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Hello Readers,
Since the last Newsletter, we have closed another position, for a pretty good gain.
QUICKLOGIC (12/20/04). Closed position 2/16/05 at $4.15 for a 60% GAIN.
As we said in the previous issue, we would soon close QuickLogic, which hit a 60% gain, probably due to some good earnings news.
With this issue of the Newsletter, we are now entering our ninth year of publishing on the Internet. In that time, we have made 442 stock picks and have closed 394 of them, which is about 4% of the total number of companies listed on the NYSE, NASDAQ, and AMEX. We can only hope that the next eight years are as fruitful as the previous eight
During the last few weeks, the markets have been treading water; there have been both sharp up and down days. Right now, we suspect that the markets are nervous about oil being at $50-plus, again, and, of course, the future of interest rates. This should blow over, soon, and give us a pretty decent Spring.
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). Establishes simulation and security subsidiary in the UK
ViroLogic (VLGC) (7/20/01). End-of-year loss looks staggering thanks to a non-recurring charge for the purchase price of ACLARA; balance sheet looks very good. Presents studies highlighting utility of Virologic assays in HIV management.
Art Technology (ARTG) (8/5/03). Announces results of independent governance reviews. Sets date for User Conference.
Targeted Genetics(TGEN) (10/5/03). Sets earnings release for March 3. Plans to expand HIV/AIDS vaccine study; says early stage trials were well-tolerated.
Insmed(INSM) (11/5/03). Seeks to dismiss patent infringement suit.
V.I. Technologies (VITX) (11/20/03). Several releases, including year-end numbers. Remember, this is on the “Endangered List”.
AVANT Immuno (AVAN) (12/5/03). Year-end earnings call set for March 2.
Actuate (ACTU) (1/5/04). Announces immediate availability of e.Spreadsheet Performance edition.
Crossroads Systems (CRDS) (2/5/04). Announces StrongBox family of network solutions appliances. Earnings call slated for March 10.
Somera Communications (SMRA) (2/20/04). Achieves TL9000 certification and ISO 9001:2000 recertification.
Transgene (TRGNY) (3/5/04). Year-end balance sheet still looks okay. Says new strategy in therapeutic vaccines, MVA-Mucl-IL2 meets primary endpoint in lung cancer Phase II.
Open TV (OPTV) (3/20/04). Sets earnings call for March 16.
Socket Communications (SCKT) (3/20/04). Reports profitable year with record annual revenue of $26.1 million and 21% year-over-year growth.
GoRemote (GRIC) (5/5/04). Access to many of AT&T’s new WiFi and wired ethernet locations made possible under expansion of pact with GRIC. Company honored by the Telework Coalition.
EMCORE (EMKR) (5/20/04). Announces 10-gigabit long wavelength ROSA for high performance optical networking. Introduces components for passive optical networks and ethernet in the First Mile Systems. Receives preliminary earn-out statement from Veeco.
GlowPoint (GLOW) (5/20/04). TANBERG to add GLOW IP video services to 19 more U.S. locations. Joins with Sony to deliver customized IP-video communications solution.
Network Engines (NENG) (6/5/04). Partners with Forum Systems to bring preconfigured web services security appliance to market.
Bindview (BVEW) (6/5/04). Company’s Directory Administration solution voted “Best ID Management Solution” by SC Magazine.
Avanex (AVNX) (7/20/04). Unveils PowerBit 10-12 Gb/s NRZ external modulator, first to reach 120 km without dispersion compensation.
Chordiant (CHRD) (9/20/04). To present new multi-channel decision management solution in Easter European market. Company’s Branch Teller solution integrates Check 21 Support. Delays quarterly filings and receives notice of possible de-listing from NASDAQ.
iGate (IGTE) (10/20/04). Sets earnings call for March 2.
Nova Measuring (NVMI) (11/5/04). Posts $1.46 million in yearly profit; balance sheet looks healthy.
Net2Phone (NTOP) (11/5/04). To provide VoIP services to Columbia’s largest telecommunications operator. Sets March 9 earnings call.
Applied Micro (AMCC) (11/20/04). Presents 10Gbps dual clock data recovery device for XFP module market.
Zhone Technologies (ZHNE) (12/5/04). Gets a nice plug in Forbes.com; story says company is a turnaround situation. Selected by IDS Telecom to augment voice and data services, migrate from UNE-P to UNE-L.
Brillian (BRLC) (1/5/04). Recommences shipments of HDTVs. To release earnings March 3.
Saviant (SVNT) (2/5/04). Will amend first three quarters of 2004 and says this would have no effect on full-year reported revenues, earnings, or cash flows.
Mindspeed (MSPD) (2/20/05). Coverage initiated by AmTech Research.
Our picks for this issue are a software company and an online loan provider that some are touting as a takeover candidate.
TUMBLEWEED COMMUNICATIONS CORP. (NASDAQ: TMWD) – $2.60. Twelve-month hi-low has been $8.32 – $1.52. Located in Redwood City, CA, with about 250 employees, this software company has 48 million shares outstanding, $30.43 million in total current assets, $87.7 million in total assets ($48 million is goodwill), little debt, and $25.3 million in total liabilities. Institutional ownership is around 28%. One analyst rates the stock a “moderate buy” and one as a “hold”. http://www.tumbleweed.com
A lot of small tech stocks seem to be drifting, lately, but one can’t help but think it’s only a matter of time before they get into gear, again. Tumbleweed Communications Corp. has a decent looking balance sheet and has had pretty good growth over the last year while paring its losses. Founded in 1993, and trading publicly since 1999, Tumbleweed provides Internet managing software products for enterprise and government customers. Its solutions are used to make email, file transfer, and Web communications secure and reliable, and these solutions are offered in three comprehensive product suites: MailGate, SecureTransport, and Valicent Validation Authority. MailGate provides protection against spam, viruses, and attacks, and enables policy-based message filtering, encryption, and routing. SecureTransport enables business to safely exchange large files and transactions without proprietary software. Valicent Validation Authority is supposedly the world-leading solution for determining the validity of digital certificates; Tumbleweed acquired Valicent in 2003. In March, 2004, the company acquired anti-spam appliance vendor Corvigo, Inc.
Tumbleweed now owns 21 U.S. patents, and has secured license agreements for its patents with twelve competitors. The company now has over 1100 customers, of which more than 700 use its products to connect to 10,000-plus corporations. Some of TMWD’s customers include Catholic Healthcare West, Bank of America Securities, JP Morgan Chase, the U.S. Navy and Marine Corps, and the FDA.
In February, Tumbleweed released MailGate Edge, which is a secure email relay that delivers network-based defenses. Also, last month, the U.S. DOD Public Key Infrastructure Program Management Office selected Valicent as one of two solutions for a global deployment, providing digital certificate validation to more than 1.3 million users worldwide. During the 4thQT of 2004, TMWD signed about 400 customer contracts including 100 new customers.
For FY2004, ending 12/31/04, net revenue was $43.4 million with $7.5 million in losses compared to FY2003 net revenues of $30.59 million and $9.2 million in losses.
Maybe there is something here that we have missed, but, given all that this company has in place, its stock has a chance to be a lot higher.
Our 20-month target for the stock is $4.75 to $5.50.
For more information, contact TMWD’s Timothy Conley at 650-216-2000;tim.conley@tumbleweed.com
E-LOAN, INC. (NASDAQ: EELN) – $3.20. Twelve-month hi-low has been $4.12 – $1.94. Based in Plesanton, CA, with about 820 employees, this finance provider has 63.7 million shares outstanding, $92.28 million in total current assets, $118.25 million in total assets, and $31.37 million in total liabilities. Institutional ownership is around 43%. Two analysts rate the stock a “strong buy” and one as a “strong sell”. http://www.ELOAN.com
We’ve been watching E-LOAN, Inc. for quite some time, and, finally, last month, the company posted some numbers that showed it got through last year in relatively good shape since 2004 was dubbed a “transition year”. Also, a columnist at the Motley Fool thinks the company could be “buy-out bait for 2005”, and he could have a point.
Founded in 1996, and trading on NASDAQ since 1999 when it was nearly $40/share, E-LOAN is an online provider of loans, offering borrowers a variety of purchase and refinance mortgage loans, home equity loans, home equity lines of credit, and auto loans. The company originates loans through its website and by telephone, funds the loans using warehouse and other lines of credit, and sells closed loans. The company’s main income sources are gains from the origination and sale of mortgage, home equity, and auto loans, as well as interest income earned on loans during the time that they are held pending sale. Also, by making credit scores freely available and integrating them with a suite of advice tools, E-LOAN claims it is pioneering the nascent debt management advice category, which helps consumers proactively manage their loan portfolio. Last year, E-LOAN was named one of the top 20 most trusted companies for privacy in America by The Ponemon Institute and TRUSTe.
Over the years, E-LOAN has entered into many strategic agreements, and the two most recent pacts appear to be quite promising. In December, EELN was named the primary provider of auto loans for online auto information provider Edmunds.com. Even more eye-popping was when in January the company announced it will work with eBay to provide its customers with financing automobiles purchased at eBay Motors. Although the eBay deal may not be an exclusive, remember that eBay is the number one auto site.
For FY20004, ending 12/31/04, revenues were $135.36 million with $805,000 in net income compared to FY2003 revenue of $152.7 million and $23.3 million in net income. The year-over-year decline was attributed mostly to a significant drop in the mortgage refinancing market in 2004. Looking ahead, E-LOAN expects 2005 revenues of $165 million and a pre-tax EPS of around 13 cents.
We will have an idea in a few months if E-LOAN has a shot at 2005 expectations when the 1stQT numbers come out, probably in May. Then, there is also that tantalizing prospect of the company as a buy-out target.
Our 20-month target for the stock is $5.50 to $6.00.
For more information, contact EELN’s IR office at 925-847-6779; ir@eloan.com
The March 20, 2005, Newsletter should be posted on 3/16 or 3/17.
Thank you,
George