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Hello Readers,
Since the last Newsletter we closed one position, for a nice gain.
KINTERA (5/5/06). Closed position 7/2/07 at $2.58 for a 75% GAIN.
Right after posting our last Newsletter, the markets took off again with a vengeance. By now, you probably have heard all of the “whys”. There is one little problem from our perspective, and this should be short-lived. The recent “surge” has been mainly a big cap and mid cap event. Small stocks haven’t really participated much. Reason probably is that cash is coming out of bonds and small stocks to fuel the bigger stocks. If history is any indicator, the reverse should occur, but we don’t when. Our gut says it should be sooner rather than later.
Here are the headlines since the last Newsletter about companies in our Current Portfolio. Dates in parentheses are when we first recommended them.
Heska (HSKA) (7/5/07). To present at Friedland Investment confab on July 16, the date we post this Newsletter. Sets 2nd QT conference call for July 24. Introduces the HemaTrue analyzer.
Pharmacyclics (PCYC) (6/20/07). Hires firm to lobby FDA for quicker drug approvals.
Xenonics (XNN) (6/5/07). Says response to Supervision has exceeded expectations, but company feels 3rd QT revenue won’t meet expectations. Sounds like the crucial quarters will be the 4th of this year and 1st QT of next year.
American CareSource (XSI) (5/20/07). Inks pact with Texas True Choice to provide ancillary care to its members. CEO resigns.
Encorium Group (ENCO) (5/20/07). Gets $1.7 million contract with Japanese biotech for Phase 2 clinical trial for major depressive disorder. Also, lands $3 million in new contracts for clinical trials in women’s health.
ECtel (ECTX) (5/5/07). To release 2nd QT results on August 6.
VocalTel (VOCL) (4/20/07). Enhances network for Switchward & Trosmann AG.
Neose Technologies (NTEC) (12/20/06). Presents positive preclinical data on GlycoPEGylated Factor V11a.
CardioTech (CTE) (12/20/06). Sells sudsidiary Gish Biomedical to German company for $7.5 million.
Lantronix (LTRX) (12/5/06). Expands industrial networking solutions with new line of rugged Ethernet switches.
YM Biosciences (YMI) (11/5/06). Announces secondary efficacy and safety findings in randomized Phase IIb Aerolef trial. Also says preclinical data confirming nimotuzumab binds to the EGF receptor and potentiates radiotherapy.
Terabeam (TRBM) (11/5/06). Proxim Wireless adds 900MHz support to point-to-multipoint product line. Sells two patents for $2.5 million.
HealthStream (HSTM) (10/20/06). Names interim CFO. Signs three-year pact with Catholic Health Initiatives.
Advanced Life Sciences (ADLS) (7/20/06). Stock sinks more as controversy over drug results continue, and company said significant time will be needed to gather more data.
NTN Buzztime (NTN) (7/5/06). Launches new web site to support customers.
02Diesel (OTD) (5/20/06). We’re placing this on the “Endangered List” as AMEX threatens delisting. Secures $1.9 million in additional funding.
Inventure Group (SNAK) (3/5/06). Enters into loan agreement with U.S. Bank for a $4 million term loan.
Gateway (GTW) (2/5/06). Founder sells shares.
8×8 (EGHT) (1/20/06). Adds professional voice recording to suite of Packet8 Virtual Office hosted iPBX phone services.
Digital Angel (DOC) (12/20/05). Says it is poised to benefit from change in aviation legislation.
RAE Systems (RAE) (10/5/05). Wins arbitration case.
EntreMed (ENMD) (9/5/05). To collaborate with University of New South Wales on Panzem mechanisms.
Zi Corp (ZICA) (8/5/05). Sets annual meeting for July 26.
N.A. Scientific (NASI) (8/5/05). Signs three-year supplier contract with Premier, Inc., and wins renewal from same company to sell Prospera Brachytherapy sources.
Applied Micro Circuits (AMCC) (11/20/4). Company cuts 1st QT forecast, but stock rises over 2nd QT expectations. Linley Group study shows AMCC leading sales gains in embedded processor and 10G PHY markets. Next Inning Newsletter updates outlook for AMCC.
Aviza Technology (AVZA) (10/5/04). Gets a favorable mention in Motley Fool article.
Network Engines (NENG) (6/5/04). Announces availability of the NS-IAG1000.
TMNG Global (TMNG) (4/20/04). A few product releases. Says largest shareholder sells stake, but this doesn’t seem to affect stock price.
NOTE: The Updates section is shorter than usual, but this is a seasonal thing. Hey! It’s summertime.
Our picks for this Newsletter are another Israeli company, only this one has been beaten up pretty badly; and another semiconductor, both trade on NASDAQ.
RADCOM, LTD. (NASDAQ: RDCM) – 98 cents. Twelve-month hi-low has been $3.30 – 83 cents. Located in Tel Aviv, Israel, with about 150 employees, this network service provider has 16.1 million shares outstanding, $23.28 million in total current assets, $27.13 million in total assets, little debt, and $12.47 million in total liabilities. Institutional ownership is around 10%. www.radcom.com
It is not too often when we see an Israeli company stub its toe as Radcom, Ltd. did a few months back, and, again, a few weeks ago, with some disappointing numbers. However, our experience has been that most Israeli companies we have picked have a way of bouncing back, and with its half-decent balance sheet and low stock price, we are adding it to the Current Portfolio. Who knows? There may be a ‘dead cat bounce’ at some point.
Founded in 1985, and public for nearly ten years, Radcom provides probe-based network monitoring solutions for communications service providers and equipment vendors. The company specializes in next-generation cellular as well as voice, data, and VoIP networks, aka the triple play. The company categorizes its products into two primary lines: the Performance family, including the Omni-Q network monitoring solution, and the Prism series of multi-technology analyzers. Omni-Q is a next-generation network testing, monitoring, and performance management solution. Propelling Radcom’s technology is the GearSet, which is its proprietary chip set and main differentiating technology. With speeds up to 10Gbps., the GearSet is a three-chip processor designed to provide what it claims is unmatched wirespeed monitoring performance on all layers independent of technologies or services. This technology offers classification, filtering, capturing, and deep-packet analysis.
Radcom’s products support more than 600 protocols and, to date, 30 3G cellular operators have chosen the company’s solutions, which are used in developing and installing network equipment, as well as in the maintenance of operational networks.
At the end of May, the company chairman purchased 263,300 Radcom shares on the open market, usually a good sign, giving him over 20% of the issued shares. Also, in May, Radcom unveiled a powerful new Omni-Q probe that gives service providers total visibility into the UMTS radio access network (UTRAN).
For FY2006, ending 12/31/06, revenue was $25 million with $1.81 million in net income. During the 1stQT of the current FY, ending 3/31/07, revenue was $3.2 million with $2.9 million in losses, and preliminary 2ndQT results are just as dismal, if not more so. This is where Radcom has stubbed its toe. The company mostly blames a number of projects being delayed due to softness in the market. However, despite the ills, the CFO is expecting a return to profitability in the 4thQT.
Yes, Radcom took a hit recently, but we’re betting that it should be able to recover. And, then, there is that Israeli thing.
Our 24-month target for the stock is $1.70 to $1.90.
For more information, contact RDCM’s Jonathan Burgin at +972-3-645-5004; jonathanb@Radcom.com
ALLIANCE FIBER OPTIC PRODUCTS, INC. (NASDAQ: AFOP) – $2.10. Twelve-month hi-low has been $2.24 – $1.18. Based in Sunnyvale, CA, with about 680 employees, this specialized semiconductor has 40.6 million shares outstanding, $41.16 million in total current assets, $45.5 million in total assets, little debt, and $7.01 million in total liabilities. Institutional ownership is around 15%. www.afop.com
With a good-looking balance sheet and four straight quarters of profitability, you need to ask why the stock price of Alliance Fiber Optic Products, Inc. isn’t higher. The simple answer is probably that the semiconductor industry is still out of favor with many investors, but, at some point, we’re thinking that they may stop throwing the babies out with the bath water.
Founded in 1995, and public since 2000, AFOP makes and markets fiber optic components and integrated modules for communication equipment manufacturers, primarily in the U.S. and also in Taiwan and China. The company claims that its passive optical products support the needs of existing and next-generation optical network systems applications. It offers interconnect devices that are used to connect optical fibers and components; couplers and splitters used to divide and combine optical power; and dense wavelength division multiplexing devices, which separate and combine multiple specific wavelengths.
AFOP also offers optical path management solutions (OPMS) that include optical connectors, adapters, and cable assemblies; OPMS modules; fused and planar fiber optical splitters and couplers; optical tap couplers and ultra low point polarization dependent loss tap couplers; amplifier wavelength division multiplexing (WDM) couplers; optical fixed attenuators; fused fiber WDM couplers; filter-based wavelength management products, which consist of filter WDMS, amplifier filter WDMs, and dense WDMs, coarse WDMs, compact coarse WDMs, and add/drop dense WDMs filters. In addition, the company also offers advanced optical devices comprised of automatic variable optical attenuators and planar lightwave circuit splitters.
This company does not churn out a lot of press releases. The latest was at the end of June when AFOP raised its revenue guidance for the 2ndQT FY2007, expecting net sales of $8.3 million.
For FY2006, ending 12/31/06, revenue was $26.79 million with $657,000 in net income. During the 1stQT of the current FY, ending 3/31/07, revenue was $6.7 million with $389,000 in net income.
Like the semiconductor industry overall, AFOP’s stock price has been flat-lined for quite a while. At some point, this should change, given the company’s numbers.
Our 24-month target for the stock is $3.50 to $3.75.
For more information, contact AFOP’s Helen Chan at 408-736-6900; hchan@afop.com
Look for the August 5, 2007 Newsletter to be posted on 8/1 or 8/2.
Thank you,
George