February 27, 2008

ViroPharma: Too Attractive to Ignore?

Zacks calls ViroPharma's shares "too attractive to ignore."

"ViroPharma, Inc.’s (VPHM) stock has been in a sideways trend for the past several months. And, although we are maintaining our Buy rating on the stock, we continue to see little movement until an update on a potential generic Vancocin product.

Management continues to petition the FDA to delay a generic entrant, most recently submitting views on the in-vitro dissolution bioequivalence testing methods. Approval of a generic product at Strides/Akorn at any time could create volatility in the stock.

At this level, ViroPharma stock is too attractive to ignore. Our 2008 revenue forecast of $221.5 million yields a price to sales ratio of 2.9x. This is significantly below the biotechnology peer group average of around 6.5x. We forecast 2008 EPS at $0.95 (including option expense). The price to earnings ratio of 9.9x is so far below the peer group, we can't help but wonder whether a company like GlaxoSmithKline (GSK), Bristol-Myers (BMY) or Wyeth (WYE) would be interested in acquiring ViroPharma.

ViroPharma’s stock sank in March 2006 on fears of generic Vancocin. Since that time, the company has continued to deliver solid results and progressed with Camvia to the point where we now include it in our long-term model. We think the candidate offers a significant growth opportunity over the long-term.

We think the market is too focused on the generic risk to Vancocin. We see the Citizen’s Petition as solid, and the recently initiated exploratory study to characterize the GI track of healthy vs. infected patients will only help add to the scientific validity of management's claim. The two letters made public outlining the legal and scientific merits for a judgment stay are rather convincing in our view."

Wow! Too attractive to ignore, and musing about buyouts? I will definately have to keep an eye on this one. The Fool has given this stock a lot of love also. See my previous posts on ViroPharma here.

Inside Buying at Montpelier Re Holdings

According to an article at the Fool here, four executives and board members purchased shares last week, including the CEO.

I own shares of Montpelier Re Holdings, and at some point soon, may own additional shares.

February 26, 2008

High on the List

With my income tax refund coming soon, I am thinking about using some of the proceeds to open positions in Immersion and Hardinge. I would also like to take a position on Netflix, but I may need to sell some existing shares in order to do that.

Of course, you should do your own research before you make any sort of investment. Just because I think something may be a good ideas does not mean that it necessarily is.

Bullish on Hardinge

Fooling around at the Fool.com, I came across Hardinge, which is a MF Hidden Gems Paydirt selection. Doing additional research, I came across two articles at Seeking Alpha that talk about the company here and here.

"Multiply 2008 EPS estimates ($2.45 per share) by HDNG's avg P/E ratio prior to the sell-off and you get 2008 target price between $34-44 per share (+93-150%). Add in the recently increased cash dividend yield of 1.13% and you've got one heck of a bargain. Once you study HDNG's solid fundamentals, growing global diversification and growth catalysts on the horizon, we think you'll agree."

This quote was written in January 2008, before they released earnings which dropped the stock even further. At today's price of $12.60, this makes the stock look even more attractive

February 25, 2008

Garmin Gouged

Garmin has been taking it on the chin lately and it may prove to be a good entry point for the GPS device leader. The Fool has a couple of write-ups here and here. Here is yet another example of a good company trading at a discount right now. If you can hold on to shares for a few years (or longer), it may prove to be a good investment.

Garming is a MF Global Gains and Stock Advisor recommendation.

February 22, 2008

$24 Target on Discover Financial

Morgan Stanley upgraded Discover Financial Services and set a $24 price target on the stock, up from $15. For more on DFS, check out my other posts.

February 21, 2008

Hidden Gem Insider Buying

The Fool has an article here that shows the top insider purchases last week. Among them was Oyo Geospace which is a MF Hidden Gems pick.

There is also high insider buying on Vertex Pharmaceuticals, which is a MF Rule Breakers recommendation:

"Such is the nature of biotech investing. Dilution persists till the promise of a blockbuster drug is either (a) fulfilled or (b) not. Investors will have to wait till at least 2010 for a definitive answer, according to company filings."

This may be a great entry point for this stock if you can wait 2-3 years for the payoff

February 20, 2008

Immersion: Cheap Growth?

The Fool has an article about Immersion where they talk about the stock being overvalued at first glance. They then dig a little deeper and the stock appears to be quite undervalued, if the company's prospects turn out.

I must say that I am intrigued and will be watching this stock closely. Immersion is a MF Rule Breakers pick. I've written about this company before here.

Betting on Eddie Lampert

The Fool has an article about Eddie Lampert and his role as chairman of Sears. They state that Eddie appears intent on saving Sears by dividing the company up into divisions. However they go on to state that several "guru" investors such as Bill Miller and Bill Ackman have followed Eddie's lead and taken positions in the company.

February 19, 2008

Bed, Bath and Beyond?

Perusing the Strategy Lab summary page, I came across this article written by John Reese where he examines a few companies that he believes would fit Warren Buffet's investing model. One of the companies mentioned was Bed, Bath, and Beyond:

"In terms of earnings predictability, you can't get much better than Bed Bath & Beyond. The company has increased earnings in each year for the past decade, sporting a 19.8% long-term growth rate (based on the average of the three-, four- and five-year EPS figures."

Doing some cross-referencing with other sites, I found here that BBBY is a Motely Fool Stock Advisor and Inside Value recommendation. The MF also own shares of the stock.

February 15, 2008

Is Iomega on the Rebound?

A write up on Iomega made it to the "Aggressive Growth" commentary page on Zacks today. They make the point that this company has good fundamentals and their new REV product line is gaining popularity.

More research at Yahoo finance yielded two more articles here and here about the company. I don't know if this company is so undervalued that it would warrant a $7.00 price target. Still, a company with good fundamentals and a growing product line at this price may make them a buyout candidate.

MVC Capital

MVC Capital is a Motley Fool Hidden Gems pick. They were first discovered in this article. Apparently, a lot of insider buying is going on right now.

Sara Lee

Sara Lee is at a new 52 week low today. The Stock Masters has a write-up on the company here.

Zacks states that the company is in the third year of a five year turn-around plan. They have a price target of $19.25 that was set in January. The full article is here.

February 14, 2008

Visiting the Strategy Lab

One of the sites I used to frequent was the MSN Strategy Lab. This is an investing "contest" between several investors that pick stocks based on a particular investing style. I haven't read anything from this site in a while. In fact, it had been so long that my bookmark was outdated. After some searching, I finally found the site here.

One of the players in the contest is John Reese who frequently comments on stocks for Zacks. His investment portfolio for the current round of the Strategy Lab is based on the models of various investors such as Buffet and Graham.

American Eagle Outfitters and the Men's Warehouse are among his current picks. He notes that the Men's Warehouse pick was based on his Value Investing model (Benjamin Graham) and AEO is based on his Patient Investor (Buffet) model.

I have written about the Men's Warehouse before and I know that the Fool is big on AEO (I believe that the company themselves own stock). Doing additional searching on the Men's Warehouse led me to this article at CNN Money.

"Hamilton identified The Men's Wearhouse (MW), AnnTaylor (ANN) and American Eagle Outfitters (AEO) as companies with positive long-term fundamentals despite concerns about consumers being "queasy." They all trade for less than 15 times earnings estimates and have debt to equity ratios below 1."

February 13, 2008

Checking Out PETS

Zacks featered Pet Med Express in their daily Agressive Growth feature. Here is their analysis:

"PetMed Express (PETS) and subsidiaries, doing business as 1-800-PetMeds, is a leading nationwide pet pharmacy. The company markets its health products for dogs, cats, and horses direct to the consumer through national television, online, and direct mail advertising campaigns in an effort to increase the recognition of its 1-800-PetMeds brand name.

PETS offers a broad selection of products for dogs, cats, and horses. These products include brands of medication such as Frontline Plus®, K9 Advantix®, Advantage®, Heartgard Plus®, Sentinel®, and Interceptor®. The company offers two types of products: Non-Prescription Medications and Prescription medications.

The investment case for buying PetMed Express is a favorable industry environment, repeat customer business, and the potential for margin expansion. According to the American Pet Products Manufacturers Association, domestic pet spending in 2006 was $38.5 billion with pet supplies and medications accounting for $9.3 billion, or 24%, of that total spending.

In the third quarter of fiscal 2008, PetMed's reorder sales increased 28% year-over-year. The reorder business is helping drive the company's overall sales. The real strength here is that the reorder business provides a stable, recurring stream of revenue that allows the company to focus on new areas in which to grow its business.

Additionally, the company's business model could generate significant profit margin expansion in future years, as its sales climb. That s because it is able to increase its sales over a fixed operating base similar to other successful e-commerce business models. Moreover, this operating leverage combined with the company's stable revenue from repeat customers could lead to solid long-term profit growth.

On January 22, PetMed Express announced its financial results for the quarter ended December 31, 2007. Net sales for the quarter were $37.3 million, compared to $31.4 million for the quarter ended December 31, 2006, an increase of 19%. Net income was $4.4 million or 18 cents per share, compared to net income of $2.8 million or 11 cents per share for the quarter ended December 31, 2006, an increase to net income of 60%.

Over the past month, earnings estimates have been increasing. This year's estimates have risen three cents to 79 cents per share. Next year's numbers have also risen three cents. Four of the five covering analysts have boosted their forecasts. The company has posted an average surprise of 15.5% over the past four quarters. The stock is cheap at only 15x next year's estimates, below the long-term growth rate of 17.75%."

I also found a link to a Barron's article titled "Four Small Fries Worth Buying" which also analyzed the stock. Here is what they had to say:

"a leading nationwide pet pharmacy, earns an overall score of 99, ranking it No. 1 among the 23 stocks in the Internet retail group. The company boasts the group's highest financial strength score and fourth-best performance score. The company has no long-term debt and inventory levels are reasonable.

At the end of December, PetMed had more than $1.90 per share in cash. December-quarter earnings per share soared 64% to $0.18, exceeding the consensus estimate by $0.04. Earnings have topped the consensus in seven of the last eight quarters. Revenue increased 19% on strong reorders and a 23% increase in Internet sales. Operating profit margin jumped more than four percentage points, partly reflecting lower advertising expenses. The company added 127,000 new customers during the quarter.

For fiscal 2008 ending March, consensus estimates project per-share earnings of $0.79, up 32%. For fiscal 2009, per-share profits should approach $0.87. Considering the company's recent operating momentum and strong market position, those estimates seem beatable. PetMed is rated "buy.""

Buy Form Factor on the Dip

From Zacks:

"FormFactor (FORM) is the market leader in advanced wafer probe cards used to test semiconductor wafers during the manufacturing process. The combination of a very difficult pricing environment in DRAM and product execution problems have led to the shares being slammed.

The company has a very strong long-term growth profile. The company's technology is leveraged towards leading edge 300mm and sub-110nm nodes, which are ramping quickly throughout the industry. We envision a strong future for FORM, and consequently, are maintaining our BUY rating on the shares.

We feel the stock's sell off was overdone and investors with a time frame of at least two quarters should consider the purchase of the firm's shares. We believe that this stock should command a premium to other back-end semiconductor capital equipment manufacturer companies. Consequently, we are decreasing our price target to $30.00, which corresponds to a P/E multiple of 24.0x."

FORM is also a MF Hidden Gems pick. They were previously covered in this post.

February 8, 2008

What Do I Own?

Here are a list of stocks that I currently have positions in:

  • Akami
  • Activision
  • Ebay
  • Pfizer
  • Nautus Medical
  • Sandisk
  • Montpelier Re
  • Radyne
  • Xpress One
  • Emergent BioSolutions
  • LoopNet
  • Citibank
  • ABX Holdings
  • II-VI
Please keep in mind that just because I have purchased shares of a company does not mean that you should. I am by no means an expert on stock picking, or even on performing a financial analysis on a company.

What convinced me to buy these companies? Research. I had read enough compelling arguments for purchasing the stock of these companies (at the time) that I decided that they would make good long term buys, and I was willing to accept the financial risk of acquiring a certain amount of shares.

This is why this blog was created. It is a collection of compelling arguments for the purchase of individual stocks. I needed a place to collect information from all of the sources that I use. If I read about several positive aspects of a stock, especially if it is coming from different sources, there is a good chance that I will look to add it to my personal portfolio.

Have I lost money on some of these companies? Absolutely. Am I worried? Not particularly. Since I plan on being invested for several years I will ride the ebb and flow of the stocks as they occur.

Blackboard is a Buy

From the Fool:

" Remember, Fools, that Blackboard continues to earn plenty of cash, and that it promises to earn more of that in the future -- making Blackboard a Grade-A student at a D-iscount price."

Blackboard is a Hidden Gems recommendation. The full article is here.

MontpelierRe a Buy, Pre-Earnings

Reinsurance company MontepelierRe (MRH) intends to release its 4Q07 results after the market close on February 19, 2008, with a conference call scheduled for the next day. The company's results, as of late, have benefited from a relatively benign catastrophe event environment, partially offset by the impact of the expenses associated with its initiatives roll-outs.

From Zacks:

While we suspect investors remain concerned with respect to MRH's investment portfolio, we view Fitch's recent one-notch upgrade a positive for the company, given the broader subprime mortgage overhang. The company continues to remain focused on the future; as such, revenues should grow from additional acquisitions and office expansions and recent initiatives during the ensuing years.

Thus, we continue to rate the shares a Buy. Our new six-month price target of $20.55 per share (down from $20.75 per share previously), incorporates a blended current peer 1.10x price-to-book multiple (down from 1.15x previously), to our estimated book value of $18.70 per share at June 30, 2008. This would imply a six-month total return of 20.3% (1.7% annualized dividend yield + 19.8% capital appreciation).

MontpelierRE is also a MF Hidden Gems Pick and a Stock Advisor pick. Disclaimer: I own shares of MontpelierRE.

February 7, 2008

Insider Buying at Actuate

The Fool has noticed that two executives at Actuate have been buying shares. They are speculating that the company may be ripe for a buyout from Oracle. The entire article is here.

Write-up on NetFlix

Zacks has a write-up on NetFlix and they see the stock as a good buy:

Netflix just blew the cover off of its fourth-quarter earnings report. This was the third straight quarter in which the company exceeded analyst expectations. The stock has an ROE of 13%, much better than the 2% industry average. The balance sheet is clean with no debt. Additionally, the stock is trading at a low 1.3x sales.

Full Analysis

Netflix, Inc. (NFLX) provides online movie rental subscription services in the United States. It provides its subscribers access to a library of movie, television, and other filmed entertainment titles on digital versatile disc (DVD). As of December 31, 2006, the company served approximately 6,300,000 subscribers with a library of approximately 70,000 movie, television, and other filmed entertainment titles on DVD.

NFLX recently said that its board authorized the repurchase of up to $100 million of its common shares. The buyback plan runs through the end of 2008, Netflix said. This is a sure sign that management has confidence in the company.

The company's fourth-quarter profit trounced analyst expectations as the online DVD rental service gained 451,000 customers, providing further evidence the company has regained the upper hand in its bruising battle with rival Blockbuster Inc.

NFLX earned $15.8 million, or 24 cents per share, for the final three months of 2007. That was 6% more than its net income of $14.9 million, or 21 cents per share, in the same period a year earlier. Revenue climbed 9% to $302.4 million, from $277.2 million the prior year. Netflix ended December with 7.48 million subscribers, up from 7.03 million in September.

Netflix also predicted it will lure as many as 1.4 million additional subscribers this year and produce annual earnings of $1.12 to $1.24 per share -- well above the average estimate of 90 cents among analysts. The company's optimistic outlook for 2008 reflects management's belief that the threat posed by Blockbuster has faded. Netflix also is betting a new online movie rental service introduced last week by Apple Inc. won't dent the company's growth.

"We achieved strong results in 2007 -- ending subscribers up 18%, revenue up 21% and net income up 36% -- despite facing tough competition for much of the year and investing strategically in our online video initiatives," said Reed Hastings, Netflix co-founder and chief executive officer.

Netflix ended the fourth quarter of 2007 with approximately 7,479,000 total subscribers, representing 18% year-over-year growth from 6,316,000 total subscribers at the end of the fourth quarter of 2006 and 6% sequential growth from 7,028,000 subscribers at the end of the third quarter of 2007.

The company has now exceeded analyst projections for three straight quarters. Over the past 30 days, 2008 estimates have increased 29 cents to $1.17 per share. The stock has an ROE of 13%, much better than the 2% industry average. The balance sheet is clean with no debt. Additionally, the stock is trading at a low 1.3x sales.

February 6, 2008

Metalico Rocks

No, its not a heavy metal band (sorry, I couldn't help myself). It is a small metal processor and recycling company. They were initially found on Zack's. Here is the write-up:


Metalico, a Zacks #1 Rank (Strong Buy), is a ferrous and non-ferrous scrap metal processor headquartered in New Jersey and operating in New York, New Jersey, Pennsylvania and Ohio. The company has scrap metal recycling facilities in the Great Lakes, serving the U.S. and Canadian markets.

Refractory metals, such as molybdenum, tungsten and tantalum, are recycled at the central Pennsylvania facility.

In Newark, New Jersey, the company processes used catalytic converters and recycles platinum, palladium, rhodium, known as platinum group metals. The metal is purchased from various sources including manufacturers, small scrap dealers, demolition contractors, and peddlers. The scrap is then sorted and sold to mills, furnaces and foundries.

MEA is also the nation's largest fabricator of lead based products. Some of MEA's lead raw material comes from recycling operations, where nearly six million pounds of scrap lead, including auto and truck batteries, are recycled annually.

Metalico takes being "green" seriously. For three years, the company has purchased up to 50 percent of its electricity from renewable wind energy for its corporate offices and several of its facilities.

Recently, Metalico has been growing through acquisitions.

On Jan 29, the company closed on two previously announced purchases of American CatCon, LLC and American CatCon Holdings LLC's two catalytic converter recycling facilities located in Texas and Mississippi. The facilities recover platinum group metals from scrap ceramic and metallic substrate automotive catalytic converters.

Even before the acquisitions, the company was hitting on all cylinders. MEA reported record third-quarter earnings, surprising on estimates by 21.43%. Net income increased 130% year over year, coming in at $5.3 million or 17 cents per share versus $2.3 million or nine cents per share.

Sales for the third quarter nearly doubled year over year. Sales hit a new company record of $102.1 million versus $55.4 million for the third-quarter 2006. Fourth-quarter earnings are due Apr 2.

There are only two brokerage analysts covering the company. One of the analysts is optimistic about MEA's future, raising estimates for 2008 in the last 30 days by one cent to 74 cents from 73 cents.

The company has been outperforming in recent quarters. It has a trailing 12 month ROE of 17.77%. Its price to book is 2.76 and its P/E is a solid 14.27. Metalico's growing as metal prices are high; a good combination in the metal recycling sector."

CAPS has the stock rated favorably also

February 5, 2008

Cemex: A Difference of Opinion

Zacks has a small write-up of Cemex who reported 4th quarter results yesterday. They have a sell on the stock with a $20.50 price target.

"In our opinion, the stock's valuation deserves a discount, due to the still above-average leverage, the considerable exposure to some volatile Latin American economies and its huge exposure to the U.S. and Spanish markets, both highly affected by concerns over housing prices. Even though the good guidance for the fourth quarter 2008, we are keeping our Sell recommendation on CX. We expect the stock to trade with an EV/2008 EBITDA multiple between 6x and 6.5x. Our target price is US$20.50."

By contrast, the Fool has written two articles listed here and here regarding the prospect of the stock. They paint a much different picture:

"U.S. pricing is holding up. While housing in the U.S. has had some effect on the local markets, our nation uses far more cement each year than our total domestic capacity. As the company's management indicated during its call, high shipping rates are keeping domestic cement prices from slipping. "

"Housing doesn't use as much cement as you probably assume. A bigger market is public works, such as roads and highways, the spending for which has been supported by a series of highway bills. The latest was the 2005 version, which will ultimately provide about $286.4 billion in funding. "

"When the turn comes, Rinker will benefit Cemex in the U.S. In Florida, for instance, by adding Rinker's two cement plants to its one, Cemex now boasts about 40% of the state's cement manufacturing capacity. "

The Fool has Cemex listed as a Global Gains selection and a Stock Advisor selection.

February 2, 2008

Buy China Fire & Security

From Zacks:

"As the leader in China's industrial fire safety market, China Fire & Security (CFSG) is well-positioned to leverage the growth potential in this market. Its revenue and earnings have exceeded the market consensus for two consecutive quarters since the market started to cover this company in July 2007.

We believe that CFSG can grow its earnings at 30% annually in the next five years. We don't think its current price fairly reflects the company's growth prospects. So we are initiating coverage of CFSG with Buy rating.

The stock is currently trading at 13.7x our estimate for fiscal year 2008 earnings per share, which is much lower than the industry mean. Using a P/E multiple of approximately 20.0x our fiscal year 2008 earnings per share estimate yields a target price of $15.00, which we believe reflects the company's growth prospects."