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Hello Readers,
Since the last issue, we closed three more positions; two for some nifty gains and one for a very long anticipated loss.
SYNTROLEUM (7/5/03). Closed position 9/9/03 at $5.39 for a 103% GAIN.
NEOMAGIC (9/5/03). Closed position 9/9/03 at $3.12 for a 56% GAIN.
NEW YORK HEALTH CARE (3/20/97). Closed position 9/9/03 at $3.56 for a 16% LOSS.
We haven’t a clue as to what sent Syntroleum into the ionosphere, and, with a 103% gain, we don’t care. Ditto with NeoMagic that was in the Current Portfolio for less than a week; we closed it at the 56% gain, but sense the stock could go higher. We need not go into a long discourse about closing New York Health Care; we kept hoping for the breakout that never came (after seven long years).
Yes, play the tape, again. We are still raging bulls, but we expect the markets to pause or pull back a little between now and mid-October. That is when the new earnings season begins, and we anticipate most of the earnings news to be better than expected. As we have said repeatedly over the last six months, the only thing that can tank this market is a catastrophic event or a terrorism attack.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
DOR BioPharma (DOR) (9/20/00). Company’s Ricin vaccine technology bags grants totaling $2.75 million from NIAID. We are removing this from the “Endangered List”, but have not decided on a new target price.
Genetronics (GEB) (10/5/00). We are also removing GEB from the “Endangered List”, and, like with DOR, we haven’t decided on a new target. If the current love affair with biotechs continues for another six to twelve months, both stocks could get a nice boost.
Arotech (ARTX) (6/5/01). Subsidiary awarded $420,000 in new contracts. Also gets $1 million order from U.S. HHS Department.
ViroLogic (VLGC) (7/20/01). Awarded NIH grant to develop hepatitis C virus drug resistance test.
Access Pharmaceuticals (AKC) (11/5/01). Announces oral drug delivery research collaboration with England’s Celltech Group.
Superconductor Technologies (SCON) (1/5/02). Carolina West Wireless to deploy SCON’s SuperLink solutions.
VASCO Security (VDSI) (2/5/02). Raises $8 million through equity financing; allows company to retire debt and strengthen balance sheet.
Catalyst (CLYS) (3/20/02). Introduces several new software solutions. This one’s still on the “Endangered List”.
Diomed (DIO) (7/5/02). Raises $21.3 million through a private placement, and acquires exclusive rights to endovenous laser treatment patent.
Hemispherx (HEB) (7/5/02) signs pact with Guangdong Medical Group.
Rigel (RIGL) (7/20/02). Discovers new regulators of the immune system. We put this one on the “Endangered List” a few months back because of that reverse stock split.
Generex (GNBT) (8/5/02). Gets $444,000 NIH award for melanoma peptide vaccine for Phase I trial. Registration statement effective.
Interactive Intelligence (ININ) (12/5/02). Nasdaq gives company delisting notice, which ININ will appeal. Worst that may happen is that stock gets a bump over to Nasdaq Small Caps.
Sequenom(SQNM) (6/5/03). Stock gets a nice nudge as brokerage Merriman Curhan Ford gives the stock a $5 target. Company increases throughput and capacity for its MassARRAY System.
Jacada (JCDA) (6/20/03). Teams with Oracle to provide non-intrusive Legacy integration based on J2EE.
Paradyne (PDYN) (7/20/03). Announces GranDSLAM 5200 listing by Rural Utilities Service.
NIC, Inc. (EGOV) (8/5/03). More counties improve services with NIC solutions.
Marimba (MRBA) (8/20/03). InfoGenesis teams with company to deliver point-of-sale solutions for the hospitality industry.
GTC Bio (GTCB) (8/20/03). Implements restructuring plan to support product commercialization.
Tuts Systems (TUTS) (9/5/03). Hong Kong’s leading telecom provider selects company’s Astria Digital TV solution.
Airspan (AIRN) (1/20/02). UTS of St. Maarten upgrades with AIRN product.
Our selections for this Newsletter are another telecom equipment provider and an alternative energy play.
SUNRISE TELECOM, INC. (NASDAQ: SRTI) – $2.50. Twelve-month hi-low has been $2.70 – $1.25. Based in San Jose, CA, with about 400 employees, this communications equipment provider has 49.82 million shares outstanding, $60.45 million in total current assets, $114.14 million in total assets, and $11.48 in total liabilities of which $1.69 million is debt. Institutional ownership is around 6%. One analyst has the stock as a “hold”. http://www.sunrisetelecom.com Factory orders are improving and so is the economy. It now may be a good time to nibble at an equipment maker like Sunrise Telecom, Inc. that not only has a very good-looking balance sheet, but also paid a dividend last quarter. It’s, also, a broadband play, obviously.
Founded in 1991, Sunrise manufactures and markets portable test equipment for the telecom industry. Their service verification equipment enables service providers to pre-qualify facilities for services, verify newly installed services, and diagnose problems relating to telecommunications, cable TV, and Internet networks. For the most part, the company’s products test broadband services that include wire line access services, including direct subscriber line, fiber optics, cable TV networks, and signaling networks. Sunrise customers include incumbent local exchange carriers, cable companies, competitive local exchange carriers, installers, and network infrastructure providers. The company’s clientele is spread through North and Latin America, Europe, Africa, the MidEast, and the Asian/Pacific rim.
Despite broadband’s quagmire of the last three years, Sunrise has not sat idle, having acquired four complementary companies in that time. One is in cable TV digital testing, one is a provider of protocol analyzers and testers for the telecom industry, another specializes in the design and manufacture of cable TV test equipment and performance monitoring systems, and, lastly, there is CaLan who products incorporate DigiSweep technology.
Early last month, Sunrise and Innsol Technologies partnered to bring revenue assurance solutions to wireless network operators; the companies have successfully deployed several applications in India. Also in August, Sunrise added enhancements to NeTracker, its next-generation test platform for VoIP (voice over IP) networks. In June, the company rolled out a fully automated test routine for HDSL installations, and expanded its Sunset MTT into fiber optic testing.
For FY2002, ending 12/31/02, revenue was $54.3 million with $5 million in losses. During the first six months of this FY, ending 6/30/03, revenue was $22.16 million with $4.57 million in losses.
Sunrise is another company with a good-looking balance sheet that has kept itself updated with upgrades and acquisitions. At some point, all of this should pay off for SRTI.
Our 20-month target for the stock is $4.50 to $5.00.
For more information, contact SRTI’s ArLynne Wiley at 408-360-1927; awiley@sunrisetelecom.com
PROTON ENERGY SYSTEMS, INC. (NASDAQ: PRTN) – $2.20. Twelve-month hi-low has been $3.70 – $1.76. Located in Wallingford, CT, with about 130 employees, this electrical equipment provider has 33.9 million shares outstanding, $116.17 million in total current assets, $134.18 million in total assets, $6.27 million in long-term debt, and $7.64 million in total current liabilities. Institutional ownership is around 29%. Three analysts have the stock as a “hold”. http://www.protonenergy.com
Over the years, we have had a fair bit of success with alternative energy plays, in fact, there are still several in the Current Portfolio. So, why not add another, which has a very healthy-looking balance sheet, like Proton Energy Systems, Inc. (NOTE: Proton and its subsidiary, Northern Power Systems, recently announced that they were merging).
Founded in 1996, Proton designs and makes what it calls proton exchange membrane (PEM) electrochemical products. These are employed in hydrogen generating devices and in regenerative fuel cell systems that function as power generating and energy storage devices. The company’s primary products are hydrogen generators and regenerative fuel cell systems. PRTN’s HOGEN hydrogen generators convert water and electricity into high purity, pressurized hydrogen gas, using PEM electrolysis, a process in which water is divided into its component elements to produce pure hydrogen gas, with oxygen and heat as the only by-products. Proton is presently making and delivering late stage development models to customers for use in commercial applications. The company’s UNIGEN regenerative fuel cell systems, that are in development, will integrate PEM hydrogen generation technology with PEM fuel cell technology to create a power generation device that produces hydrogen from water and electricity, stores the hydrogen and later uses it as fuel for producing electricity.
Since February, Proton has started shipping several of its HOGEN 40 hydrogen generators. Back in May, the company was authorized to begin Phase II of its contract with the Naval Research Laboratory for advanced fuel cell development; the contract could be worth up to $4.5 million over the next few years. And, quite recently, Proton acquired Northern Power Systems, which bills itself as a leader in the installation of integrated on-site power systems for stationary commercial and industrial applications.
For FY2002, ending 12/31/02, net revenues were $4.7 million with $13.5 million in losses. During the first six months of this FY, ending 6/30/03, revenue totaled $624,000 with $7.86 million in losses.
Proton is gambling on more rapid acceptance for its alternative energy technologies. We think that given the U.S. energy situation and Proton’s cash/equivalents position, the company has a good chance to get where it wants to go.
Our 24-month target for the stock is $4.00 to $4.50.
For more information, contact PRTN’s Francis X. Moran at 203-678-2355; investor-relations@protonenergy.com
Look for the October 5, 2003 issue to be posted on 10/1 or 10/2.
Thank you,
George