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Hello Readers,
And so, again, the markets remain fixated on the Federal Reserve and monetary policy as Chairman Ben keeps alluding to the idea that the central bank could ease financial conditions even more, if that is still possible. The day this Newsletter is posted, August 31, the Chairman is to give his annual Jackson Hole address, which could set the markets’ path for September, and, perhaps, up until Election Day. The problem with all of this Fed easing is that it is having very little impact neither on Main Street nor on small stocks, which is our fixation. Any new Fed money is channeled into institutions and banks that shovel it into mutual funds, hedge funds, and ETFs, which in turn lap up big cap stocks and other such financial instruments. As we have said on countless occasions, this is no way to run a stock market, much less a country. Oh, and let’s not forget about Europe.
Our Current Portfolio has been marking time through all of this over the last few months and has not enjoyed the fruits of Ben’s largesse. Once more, the key word here is “patience”, for which most of us have run short.
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.
pSivida Corp. (PSDV)(8/5/12). To present at the Stifel Nicolaus Healthcare conference on September 5 and at the Rodman % Renshaw global investment conference on September 10.
Overland Storage (OVRL)(7/20/12). Sets earnings call for September 5. Quantum sues company for patent infringement.
Aviat Networks (AVNW)(7/20/12). Signs agreement to provide managed network services to mobile operator Etisalat Nigeria.
Vermillion (VRML)(6/20/12). To present at the 2012 Gateway Conference on September 6.
Avanir Pharmaceuticals (AVNR)(6/5/12). To present at the Stifel Nicolaus Healthcare confab on September 6.
Bacterin Int’l Holdings (BONE)(5/5/12). Stocks gets a pop when company secures $25 million financing with OrbiMed.
Five Star Quality Care (FVE)(5/5/12). To present at Stifel Nicolaus healthcare conference on September 5.
Axcelis Technologies (ACLS)(4/5/12). Wins high volume, follow-on order for Integra RS plasma dry strip systems from chipmaker.
Geron Corporation (GERN)(2/5/12). Coverage initiated by Stifel Nicolaus with a “buy”.
Synthesis Energy Systems (SYMX)(8/20/11). To present at the Rodman & Renshaw investment confab on September 11. Announces progress update at the Yima joint venture project in China.
Cover-All Technologies (COVR)(7/20/11). Company’s BlueWave claims recognized in Novarica claims report while its Business Intelligence Solution is recognized in Celent Data mastery report.
On Track Innovations (OTIV)(6/20/11). Even the company is disappointed in its first-half results; balance sheet still looks okay. City of Dover, NH selects company’s EasyPark system.
Gleacher & Company (GLCH)(6/5/11). Company is reportedly seeking buying; hires Credit Suisse as advisor. Names new head of Investment Banking and Capital Markets.
ThermoGenesis (KOOL)(4/5/11). Completes sale of wound care product line. Signs distribution pact with Chinese company Golden Meditech Holdings.
Jamba, Inc. (JMBA)(3/20/11). Enhances eco-sustainability commitment. Launches Healthy-Go-Lucky sweepstakes.
Oculus Innovative Sciences (OCLS)(3/5/11). Enrolls first patient in study of Microcyn Hydrogel in managing scars.
Sprint Nextel (S)(1/5/11). The usual several dozen stories and news items; of some note is that the company has brought its 4GLTE network to four more markets.
Astex Pharmaceuticals (ASTX)(12/5/10). Stocks get a nice boost on expectations of European approval for its leukemia treatment. Company president gets award for new technologies in drug discovery. To present at the Stifel Nicolaus healthcare confab on September 6; at the BioCentury confab on September 7; and at the Rodman & Renshaw investment conference on September 10.
Pixelworks (PXLW)(11/20/10). To participate at the Citi Technology Conference on September 5.
RELM Wireless (RWC)(11/5/10). Stock upgraded to a “buy” at TheStreet.com.
Inovio Pharmaceuticals (INO)(10/20/10). To present at the 2012 Gateway confab on September 6 and at the Rodman & Renshaw investment conference on September 10.
Rexahn Pharmaceuticals (RNN)(7/20/10). Announces positive top-line Phase 2a data for Archexin in patients with metastatic pancreatic cancer. To present at the Stifel Nicolaus healthcare confab on September 5.
NovaBay Pharmaceuticals (NBY)(4/20/10). Receives FDA okay for its NeutroPhase wound cleanser.
Qualstar Corporation (QBAK)(10/20/09). Recent numbers a little disappointing; balance sheet still looks good.
Our picks for this Newsletter are an electronic retailer and a maker of integrated circuits, both NASDAQ-listed.
VALUE VISION MEDIA, INC. (NASDAQ: VVTV) – $1.84. Twelve-month hi-low has been $4.05 – $1.43. Located in Eden Prairie, MN, with about 790 employees, this electronic retailer has 44.8 million shares outstanding, $168.47 million in total current assets, $224.62 million in total assets, and $133.87 million in total liabilities, of which $133.87 million is a long-term credit facility. Institutional ownership is around 48%. Two analysts rate the stock a “strong buy”, one as a “buy”, and one as a “hold”. www.shopnbc.com
During our 17-year publishing history, we have only picked one other company like ValueVision Media, Inc., the other being Drugstore.com, which worked for us. This one seems too cheap to let pass and the company also has a strong balance sheet.
Founded in 1990, and public for over eighteen years, ValueVision operates as a multichannel electronic retailer, mainly in the U.S. It markets products to consumers through TV, telephone, online, mobile, and social media. If you visit their web site, you will find fashion jewelry, comprising gold, sterling silver, and platinum products; men’s and women’s watches; home décor; bed and bath textiles, kitchen appliances, mattresses, dining accessories, home furnishings, and consumer electronics; beauty, health, and an assortment of products including skincare, cosmetics, and hair care, as well as nutritional supplements, and exercise gear and fitness accessories; along with apparel, outerwear, handbags, and footwear.
ValueVision’s main exposure comes from its 24-hour TV shopping network, ShopNBC, which markets brand names and private label products. The company also operates e-commerce platforms, including ShopNBC.com and ShopNBC.tv that sell products appearing on its TV shopping channel, as well as an assortment of online-only merchandise. The company also markets via mobile devices, including smartphones and tablets.
For the FY ending 1/27/12, revenue was $558.39 million with $48.1 million in losses. During the first six month of the current FY, ending 7/28/12, revenue has been $271.72 million with $12.58 million in losses. The company made some nice strides last quarter in trimming the losses.
If the company continues making bottom-line progress while holding its own on the top line, the stock could see a nice run at some point.
Our 24-month target for the stock is $3.50 to $4.00.
For more information, contact VVTV’s Dawn Zaremba at 952-943-6043; dzarembal@shopnbc.com
AXT, INC. (NASDAQ: AXTI) – $3.18. Twelve-month hi-low has been $8.35 – $2.75. Based in Fremont, CA, with about 1300 employees, this maker of integrated circuits has 32.4 million shares outstanding, $112.08 million in total current assets, $167.67 million in total assets, little debt, and $24.82 million in total liabilities. Institutional ownership is around 62%. Four analysts rate the stock a “strong buy”, one as a “buy”, and two as a “hold”. www.axt.com
Once again, we are walking down the same path twice. The first time we picked AXT, Inc. the stock had a good run. So, maybe it is time to hop on the low end of the roller coaster, again. The company still has a strong balance sheet, and is still making money.
Founded in 1986, and public for over a dozen years, AXT makes and distributes compound and single element semiconductor substrates for use in wireless communications, lighting display applications, and fiber optic communications. It offers semi-insulating gallium arsenide substrates, which are used for applications in power amplifiers and radio frequency integrated circuits for wireless handsets; direct broadcasts TVs; high performance transistors; and satellite communications. The company also offers semi-conducting gallium arsenide substrates, which are used in light emitting diodes, lasers, and optical couplers; substrates made from indium phosphide that are used in broadband and fiber optic communications; and substrates made from germanium, which are used in satellite and terrestrial solar cells and optical applications.
AXT manufactures its semiconductor substrates using its proprietary vertical gradient freeze technology. In addition, the company, through its joint ventures, makes and sells gallium, arsenic, germanium, germanium oxide, paralytic boron nitride crucibles, and boron oxide.
For FY2011, ending 12/31/11, revenue was $104.12 million with $20.32 million in income compared to FY2010 revenue of $95.49 million and net income of $18.65. During the first six months of the current FY, ending 6/30/12, revenue was $48.63 million with $2.93 million net income.
Yes, the second quarter of this FY was on the lite side but the company sees a pickup later in the year. We, along with the half-dozen analysts who are high on the company, are inclined to give them the benefit of the doubt.
Our 24-month target for the stock is $5.00 to $6.00.
For more information, contact AXTI’s Raymond Low at 510-683-5900, Ext.235.
Look for September 20, 2012 Newsletter to be posted on 9/17 or 9/18.
Thank you,
George