock a “strong buy” and five have it as a “hold”. www.merunetworks.com
Sometimes we stumble across one of those “boring” companies whose stock price were knocked down, probably due to some traders’ over-reactions, but still look to be in pretty decent shape. Meru Networks, Inc. has a good balance sheet and appears to be making modest revenue gains.
Founded in 2002, and public for over two years, Meru Networks provides wireless local area network LAN solutions to over 6600 customers worldwide. It offers these solutions based on its System Director Operating System (SDOS), which runs on its controllers and access points to enable enterprises to deliver business-critical applications over wireless networks. The SDOS provides centralized coordination and control of various access points on the network; controllers synchronize access points to optimize the user experience and mange traffic on the network; and Wi-Fi certified access points to provide network connectivity for wireless devices.
Meru Networks also offers Meru Networks E(z)RF application suite comprising E(z)RF Network Manager, E(z)RF Service Assurance Manager, E(z)RF Location Manager, E(z)RF OnTheGo, Spectrum Manager, and wired and wireless management solutions, which enable enterprises to configure, monitor, troubleshoot, secure, and operate virtualized LAN solution. In addition, the company provides Identity Manager that simplifies enterprise network access and identity management; Wireless Intrusion Prevention System to recognize and mitigate threats; Compliance Manager to reduce the risk of security breach by protecting customer and employee personal information by extending security to the wireless network; AirFirewall to intercept and block unwarranted communications as they transmit over the air, stopping them before they reach the network; and Security Gateway SG1000 to meet the demands of the Federal Information Processing Standard, 140-2 Level 3 security required by federal government agencies and other security-conscious organizations.
For FY2011, ending 12/30/11, revenue was $90.47 million with $26.7 million in losses compared to 2010 revenues of $85 million and $36.61 million in losses. During the first six months of the current FY, ending 6/30/12, revenue was $43.9 million with $20.96 million in losses.
Of some note is the fact the company added 400 customers in the second quarter alone, including a top ten university in China with nearly 35,000 students. Our bet here is that the company may experience a “growth spurt” over the next year or so.
Our 24-month target for the stock is $5.00 to $6.00.
For more information, contact MERU at 408-215-5300; ir@merunetworks.com
SEMILEDS CORPORATION (NASDAQ: LEDS) – $2.03. Twelve-month hi-low has been $5.47 – $2.00. Based in Taiwan, with about 580 employees, this semiconductor has 27.47 million shares outstanding, $84.76 million in total current assets, $153.61 million in total assets, and $21.36 million in total liabilities, of which $5.2 million is long-term debt. Institutional ownership is around 19%. Two analysts rate the stock a “strong buy”, one as a “buy”, and four as a “hold”. www.semileds.com
And yes, SemiLEDS Corporation is another one of those boring stocks that has seen revenue growth for the last three to four quarters. The company claims its R&D investments, which have led to a new product series, should bode well for the future. With a strong balance sheet the company seems to have time to prove itself. Also, the recent settlement of a lawsuit may give the company room to breathe, again.
Founded in 2005, and public for less than two years, SemiLEDS makes and sells light emitting diode (LED) chips and LED components. Its products are used primarily for general lighting applications, including street lights and commercial, industrial, and residential lighting. It sells blue, green, and ultraviolet (UV) LED chips under its MvpLED brand, mostly to customers in China, Taiwan, and other parts of Asia, as well as in Russia and North America. The company sells its LED chips to packaging customers or to distributors, who in turn sell to packagers.
In addition, SemiLEDS packages a portion of its LED chips into LED components, which it sells to distributors and end-customers in selected markets. The company has developed capabilities in sapphire reclamation, GaN epitaxial growth, copper alloy technology, nanoscale surface engineering and vertical LED structure technology. It recently announced the launch of Enhanced Vertical (EV) LED product series, which are being introduced globally.
For the FY ending 8/30/11, revenue was $33.9 million with $16.11 million in losses. During the first nine months of the current FY, ending 5/31/12, revenue was $23.8 million with $25.84 million in losses; the company showed good revenue growth over the last three quarters.
Yes, we would like to think that most of the losses will soon abate. The main key, for now, is that revenue growth continues.
Our 24-month target for the stock is $3.50 to $4.00.
For more information, contact LEDS’ David Young at 415-471-2700; investor@semileds.com
Look for the September 5, 2012 Newsletter to be posted on 8/31 or 9/4.
Thank you,
George