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Hello Readers,
Since the last Newsletter, we have closed one position for a nice gain.
PEERLESS Systems (1/20/04). Closed position 5/27/05 at $4.10 for a 61% GAIN..
For the last few months, Peerless had been making small gains here and there. Then, the stock had a spurt thanks to a good earnings report and more upbeat news on their deal with Kyocera-Mita. This has been a wicked drought for us, and we’re glad to take the 61% gain.
Seems too easy to predict, right? Actually, it is. Oil goes under $50, and holds there for a while, and the markets go on a mini-tear. Then, it shoots above $50 and the markets grow weary, as we have seen over the last few trading days. As we said in the last Newsletter, and many times prior to that, if crude stays under $50, we should expect a pretty decent summer rally.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Arotech (ARTX) (6/5/01). Even though they have bagged all sorts of new contracts, lately, the company just issued another 8.26 million shares, which is probably what sent the stock down over the last few weeks. So, reluctantly, we’re placing ARTX on the “Endangered List”.
ViroLogic (VLGC) (7/20/01). To present at Pacific Growth Equities confab on June 6. Added to the NASDAQ Biotechnology Index. VLGC’s eTag system demonstrates potential ability to better select breast cancer patients for therapy with Herceptin.
Art Technology (ARTG) (8/5/03). Louis Vuitton continues to use ATG solutions. Body Shop launches ATG-powered U.S. e-commerce business.
Targeted Genetics (TGEN) (10/5/03). To present on several programs at the American Society of Gene Therapy between June 1 and 5. Expands AAV Vector patent portfolio. On the “Endangered List”.
Insmed (INSM) (11/5/03). Reports positive results from clinical trial of Somatokine. U.K. court ruling allows continuation of Tercica lawsuit against INSM, and Tercica seeks to block Insmed drug.
Active Power (ACPW) (11/20/03). Ships five megawatts of CleanSource DC systems.
AVANT Immuno (AVAN) (12/5/03). Stock got a nice bump after announcing it would sell Rotarix royalty rights for about $61 million, while still retaining a substantial upside in future royalty sales.
Crossroads Systems (CRDS) (2/5/04). Quarterly results pretty crummy, but balance sheet still appears pretty good.
Somera Communications (SMRA) (2/20/04). To present at Lehman 2005 Wireless/Wireline confab on June 2.
Oplink (OPLK) (2/20/04). Enhances Quality System with TL 9000 and ISO 14001: 2004 certifications.
Transgene (TRGNY) (3/5/04). Files going-concern form. Presents updated positive Phase 2 data of its vaccine MVA-MUC1-IL2 in prostate cancer at annual ASCO meeting.
Socket Communications (SCKT) (3/20/04). Expands strategic Vertical Integrator program, and also expands portfolio of data collection products.
NexMed (NEXM) (4/5/04). Announces positive Femprox study results at AUA annual meeting. Announces private placement.
GoRemote (GRIC) (5/5/04). Slates earnings call for June 7. Branch Office 3.0 to offer new value-added services. Firestone uses Branch Office to securely connect more than 1500 stores. Emirates airline to deploy GRIC’s managed security and mobility solutions.
EMCORE (EMKR) (5/20/04). Stock has shot up on several pieces of good news. A few weeks back Jeffries & Co. gave the stock a “buy” signal. Then, just days ago, EMKR announced that it was buying JDS Uniphase’s CATV business.
GlowPoint (GLOW) (5/20/04). Expands IP-based video availability to over 250 European municipalities. Legal related customer orders increase 15% since January.
BindView (BVEW) (6/5/04). Taps IDSOnline to join global partner program.
Avanex (AVNX) (7/20/04). Names new leader for Optical Components Group. Announces $35 million senior convertible notes offering.
Tripath (TRPH) (8/5/04). Quarterly results not good, balance sheet okay but nothing to write home about.
Chordiant (CHRD) (9/20/04). ING Canada picks Chordiant to transform policy holder sales and securing. Also chosen by Time Warner Cable for strategic real-time decision management.
Trikon (TRKN) (10/5/04). Receives NASAQ delisting notice for failure to file quarterly report, but since stock is up 20 cents in last two weeks, this may not be a worry.
Net2Phone (NTOP) (11/5/04). Will report quarterly earnings on June 6. Also, will present at three confabs over the next three weeks.
Applied Micro (AMCC) (11/20/04). Various releases about several software products.
Zhone Technologies (ZHNE) (12/5/04). Fluke Networks and Zhone complete interoperability integration. Announces support for distributed emergency stand alone service. Coverage initiated by Legg Mason.
Advancis Pharma (AVNC) (12/20/04). Will be presenting at various investor conferences.
B.O S. (BOSC ) (1/5/05). Quarterly results not bad, not great; balance sheet looks good. Plans private placement to raise up to $2.5 million.
Brillian (BRLC) (1/5/04). Debuts new 65-inch 720P HDTV monitor model optimized for home theater. Unveils full turnkey light solution for HDTV OEMs.
Xycte Therapies (XCYT) (1/20/05). Stock takes a hit as company revises clinical development strategy and is downgraded by JMP Securities. Quarterly balance sheet still looks pretty healthy.
Three-Five Systems (TFS) (2/5/05). Sadly, we need to put this on the “Endangered List” as TFS has received a delisting notice from the NYSE: it has until October 25 to get its stock back over a dollar. First QT results were not good and balance sheet has weakened somewhat.
Mindspeed (MSPD) (2/20/05). Will present at a few conferences over the next several days (June 1 and 2).
Centra Software (CTRA) (2/20/05). InterContinental Hotels implements Centra’s Collaboration software.
Tumbleweed (TMWD) (3/5/05). Establishes Federal advisory board. To present at investor confab on June 1 or 2. Bolsters email security products with addition of Outbreak Detection.
Repligen (RGEN) (3/20/05). Stock upgraded by Rodman & Renshaw. Quarterly and year-end results not bad; balance sheet still appears healthy. Says VEGF Trap showed promise in shrinking cancerous tumors in Phase 1 clinical trials.
Loudeye (LOUD) (4/5/04). Launches music bundle initiative with Planet Internet.
Verticalnet (VERT) (4/5/05). Chairman steps down and elects Gregory Schott. Causes some consternation with the stock price.
Therma-Wave(TWAV) (5/5/05). Quarterly and year-end revenue numbers look okay; so does balance sheet.
Exact Sciences (EXAS) (5/20/05). Shows link between DNA preservation and improved non-invasive colorectal cancer screening.
Our picks for this issue are another semiconductor and a utility (of sorts).
SIRENZA MICRODEVICES, INC.(NASDAQ: SMDI) – $3.25. Twelve-month hi-low has been $6.89 – $2.15. Located in Broomfield, CO, with about 285 employees, this semiconductor/IC has 35.6 million shares outstanding, $29.6 million in total current assets, $53.9 million in total assets, little debt, and $8.26 million in total liabilities. Institutional ownership is around 34%. Four analysts rate the stock a “strong buy”, one as a “moderate buy”, and three have it on “hold”. http://www.sirenza.com
Rarely have we picked a stock based mostly on analysts’ enthusiasm, but such is the case with Sizenza Microdevices, Inc. And, it also helps that the company has a half-way decent balance sheet.
Founded in 1985, and trading on NASDAQ since early 2000, Sirenza supplies radio frequency (RF) components to the commercial communications, aerospace, and defense equipment markets. The company claims its products are designed to optimize receiving and transmitting of voice and data signals in mobile wireless communications networks, and in other wireless and wireline applications. Components sales of mobile wireless infrastructure applications accounted for over half of SMDI’s 2004 revenues. Other commercial applications include components for LANs, fixed wireless networks, and broadband wireline applications, such as coaxial cable and fiber optic networks, cable TV set-top boxes, RF ID readers, and wireless video transmitters.
Sirenza operates in two business segments: The Amplifier Division’s main product lines are primarily IC-based and include discrete amplifier, low noise amplifier and power amplifier IC products, transceiver IC products and a multi-component module (MCM) product line, including power amplifier modules. Its Signal Source Division’s main product lines are MCMs used in wireless infrastructure applications to generate and control RF signals.
A few weeks ago, Sirenza reaffirmed current quarter revenue guidance, which was in line with analysts’ expectations. Also, at that time, the company announced volume shipments of Direct Quadrature Modulators for a major European OEM. In April, Sirenza announced release of a high performance digital TV and set-top box amplifier IC; opened an office in Shanghai; and released the latest additions of new broadband amplifiers utilizing a patented thermal distribution system.
For FY2004, ending 12/31/04, revenues were $61.25 million with a net income of $280,000. During the 1stQT of FY2005, ending 3/31/05, net revenues were $12.16 million with $1.84 million in losses.
As stated above, this is what we would call an “analysts play”.
Our 24-month target for the stock is $5.25 to $6.00.
For more information, contact SMDI at 303-327-3192; ir@sirenza.com
COMMERCE ENERGY GROUP, INC. (AMEX: EGR) – $1.62. Twelve-month hi-low has been $3.49 – 75 cents. Based in Costa Mesa, CA, with about 200 employees, this utility has 30.5 million shares outstanding, $88 million in total current assets, $104.9 million in total assets, little debt, and $31.25 million in total liabilities. http://www.CommerceEnergy.com
Here we go again with the word ‘rarely’. Rarely do we pick small energy companies and rarely do we choose companies that have been recently reorganized. However, Commerce Energy Group, Inc. has a pretty good-looking balance sheet and appears to be showing signs of decent growth. Also, Warren Buffet recently made utilities one of his new top investments, so, maybe he’s onto something.
Founded in 1997 and reorganized in July, 2004, and trading on the AMEX for less than a year, Commerce is an energy services company that provides retail electric power to its residential, commercial, industrial, and institutional customers and provides consulting and technology services to energy-related businesses and offers energy transaction data management services. The company claims to be the largest non-utility retail marketer of natural gas and electricity in America. The bulk of its customers are in New Jersey, Pennsylvania, Michigan, Texas, and California. EGR also has investments in three energy technology companies, namely Encorp, Inc. (formerly Envenergy), Turbocor B.V., and Power Efficiency Corp.
Commerce Energy is a holding company operating mainly through three wholly-owned subsidiaries: electricAmerica offers electric service to customers under month-to-month, one year, or longer-term service contracts. All of its power is purchased from third-party power generators; EGR does not own electricity generation facilities with the exception of small experimental renewable energy assets. Skipping Stone offers a number of professional consulting services and technologies to energy companies such as utilities, electricity generators, and natural gas pipelines. UtiliHost provides managed back office services and transactional data management; the company has developed software and service products known as TACT and TRIUMPH.
In early April, Commerce Energy won a contract to provide electricity to the Los Angeles Unified School District; this contract will serve 217 schools over the next 18 months. For FY2004, ending 7/31/04, revenue was $210.6 million with $21.72 million in losses.
During the first six months of FY2005, ending 1/31/05, revenue was $119.5 million with a net income of $252,000.
Our thinking here is that this is a small energy company showing some nice growth and whose stock could see a nifty pop if oil prices go completely whacky, which is a very real possibility.
Our 20-month target for the stock is $3.00 to $3.50.
For more information, contact EGR’s Verna Ray at 714-259-2500; vray@CommerceEnergy.com
Look for the June 20, 2005 Newsletter to be posted on 6/16 or 6/17.
Thank you,
George