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Hello Readers,
Since the last Newsletter, we closed six more positions; four for gains and two for losses.
ENDOLOGIX (1/20/07). Closed position 12/15/10 at $6.88 for a 62% GAIN.
WILLDAN GROUP (5/20/10). Closed position 12/9/10 at $4.00 for a 60% GAIN.
INVENTURE FOODS (3/5/06). Closed position 12/9/10 at $4.47 for a 54% GAIN.
U.S. HOME SYSTEMS (8/20/10). Closed position 12/7/10 at $4.75 for a 58% GAIN.
XENOMICS (6/5/07). Closed position 12/7/10 at 45 cents for a 82% LOSS.
HARBOR BIOSCIENCES (12/20/07). Closed position 12/7/10 at 15 cents for a 92% LOSS.
The Willdan Group was one of those picks that pretty much pushed steadily upward over the last few months. It took long enough, but, finally, Inventure Foods got out of its way and hit our 50%-plus target, due to a nice drumbeat of good news since summertime. Ditto, with Endologixthat also got an added boost with a “buy” recommendation from Oppenheimer. To be candid, we never thought that U.S. Home Systems would shoot up so quickly, but the demand for home improvement products appears to be stronger than first anticipated. And, we closed Xenomicsand Harbor BioSciences for some nasty losses.
For the first time in three years, we are starting to get enthusiastic about the markets. As we write this, Congress is about to pass the extension of the Bush tax cuts, which has a rather hefty holiday trinket that could really boost the economy next year. This bauble is the 2% payroll tax cut, which is the first real new money available to all taxpayers in almost a decade, other than puny one-time stimulus checks. Most households will have an added $800 to $4000 in disposable income in 2011, depending, of course, upon family and income size. AND, it goes into the people’s hands and not into the black holes of various government agencies, where previous stimulus plans were targeted.
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 highly significant.
I.D. Systems(IDSY)(12/5/10). Forward Air deploys VeriWise Track & Trace on cargo trailer fleet.
SuperGen(SUPG)(12/5/10). Presents SGI-110 preclinical data at hematology confab.
World Heart(WHRT)(11/10/10). Levacor hemocompatibility analysis presented at European mechanical circulatory support summit.
Peregrine Pharmaceuticals(PPHM)(11/5/10). Balance sheet still looks healthy as company advances multiple Phase 2 oncology trials for Bavituximab and Cotara.
Inovio Pharmaceuticals(INO)(10/20/10). Preclinical efficacy of INO’s smallpox DNA vaccine featured in The Journal of Infectious Diseases.
Amicus Therapeutics(FOLD)(10/5/10). Awarded $500,000 grant from the Michael J. Fox Foundation for development of next-generation pharmacological chaperone to treat Parkinson’s.
Rexahn Pharmaceuticals(RNN)(7/20/10). Presents data on Serdaxin Phase IIa clinical trial. Issued U.S. patent for new method for treating cognitive disorders. Brokerage firm Brean Murray gives the stock a “buy” rating.
Aeterna Zentaris(AEZS)(6/20/10). Says Phase 2 data demonstrate Perifosine’s promising efficacy in treating advanced leukemia, lymphoma, and multiple myeloma.
NovaBay Pharmaceuticals(NBY)(4/20/10). To get $3.25 million as Galderma expands their agreement to include Impetigo.
China Direct Industries(CDII)(4/5/10). Sets earnings call for December 17, the day after we post this Newsletter.
Achillion Pharmaceuticals(ACHN)(3/5/10). To present data from studies of ACH-1625 in hepatitis C at Asian Pacific Liver conference February 17-21, 2011.
Cytokinetics(CYTK)(2/5/10). Completes Phase IIa “Evidence of Effect” clinical trial of CK-2017357 in patients with amyotrophic lateral sclerosis.
CytRx(CYTR)(1/5/10). Says INNO-206 safely delivers high-dose doxorubicin to human tumors in animal model of multiple myeloma. Initiating Phase 2 clinical trial with Tamibarotene in advanced lung cancer.
Qualstar(QBAK)(10/20/09). Announces two new 5 volt DC-DC power supply models; and new rack mountable tape libraries.
BioClinica(BIOC)(8/5/09). Partners with Kaizen Clinical Services, an oncology-focused contract research organization.
U.S. Geothermal(HTM)(8/5/08). Updates Neal Hot Springs and San Emidio construction projects.
MicroVision(MVIS)(5/20/08). Inks deal with Japan’s Pioneer to jointly commercialize laser display products.
LRAD Corp(LRAD)(10/5/07). Reports pretty good numbers; balance sheet still looks okay.
YM BioSciences(YMI)(11/5/06). Plans $40 million secondary offering, which pressures stock price. Reports positive interim data including substantial anemia response from Phase I/II trial of JAK1/JaK2 inhibitor CYT387.
Our picks for this Newsletter are a media chip designer and a developer of bio-based resins, both NASDAQ-listed.
TRIDENT MICROSYSTEMS, INC. (NASDAQ: TRID) – $1.75. Twelve-month hi-low has been $2.56 – $1.27. Based in Santa Clara, CA, with about 630 employees, this semiconductor/media chip designer has 176.9 million shares outstanding, $280.26 million in total current assets, $423.87 million in total assets, and $148.1 million in total liabilities. Institutional ownership is around 19%. One analyst gives the stock a “moderate buy”. www.tridentmicro.com
At first glance, Trident Microsystems, Inc. seems stuck in neutral, but a leading analyst in chip researchers thinks things are changing quickly for the company, despite recent quarterly numbers. And, Trident appears to have a hefty balance sheet to keep it afloat while making the hoped-for turnaround.
Founded in 1987, and public for nearly two decades, Trident provides high-performance multimedia semiconductor solutions for the digital home entertainment market. It designs, develops, and markets integrated circuits (ICs), and related software for processing , displaying, and transmitting high quality audio, graphics, and images in home consumer electronics applications, such as digital TVs, PC and analog TVs, and set-top boxes. The company offers system-on-a-chip semiconductors that provide integrated solutions for processing and optimizing video, audio, and computer graphic signals to produce high-quality and realistic images and sound; and frame rate converter, demodulator and audio decoder products, DOCSISR modems, interface devices, and media processors. Trident sells primarily to digital TV and set-top box OEMs.
Trident currently has an extensive portfolio of consumer IP applicable to a wide range of markets, with over 2000 granted and in-process patents including motion estimation/motion compensation and conditional access, as well as advanced 45nm system-on-chip technology.
For the nine-months ending 9/30/10, revenue was $438.61 million with $75.11 million in net losses compared to the same period in 2009 with $52.85 million in revenue and $54.84 million in losses. For the 4thQT, the company expects net revenues to range from $130 million to $140 million.
The 4thQT estimates from the company are what is driving some analysts nuts; they expected revenue estimates of $160 million. However, the research firm iSuppli doesn’t seem overly worried and says there is a lot of business coming Trident’s way. iSuppli says that Trident has regained the top ranking in the worldwide market for TV-bound video processing chips, a spot it hasn’t held since 2007. This is a case where we are inclined to believe the chip researchers.
Our 24-month target for the stock is $3.25 to $3.50.
For more information, contact TRID at 408-962-5000; investor@tridentmicro.com
CEREPLAST, INC. (NASDAQ: CERP) – $3.95. Twelve-month hi-low has been $7.00 – $2.78. Based in El Segundo, CA, with about 25 employees, this synthetics maker has 13 million shares outstanding, $6.05 million in total current assets, $9.78 million in total assets, little debt and $1.36 million in total liabilities. Institutional ownership is around 7%. www.cereplast.com
Cereplast, Inc. could very well thrive thanks to government interference in the marketplace. In this case it is a ban on petroleum-based plastic bags in Europe. Will the same ban be coming soon to America. With the Obama administration, it’s a very strong possibility.
Found in 2001 as Biocorp North America, and public for five years, Cereplast develops and sells bio-based resins which replace a significant percentage of petroleum-based additives with starches made out of corn, wheat, tapioca, and potatoes (sounds like a meal sans fish or meat). The company’s products include Cereplast Compostables resins, which are substitutes for petroleum-based plastics targeting primarily single-use disposables and packaging applications. It also offers Cereplast Hybrid Resins that replace up to 50% of the petroleum content in conventional plastics with bio-based materials, such as industrial starches sourced from plants for use in a range of markets, such as automotive, consumer goods, consumer electronics, medical, packaging, and construction. The company’s resins are also used in various conventional converting processes, including injection molding, thermoforming, blow film, blow molding, and extrusion. It is also developing Cereplast Algae Plastics to transform algae into bioplastics.
In early November, Cereplast announced that demand in Europe for Cereplast bioplastic resin continues to soar as a result of Italian legislation banning the sale of plastic bags. The company says that European manufacturers are increasingly seeking plastic alternatives, including bioplastic blown film, to prepare and comply with the legislation that goes into effect in January, 2011, a few days from now.
For FY2009, ending 12/31/09, revenue was $2.73 million with $6.07 million in losses. During the first nine months of the current FY, ending 9/30/10, revenue was $2.5 million with $5.65 million in losses. It should be noted that $1.5 million of that came in the 3rdQT, which is a 122% increase over the 3rdQT of 2009.
The company is expecting 2010 revenues to be between $8 million to $10 million, which would mean a blockbuster 4thQT. Cereplast is one of those non-sexy companies that could catch would we call a “government wave”.
Our 24-month target for the stock is $6.50 to $7.00.
For more information, contact CERP at 310-615-1900.
Look for the January 5, 2011 Newsletter to be posted on 1/4 or 1/5.
Happy Holidays and Merry Christmas!
George