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Hello Readers,
To borrow from Star Trek, “there is an anomaly in the time continuum”. While the major averages have teased, tempted, and bedeviled us for the last few weeks, the Russell 2000 has been inching steadily upward. This most-watched index of small stock movement even has us a little baffled. We’ve heard several explanations from the pundits, but the one making the most sense is that with the decline in oil and commodity prices the hot money is starting to come into our end of the market. Actually, our Current Portfolio, which is still beaten to a pulp and still mostly in the red, has seen many picks show some slight signs of life over the last ten days. And, paradoxically, we have added more picks to the “Endangered List”, which is at a all-time total; most of them are older recommendations, and the victims of the worst bear market since the 1970s.
However, don’t get too excited, just yet. Remember bear markets end with a major mind-numbing sell-off, the kind that makes us cry and gnash our teeth. Any simply put, we have not seen it, but we feel it is coming closer. Why? Despite all of the bad news lingering over the markets and economy, there is too much investor complacency.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
ICAgen (ICGN) (8/5/08). Recent balance sheet still looks pretty good.
Hythiam (HYTM) (7/20/08). Quarterly report upbeat as revenues inches up; balance sheet still looks good.
E&TRADE (ETFC) (7/20/08). Daily average revenue trades in July rose 9.2% from June.
Applied Energetics (AERG) (7/5/08). 2ndQT report has some bright spots as company reports a $13.1 million backlog; balance sheet still looks okay.
Neurobiological Technologies (NTII) (7/5/08). Reaches patient enrollment target for interim analysis of Viprinex Phase 3 stroke trials. Gets $2.1 million royalty for quarterly sales of Memantine.
Avigen (AVGN) (6/20/08). Credit Suisse upgrades the stock to “outperform”.
MMC Energy (MMCE) (6/20/08). Recent numbers so-so; balance sheet still seems to be good.
Energy Focus (EFOI) (6/5/08). Repositions itself as a full-service lighting energy solutions provider.
Bridgeline Software (BLSW) (6/5/08). Reports record revenues for 3rdQT of FY2008; balance sheet still seems okay.
Microvision (MVIS) (5/20/08). Several brokerage firms downgrade the stock to a “hold” as recent revenue numbers disappoint; balance sheet still looks viable.
GlobalScape (GSB) (5/20/08). Resets earnings call for August 19.
Ziopharm Oncology (ZIOP) (5/5/08). Leukemia Journal publishes results from Darinaparsin study, which suggests potentially broader therapeutic spectrum for Darinaparsin than inorganic arsenic.
Replidyne (RDYN) (4/5/08). Recent balance sheet still looks healthy.
Biolase Technology (BLTI) (4/5/08). Recent numbers seem pretty good, as does balance sheet.
Rodman& Renshaw (RODM) (3/20/08). Reports record 2ndQT revenue, up 95% sequentially; balance sheet appears to be okay.
ActivIdentity (ACTI) (3/5/08). Recent numbers not great but company upbeat about the future; balance sheet still looks very strong. Names new CFO.
IncrediMail (MAIL) (2/20/08). Latest report shows revenues up 21% year-over-year; balance sheet looks pretty good.
Amicas (AMCS) (1/20/08). Recent numbers look good and so does balance sheet.
Nanophase (NANX) (1/20/08). Names acting CEO.
Hollywood Media (HOLL) (1/5/08). 2ndQT loss lessens as revenue is down slightly from a year earlier; balance sheet still seems okay.
Move, Inc (MOVE) (1/5/08). Recent numbers so-so; balance sheet still looks good. Plans to sell Welcome Wagon business and realign cost structure in second half of this year.
Catalyst Pharmaceutical (CPRX) (12/20/07). Balance sheet still seems to be okay.
Hollis-Eden Pharmaceuticals (HEPH) (12/20/07). Latest balance sheet still looks healthy. Commences Phase I/II clinical trial with TRIOLEX (HE3286) in rheumatoid arthritis patients.
DigitalFX (DXN) (12/5/07). Releases new media vault. This is on the “Endangered List”.
Santarus (SNTS) (11/20/07). Recent numbers pretty upbeat as company reports first profitable quarter; balance sheet still seems okay.
Continucare (CNU) (11/20/07). To present at the Noble Financial Equity Conference on August 19.
Sunesis Pharmaceuticals (SNSS) (11/5/07). Piper Jaffray gives the stock a “buy” rating. Recent balance sheet still looks pretty fair.
Linktone (LTON) (11/5/07). Terminates agreements with Chinese youth league Internet, film, and television center.
Retractable Technologies (RVP) (10/20/07). Recent numbers seem okay; balance sheet still looks good.
Orsus Xelent (ORS) (10/20/07). Recent numbers look good as company boasts of record sales in certain areas; balance sheet could look better from a cash perspective.
Nucryst Pharmaceuticals (NCST) (10/5/07). Recent balance sheet still appears to be good.
American Technology (ATCO) (10/5/07). Brokerage firm downgrades stock as losses mount even with better revenues; balance sheet could be better.
XATA (XATA) (9/20/07). 84% increase in XATANET sales lead to 57% earnings improvement; balance sheet still looks good.
Wave Systems (WAVX) (9/5/07). Partners with Toshiba to develop full disk encryption solution for mobile PCs. Receives minimum bid non-compliance letter from NASDAQ. Recent revenue numbers look good but losses mount; balance sheet now shows a deficit. To complete $821,000 stock offering. We’re placing this on the “Endangered List”.
Siga Technologies (SIGA) (8/20/07). Balance sheet could use improvement.
A.P. Pharma (APPA) (8/5/07). Recent balance sheet still viable.
Heska (HSKA) (7/5/07). Recent numbers show a slight dip in revenue but a nice pop in income; balance sheet still looks okay.
Pharmacyclics (PCYC) (6/20/07). Recent balance sheet could look better.
Xenonics (XNN) (6/5/07). Reports 85% increase in 3rdQT revenue and narrower net loss; balance sheet okay. Company’s Supervision facilitates drug bust in Northern California mountains.
Oncolytics Biotech (ONCY) (6/5/07). U.S. NCI starts enrolment in Phase 2 systemic melanoma clinical trial with REOLYSIN. Completes dosage escalation in combination REOLYSIN Docetaxel trial.
Encorium Group (ENCO) (5/20/07). Latest numbers not great but not bad as company touts recent new business awards; balance sheet still seems okay. Signs $3.5 million of new contracts for vaccines clinical trials. Receives delisting notice from NASDAQ, but problem appears to be manageable, at this time.
Hana Biosciences (HNAB) (5/5/07). Balance sheet could use improvement.
ECTel (ECTX) (5/5/07). Brokerage firm downgrades stock to a “hold”. Recent numbers show revenue increase and less losses; balance sheet still looks okay.
Ore Pharma (ORXE) (4/20/07). Reports 2ndQT numbers. Acquires rights to develop second drug candidate from Roche. This is on the “Endangered List”.
TTI Team Telecom (TTIL) (3/5/07). Recent numbers look good; balance sheet seems to be strong.
Neose Technologies (NTEC) (12/20/06). Reports quarterly results. This is on the “Endangered List”.
CardioTech (CTE) (12/20/06). Latest balance sheet looks okay. Company optimistic about new brand launch.
Lantronix (LTRX) (12/5/06). Lantronix UDS and SecureBox now UL 864 listed.
YM Biosciences (YMI) (11/5/06). Makes staff changes. Reports Phase II data for cancer drug candidate. On “Endangered List”.
Proxim Wireless (PRXM) (11/5/06). Releases quarterly results. We have placed this on the “Endangered List”.
HealthStream (HSTM) (10/20/06). To present at the Noble Financial Equity confab on August 18, the day we post this Newsletter.
Hydrogenics (HYGS) (9/20/06). Recent numbers so-so; balance sheet still looks good.
TVI Corp (TVIN) (9/5/06). Releases quarterly numbers. This is on the “Endangered List”.
Advanced Life Sciences (ADLS) (7/20/06). Balance sheet could be a lot better. U.S. DOD awards company biodefense contract valued at up to $3.8 million.
NTN Buzztime (NTN) (7/5/06). Recent losses making us nervous; balance sheet still looks okay.
TRI-S Security (TRIS) (5/5/06). Latest quarterly numbers look pretty good; balance sheet could be better. Subsidiary awarded $8.7 million contract for State of Florida.
Pharmos (PARS) (4/20/06). Posts quarterly report. On “Endangered List”.
TII Network Technologies (TIII) (3/20/06). Recent numbers show sliding revenues but increasing income; balance sheet so-so.
Lipid Sciences (LIPD) (2/20/06). Latest balance sheet needs help. Gets NASDAQ delisting notice. We’re placing this on the “Endangered List”.
Adherex (ADH) (2/20/06). Reports quarterly numbers. On “Endangered List”.
Digital Angel (DIGA) (12/20/05). Quarterly results. On “Endangered List”.
Westell Technologies (WSTL) (10/20/05). Updates quarterly release from July 23. CEO and board members announce stock purchases, which is usually a good thing.
RAE Systems (RAE) (10/5/05). Preliminary results look positive.
EntreMed (ENMD) (9/5/05). Teams with JSB-Partners to expedite partnering of its Aurora Kinase program. Balance sheet weakens. We’re placing this one on the “Endangered List”.
Zi Corp (ZICA) (8/5/05). Nuance proposes to acquire ZICA for 80 cents a share in cash; prior to this news, stock was at 39 cents. On “Endangered List”.
B.O.S (BOSC) (1/5/05). Posts some good-looking quarterly numbers. Balance sheet still looks good.
Nova Measuring Instruments (NVMI) (11/5/04). Company still shows income, which has declined; balance sheet still looks good.
TMNG Global (TMNG) (4/20/04). Shows pretty nice revenue growth but losses dampen enthusiasm; balance sheet still looks good. And, yes, we know this one has started to get gray hairs.
Our picks for this Newsletter are a uranium mining company listed on the AMEX and a medical equipment supplier trading on NASDAQ.
URANIUM ENERGY CORPORATION (AMEX: UEC) – $2.05. Twelve-month hi-low has been $4.82 – $1.80. Based in Austin, TX, with about 20 employees, this mining exploration company has 39.8 million shares outstanding, $3.25 million in total current assets, $18.54 million in total assets, little debt, and $830,000 in total liabilities. Institutional ownership is around 4%. One analyst rates the stock a strong buy. www.uraniumenergy.com
Sometimes we throw one into the Current Portfolio for kicks and giggles, and at first blush that is what Uranium Energy Corporation appears to be. However, with John McCain talking about building 47 nuke plants over the next 20 years, this could be worth a pop; and Mr. Obama will, at some point, need to cede to nuclear power. It also helps the company that it has raised a pile of cash that should be reflected in future balance sheets.
Founded in 2003, and public for a little over two years, Uranium Energy, as its name implies, is a junior resource company with the intent of becoming a near-term ISR uranium producer. The company claims to control one of the largest historical uranium exploration and development databases in the U.S. By using this info, UEC has acquired what it considers to be advanced uranium properties in Arizona, Colorado, New Mexico, Texas, Utah, and Wyoming. At the end of July Uranium Energy had acquired interests in over 82,000 gross acres of leased or staked mineral properties.
The company’s principal mining properties are the Goliad Project in Goliad County, TX, and the Cebolleta Project in Cibola County, NM. Some of the proceeds from the company’s recent funding efforts will be used to advance the Goliad ISR Uranium project.
Since this is a relatively new start-up mining company, UEC has no revenue and some pretty hefty losses. For example, during the quarter ending 4/30/08, losses were over $6 million.
This may take some time to work, if it works, but the play here, of course, is on alternative energy solutions.
Our 24-month target for the stock is $3.50 to $4.00.
For more information, contact UEC at 866-748-1030; info@uraniumenergy.com
DIGIRAD CORPORATION (NASDAQ: DRAD) – $1.85. Twelve-month hi-low has been $4.68 – $1.61. Located in Poway, CA, with about 450 employees, this medical equipment provider has 18.9 million shares outstanding, $41.17 million in total current assets, $68.58 million in total assets, little debt and nearly $12.7 million in total liabilities.
Let’s face it, in this market there a few “sexy stocks” so perhaps it’s best to keep adding to the Current Portfolio those that appear to be weathering the slowdown, have strong-looking balance sheets, and, according to Digirad Corporation, has been keeping its equipment updated.
Founded in 1985, and trading on NASDAQ for nearly four years, Digirad provides diagnostic nuclear and ultrasound imaging systems and services to physicians’ offices, hospitals, imaging centers, and other medical service providers. The company has designed and commercialized the solid-state nuclear gamma camera for detecting cardiovascular disease and other medical conditions. Digirad offers two lines of nuclear medicine cameras: the 2020tc Single-Head Imaging System for general planar nuclear medicine applications; and the Cardius XPO Dedicated Cardiac SPECT Imaging Systems in single, dual, and triple head configurations. Digirad’s installed base of equipment exceeds 550 systems and a mobile fleet of 164 nuclear and ultrasound imaging systems.
Through wholly-owned subsidiaries, Digirad also provides mobile imaging service leasing programs as an alternative to purchasing a gamma camera or ultrasound machine to doctors who wish to perform nuclear imaging, echocardiography, vascular ultrasound, or any combination thereof in their offices. In addition, it offers leases to customers who own one of its nuclear gamma cameras but contract with the company for staffing and support services. During 2007, Digirad leasing services performed more than 100,000 imaging procedures in 23 states; and the company provided mobile imaging services to about 800 healthcare providers.
For FY2007, ending 12/31/07, revenue was $73.95 million with $1.38 million in losses. During the first six months of the current FY, ending 6/30/08, revenue was $38.16 million with $2.55 million in losses. The company attributes the losses to several things like slowing economic conditions; but one expense was upgrading three cameras in its fleet with its multi-head Cardius XPO camera during the last quarter, completing the company’s two-year upgrade of its fleet of 71 mobile nuclear imaging cameras.
Despite economic conditions, Digirad has been showing pretty steady revenue growth. Once the economy turns around, this one should, too.
Our 24-month target for the stock is $3.25 to $3.50.
For more information, contact DRAD’s Todd Clyde at 858-726-1600; ir@digirad.com
Look for the September 5, 2008 Newsletter to be posted on 9/2 or 9/3.
Have a safe Labor Day,
George