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November 20, 2003
Hello Readers,
Since the last issue, we have closed four more positions; three for gains and one for a loss.
SUPERCONDUCTOR TECHNOLOGIES (1/5/02). Closed position 11/14/03 at $6.15 for a 60% GAIN.
CALIPER TECHNOLOGIES (7/5/03). Closed position 11/13/03 at $7.18 for a 58% GAIN.
MARIMBA (8/20/03). Closed position 11/10/03 at $5.68 for a 55% GAIN.
MOUNTAIN PROVINCE DIAMONDS (10/20/97). Closed position 11/10/03 at $1.75 for a 45% LOSS.
Superconductor Technologies finally broke through our 50% threshold, probably due to new investor enthusiasm for the chip sector. Ever since picking Caliper back in July, the stock had made a steady climb, and we’re happy to grab the 58%. Marimba had a nice pop when news broke of a deal with Circuit City; the stock may have more juice left, but we’ll take the 55% gain. During the last few weeks, Mountain Province had another good uptick, but, as promised at the first of this year, we got rid of just about the last of the “golden moldies”.
Our mood toward the markets is still very bullish, barring a global catastrophic or domestic terrorism. We still feel that Dow 10K and Nasdaq 2K are just around the corner, however, expect some downward pressure between now and mid-December because of tax selling. And, no doubt, most of you have noticed that the Russell 2000 is dancing with 540; is 600 soon in the cards?
Here are the headlines since the last Newsletter about stocks in the Current Portfolio. Dates in parentheses are when we first recommended them.
Draxis Health (DRAX) (3/20/00). After a long sleep, this one finally woke up due to healthy 3rd QT results.
MCF Corp. (MEM) (1/20/01). Another oldie that seems to be waking up as it, too, reports good quarterly number, and a nice-looking balance sheet.
Digital Power (DPW) (2/20/01). Bad quarterly numbers and company makes changes to management team, however, CEO says new designs are near completion and predicts a “new growth cycle”.
Arotech (ARTX) (6/5/01). Stock had a nice pop over the last few weeks as company is awarded contracts for Iraq and its hybrid electric bus had another successful demonstration.
ViroLogic (VLGC) (7/20/01). Releases quarterly report; balance sheet still appears okay.
Abraxas Petroleum (ABP) (10/5/01). Quarterly results not great, but company sees an increase in production.
Orthovita (VITA) (12/20/01). Receives FDA IDE approval to begin CORTOSS vertebral compression fracture pivotal study. Also, FDA grants 510K clearance to market new VITOSS pre-filled cartridge device. Releases pretty good 3rdQT sales figures; balance sheet still looks good.
Airspan Networks (AIRN) (1/20/02). Despite lackluster quarterly numbers, shouldn’t this stock be much higher? For one, the balance sheet still seems very very solid. Next, AIRN signs a letter of intent to acquire Nortel Networks fixed wireless access business. Then, Russian company Golden Telecom deploys AS4020 in three cities after a successful trail in St. Petersburg, and AIRN also bags business in Serbia.
VASCO Security (VSDI) (2/5/02). Indonesia’s leading retail bank signs on for Digipass 260.
Diomed (DIO) (7/5/02). Despite positive quarterly revenue figures, we see no reason to remove this one from the “Endangered List”.
Hemispherx (HEB) (7/5/02). Presents data at various conferences on SARS and its bioterror program.
Generex (GNBT) (8/5/02). Demonstrates improved glucose control on study of patients with Type-2 Diabetes. To begin studies in teenagers with diabetes.
Viewpoint (11/20/02). Releases 3rd QT numbers. This, too, is on the “Endangered List”.
Interactive Intelligence (ININ) (12/5/02). Receives Microsoft’s “Most Valuable Professional” award. Upgrades Unified Communications Software. Teams up with Polycom to deliver complete IP telephony solution using SIP-based phones. Announces stock repurchase plan. And, shouldn’t this one also be a lot higher in price?
Allos Therapeutics (ALTH) (6/20/03). Third QT report still shows a pretty good balance sheet.
Diedrich Coffee (DDRX) (7/20/03). Stock takes a nice climb during last few weeks. First quarter about what company expected; balance sheet still seems good.
Art Technology Group (ARTG) (8/5/03). Stock took a slight hit as company filed a $50 million equity shelf registration, which means more stock will turn up in the float, at some point. However, if ARTG raises these funds, company should be helped long-term. Company helps launch the Next-Generation of Freeman Online.
Proton Energy (PRTN) (9/20/03). Third QT report; balance sheet looking very solid. Snares contract from UNLV Research Foundation for renewable hydrogen project.
Targeted Genetics (TGEN) (10/5/03). Expands AAV manufacturing patent portfolio.
MetaSolv (MSLV) (10/5/03). Telefonica Brasil selects company’s IP service activation solution.
Trio-Tech (TRT) (10/20/03). Quarterly numbers not great, not bad, but balance sheet still seems to be holding up. Bangkok facility should be completed this month, as company is now receiving manufacturing orders from China.
Insmed (INSM) (11/5/03). Quarterly balance sheet still looks healthy.
A.P. Pharma (APPA) (11/5/03). Same with this one, 3rd QT balance sheet also appears healthy.
Our picks for this issue are another biotech and a company that offers back-up power supply with flywheel technology.
V.I. TECHNOLOGIES, INC. (NASDAQ: VITX) – $2.38. Twelve-month hi-low has been $3.98 – 45 cents. Based in Watertown, MA, with about 70 employees, this biotech has 40.9 million shares outstanding, $13.54 million in total current assets, $25.99 million in total assets, and $8 million in total liabilities, of which $1.92 million is long-term debt (as of 6/28/03). Institutional ownership is around 15%. One analyst rates the stock a “strong buy” and another as a “hold”. http://www.vitechnologies.com
And so we add even another biotech that not only has a half-decent balance sheet, but V.I. Technologies, Inc. could get noticed very quickly should there be incidents of tainted blood.
Trading on NASDAQ since 1998, VITX says it is developing products designed to improve the safety of the world’s blood supply. The company’s proprietary INACTINE technology uses nucleic acid chemistry to inactivate blood-borne viruses, parasites, lymphocytes, and bacteria. Its lead product, INACTINE Pathogen Reduction System for red blood cells, is designed to inactivate these viruses, etc. and to remove harmful immunologic factors in blood before they reach the patient during transfusion, all the while maintaining the red blood cells’ therapeutic properties. For those of you with medical backgrounds, the technology works by binding to the RNA or DNA of the pathogen. Once bound, the compound forms an irreversible bond to the pathogenic nucleic acid, preventing replication and thereby killing the pathogens. The system is currently in Phase III clinical trials.
The INACTINE system has also demonstrated in non-clinical trials the ability to remove prions that may cause Mad Cow Disease in cows, or in humans, variant Creutzfeldt-Jakob Disease (vCJD). In July, VITX reported that the INACTINE system effectively inactivates both the Asian and Toronto strains of the SARS virus in red blood cells.
Other recent developments include publication in the medical journal “Transfusion” of an article covering the effectiveness of INACTINE in eradicating high titers of West Nile Virus. Also, of particular note, is that during the second quarter the company completed equity financings totaling $18.4 million.
By now, it should go without saying that VITX is typical of a small biotech in that its P&L reads like a Scary Movie. For example, during the first six months of this FY, ending 6/28/03, revenue was $209,000 with $13 million in net losses.
This obviously is a bet on the VITX INACTINE technology, but it appears we are not the only ones making the bet. We suspect that much of that newly-raised $18.4 million came from investors who may be more knowledgeable than us.
Our 24-month target for the stock is $4.50 to $5.50.
For more information, call VITX’s Thomas Higgins at 617-926-1551; tom.higgins@vitechnologies.com
ACTIVE POWER, INC. (NASDAQ: ACPW) – $3.50. Twelve-month hi-low has been $3.82 – 98 cents. Located in Austin, TX, with about 160 employees, this backup power provider has 42.1 million shares outstanding, $62.37 million in total current assets, $94.47 million in total assets, little debt, and $4.96 million in total liabilities. Institutional ownership is around 37%. One analyst rates the stock a “strong buy” while four have it as a “hold”. http://www.activepower.com
For those of you who experienced the big blackout that paralyzed the Northeast and parts of Canada this past summer, you may appreciate Active Power, Inc. And, for those of you shopping for fundamentals, the company appears to have one eye-popping balance sheet.
Trading on NASDAQ for just over three years, Active Power bills itself as the leader of battery-free uninterrupted power solutions to meet demand for critical back-up power. The company has developed and commercialized a flywheel energy storage system that provides a non-toxic replacement for lead-acid batteries and used in conventional quality installations. This patented flywheel technology is the world’s first commercially viable mechanical battery; and, speaking of patents, the company has 32 of them. ACPW has also developed a battery-free uninterruptible power supply (UPS) system. It markets it products under the CleanSource trade name.
Active Power has two CleanSource-based products available: The CleanSource DC Energy Storage System and CleanSource UPS, the latter is marketed by Caterpillar under the Caterpillar brand name Cat UPS, and also by ACPW itself, and ranges from 150 kilovoltampere (kVA) to 900 kVA. The company’s products are sold to a vast array of industries, including broadcasters, hospitals, credit card processing centers, semiconductor makers, data centers, and electric utilities.
A few weeks ago, the company enhanced its CleanSource DC line by expanding power levels and making several changes in its product line to meet market requirements. In September, ACPW announced the international version of its new high power UPS, a 1000 kVA unit, will soon be delivered to a Belgium hospital, and that it had shipped its first 1200 kVA system to a customer in Illinois to protect data center operations. In August, Active Power finalized a distribution pact with Fuji Electric to sell its CleanSource products in Japan.
For FY2002, ending 12/31/02, revenue was $13.46 million with $27.62 million in losses. During the first nine months of this FY, ending 9/30/03, revenue was $6.48 million with $17.3 million in losses.
This is a company that seems to be in the middle stages of its development. A few more massive blackouts would probably give it a big lift.
Our 24-month target for the stock is $5.50 to $7.00.
For more information, contact ACPW’s Derek Jones at 512-744-9210; djones@activepower.com
Look for the December 5, 2003 Newsletter to be posted on 12/1 or 12/2.
Happy Thanksgiving,
George