August 28, 2008

Hold American Capital Strategies

Zack's is out with a call on American Capital Strategies (ACAS) after their earnings miss. It appears that they still like the stock, but in the near term rate it a hold with a $21.15 price target.

I wrote about ACAS in January when it was noted that insiders were buying the stock around $30.00. Another article written around that time calculated the book value of the stock to be around $34.

Zack's seems to still believe in the stock saying, "we believe that ACAS earnings and dividend growth in late 2008 have the potential to benefit from current pipeline of new investment opportunities, as well as the containment of asset quality."

They also note that the dividend may be the "the major component of shareholder return over the next year" if it doesn't get cut.

I believe that ACAS can get back on track. Like a lot of quality companies, they simply have to weather the current storm that they are in. While you wait for the sun to come out, you can enjoy the dividend yield.

August 26, 2008

Inventiv: A Hidden Gem

While reading the Fool, I came across InVentiv, a company that the Fool has disclosed as a Motley Fool Hidden Gems recommendation.

Inventiv provides outsourcing services to the pharmaceutical industry. These services include helping to staff and run clinical trials, advertising and marketing services used to build brands, pharmaceutical sales forces, market research and analytics, and more. Small to mid-sized companies use inVentiv because they do not want to incur the overhead costs of having their own sales force or don't have the expertise to gain Food and Drug Administration approval. Larger companies use outsourcers like inVentiv to hold down overhead expenses and provide flexibility as the number of products in the approval process and being marketed varies over time.

Growth Prospects

The company is growing by entering new markets and acquiring existing companies. As mentioned here, the company is expanding its services into Latin America. Inventiv also purchased Patient Marketing Group at the beginning of August.

Insider Buying

The CEO, Executive Chairman, COO have purchased shares this month.

Valuation

Inventiv sports a P/E of 14.18 and a forward P/E of 12.13. It appears that the earnings miss last quarter has provided an opportunity to buy cheap growth.

Sell Cost Plus to $1

Zacks is out with an article this morning on selling Cost Plus down to $1.00. From the article:

"Cost Plus is in a tough spot and its business continues to deteriorate. We see no signs that the company will be able to right its ship in the near term. The macro headwinds including housing, credit markets, and food and energy prices are eroding the consumers’ purchasing power, which is hurting its results. What’s more, the company’s losses are mounting and its balance sheet remains weak. This combination does not point to a higher stock price."

While I have not ever shorted a stock, I completely agree with this analysis. The only time my wife and I set foot in a Cost Plus was because someone gave us a gift card. We spent over an hour in the store looking for something that we actually wanted to spend $20 on. We ended up buying some coffee, since we figured that we could always use some.

The only hope investors might have, is if someone buys them out. How does that $4.00 a share buyout from Pier 1 look now?

August 25, 2008

Apogee: Boring Company, Good Value

Apogee Enterprises (APOG) isn't a company developing the next generation of life saving drugs or a Silicon Valley rising star working on a revolutionary computing technology. Apogee is an established, profitable company based in Minneapolis, Minnesota that designs, installs, and maintains many types of glass and windows used in commercial buildings.

Unlike other industrial goods companies that are struggling to maintain profitability due to the softening economy and downturn in the construction industry, Apogee is growing earnings and operating margins.

Business Segments

Apogee operates in two business segments: architectural glass and large scale optical technology. Their architectural segment is comprised of five subsidiaries:

  • Viracon: A leading fabricator of energy efficient, silk screening architectural glass used for hurricane protection and sound control. According to the company, Viracon wins 70% of their high profile projects.
  • Harmon, Inc.: One of the largest full service building glass installation, maintenance, and renovation companies in the U.S. The company has a 10-20% share in its served markets.
  • Wausau Window and Wall Systems: A manufacturer of custom aluminum window and curtain wall systems.
  • Linetec: A manufacturer of painted and anodized aluminum window frames; painted plastic interior shutters.
  • Tubelite: The 6th largest supplier of aluminum and storefront products in the U.S.
Their optical technologies segment is composed of one business:

  • Tru Vue: A proprietary value-added picture framing glass and acrylic with UV, anti-reflective and/or security properties. This company has a 80-90% share in its target market.
A Record Fiscal 2008

Apogee reported record fiscal 2008 earnings on April 8. The company's $0.49 EPS beat analyst expections of $0.42. Revenues rose 18% to $243.3 million from the year-ago period. Operating margin was 9.2% compared to 6.6% in 2007.

Raised Outlook for Fiscal 2009

For the full fiscal 2009 year, Apogee has raised earnings from continuing operations of $1.82 to $1.94 per share on revenue growth of 13 to 16%.

Russell Huffer, Apogee chairman and chief executive officer states that, Our architectural visibility gives us high confidence that we can deliver earnings in the mid to lower end of our guidance range, with the top end of the range achievable with strong operational performance and limited project delays, he said. We are expecting record years in fiscal 2009 and 2010, as demand for our architectural products and services remains healthy despite a more competitive environment in a market that is experiencing increased uncertainty.

A First Quarter Miss

Apogee reported fiscal 2009 first quarter results on June 25, where they missed earnings estimates. Apogee reported earnings of $0.36 per share. The street was looking for $.043. Although revenue was up 14% from $209.9 million to $238.5 million compared to last year, margins decreased primarily due to increasing manufacturing costs.

Despite the earnings miss, the company noted that its backlog is up 19% compared to the first quarter last year. They have also reaffirmed their fiscal 2009 guidance of $1.82 to $1.94 per share.

Valuation

Currently trading at just under $20.00 a share, Apogee sports a P/E ratio of 12 and a forward P/E of 9.9, both of which are well under the industry average of 21.5. Apogee's Price to Book ratio of 2.00 is also under the industry average of 4.00.

Conclusion

Currently trading at a discount to its peers, Apogee is an established, profitable company that is growing earnings and revenue estimates. It is only a matter of time before they deliver on these estimates and Mr. Market brings its shares up to full valuation. To compensate you for your time, Apogee will also pay you a 1.40% dividend.

Disclosure: None

August 21, 2008

More on Primus Guaranty

College Analysts tell us why they are heavily invested in Primus Guaranty:

"The DCF value of Primus common stock, should no credit losses take place and no new business be written, is $15/share – a triple from the current price."

I wrote about Primus earlier in the month. From all accounts, it looks like this stock is a screaming buy. The Fool has also picked it as a Global Gains recommendation.

More on Manitowoc

The Fool has two article in which Manitowoc is mentioned. The first one points out that the company has a five year estimated annual growth rate of over 30% and a PEG ratio of .22. The second one also points out the company's growth rate and notes that 98% of reviewers at the Fool are bullish on the stock.

August 20, 2008

Great Long Ideas

There is a great article at Seeking Alpha by Glen Bradford who lists 16 undervalued stocks and his reasons for owning them. Familiar names like Hurco, Terex, Sigma Designs, and NASDAQ OMX Group are included in this article.

I've covered Hurco, Terex, Sigma Designs and NASDQ OMX here before.

August 19, 2008

MANITOWOC CO: Funny Name, Cheap Stock

I came across Manitowoc while looking at the stocks that compose the Benjamin Graham Small Cap Value Elements portfolio as detailed here.

Doing some more research on the company, I came across a small article here that highlights the stock:

  • With a huge RoE that is north of 30%, low debt ratios and trading at less than 8 times this years earnings, the threat of a downturn in the economy seems to be more than priced into this stock.
  • This stock is down more than 50% from its 52 week high. Analysts are calling for it to return to the upper $30s, giving it a 50% upside from here.
Forbes also has an article on the company that does a more in depth financial analysis.


This stock has a P/E of under 8 and a forward P/E of just over 6. It also has a PEG under 1.0. Analysts are expecting earnings growth of at least 20% for the next five years. No matter how you slice it, this is a stock that has been unfairly beaten down in the last year. Today's price of $24.33 is a new 52 week low for the stock and looks like a great place to get in.

August 18, 2008

Discovering Alvarion

The Fool has an article on Alvarion today, which has been publicly disclosed as one of their Rule Breakers selections. They claim that the company is "growing quickly" and "trading at just 17 times next year's projected profitability."

This leads to a second article at the Fool on Alvarion, where they talk about a few of the company's growth prospects and their application for a $30 million share repurchase grant from the Israeli court.

Seeking Alpha also chimes in on the company, saying that the company has been beat down unfairly due to reduced margins as a result of the weakened dollar compared to the shekel. According to the article, "Management guided that Q3 earnings could be as much as double from Q2" even with the CFO basing her forecasts on a flat dollar.

With shares currently trading in the low $6.00 range, this could be a great entry point for a company that is forecasting growth in the 20-30% range.

August 13, 2008

Anesiva Set for Takeoff

Anesiva (ANSV) is a tiny biopharmaceutical company about to enter a stage of high growth thanks to the successful launch of a niche pain relief product that has the potential for adoption as the standard treatment for pain related to needle procedures and orthopedic surgeries.

It All Starts With Zingo: Zingo is a needle free, painless, topical product approved by the FDA for use on children ages 3 to 18 in order to numb the skin prior to drawing blood or inserting an IV. Each Zingo device contains .5 mg sterile lidocaine powder. When the device is activated, compressed gas accelerates the lidocaine particles into the skin, numbing the area after approximately one minute. This is a vast improvement over anesthetic creams which can take between 30 to 60 minutes to work.

Any parent should welcome the use of Zingo on their children in order to assuage the fear of pain associated with any procedure involving a needle. In order to provide better care to their clients, doctor offices should be quick to adopt the product for use in their offices.

Zingo has been approved for use by the FDA and the product was launched at the end of June in the United States. According to information in the company's second quarter 2008 press release, Anesiva has signed an exclusive licensing and distribution agreement for territories in the Middle East and expanded a current distribution agreement to include "most of Europe."

Adult Zingo: The FDA has also accepted Anesiva's application to expand Zingo's use for adults. The Prescription Drug User Fee Act will require the FDA to make a decision regarding approval by January 2009.

The company estimates 18 million pediatric needle procedures are performed annually in U.S. hospitals alone. With the pending approval for adults in the U.S. as well as Europe, Zingo has a huge potential market.

Adlea in the Pipeline: The company is in Phase III trials of Adlea, a long-acting, non-opioid analgesic drug candidate designed to provide pain relief for weeks to months after a single local application. The Phase III trials are currently focusing on the use of Adlea in knee replacement surgery.

Currently, orthopedic surgery patients are given opioids such as morphine for pain relief. The advantage that Adlea has over opioids is that is applied to the surgical area locally instead through the entire body like morphine. Trial data has also shown that one application has been effective managing pain for up to months at a time.

Phase II trials are currently underway for the use of Adlea in hip replacement surgery as well as arthroscopic shoulder surgery. Anesiva also sees osteoarthritis and tendonitis patients as a potential market for Adlea.

Recent Quarter Results: The company reported 2008 Second Quarter results on August 7, which looked similar to many small biotech companies:

For the second quarter of 2008, the net loss was $21.9 million, or $0.54 per share. In the second quarter of 2007, the net loss was $13.8 million, or $0.51 per share. The net loss for the six months ended June 30, 2008 was $43.4 million, or $1.08 per share, and for the six months ended June 30, 2007, the net loss was $25.5 million or $0.93 per share.

As of June 30, 2008, cash, cash equivalents and investments were $48.7 million compared to $90.8 million at December 31, 2007. The company believes it has sufficient resources to fund anticipated expenses for the remainder of 2008 and into 2009.

The company attributed the increased operational expenses to the preparation for the launch of Zingo and the continued development of Adlea.

Conclusion: With Zingo, Anesiva has delivered a product that has distinct competitive advantages over any other available product, and has potential for widespread adoption among a large customer base.

With Adlea, the company also has an additional product in late stage trials that has significant advantages over any other pain management drug on the market.

With shares trading right around $2.00, this seems like a cheap price to pay for two potential blockbuster drugs, one of which is already on the market and should contribute to the company's income statement as early as next quarter.

Disclosure: The author holds a long position in ANSV.

$9 Price Target on Anesiva

Zacks is out with an article on Anesiva, where they give the stock a $9 price target citing that the stock is relatively unknown and undervalued. This is due to the fact that their first product, Zingo has launched and that another product, Adlea is in Phase III trials.

August 12, 2008

More on Infinera

The Fool reminds us that they own shares of Infinera and that it is a Rule Breakers selection. Also out today is an article at SmallCapInvestor on the company which gives a detailed look at the company.

According to the article, one analyst has a $16 price target on the stock. At $11.oo and change, it seems like a great entry point for such remarkable growth, especially since their IPO was at $13.oo.

I wrote about Infinera a couple of months ago when I first came across the company at the Motley Fool:

"Infinera holds technical and cost advantages over many alternatives, giving it a good moat and solid standing against much larger competitors."

$31.25 Price Target on Penn Virginia Resource Partners

Zacks is out with a one year price target of $31.25 on Penn Virginia Resource Partners (PVR). At just over $24 currently, this stock could turn out to be quite a play, especially when you consider that it also pays a 8% dividend, which they just raised at the end of July.

August 11, 2008

More on Terex

Seeking Alpha has an article on Terex where the author gives his reasons for being long on the stock.

I've written about Terex before. This stock has now been featured by three different authors, one of which is the Motley Fool who has disclosed that they own shares of the company.

This is shaping up to be an intriguing long play.

Keep an Eye on Clarient

Seeking Alpha has an article on Clarient, (CLRT) a small cap play. While the company has reported, record revenue, they cannot find a way to seem profitable and checked in with -.06 EPS last quarter.

The article lists a lot of positives that the company has going for it. I did some digging and it appears that several insiders bought shares multiple times so far this year, right around $2.00 a share.

If this company can attain profitability, then this may be a company to keep an eye on.

August 8, 2008

Universal Display Set to Take Off

The Fool is out with an article on small cap Universal Display (PANL), a publicly disclosed Rule Breaker Selection. The article focuses on the development of their OLED technology which will be the future growth driver for the company. From the article:

"The company just reported a massive increase in commercial revenue, to $1.4 million from $390,000 a year ago. That's a threefold rise, with sugar on top. Of course, Mr. Market couldn't see past the dropping total revenue -- development contracts keep falling off the table -- so the stock is a little cheaper today. Universal Display is becoming a business for profit, rather than a development house for fancy science-fictiony technologies."

August 7, 2008

Keep an Eye on KSW

Seeking Alpha has an article on KSW, a small cap HVAC company that is growing rapidly and having good success.

Big Value at Primus Guaranty

I stumbled across this great article at CircleofCompetence that lists several stocks that are severely undervalued, one of which is Primus Guaranty (PRS). From the article:

"You’re still getting a company worth anywhere between $9-$12 or so, for under $4. If I had a Cramer BUY BUY BUY button, I might hit it right now."

Zacks is also out with an article on the company where they give it a six month price target of $4.50, however they echo CircleofCompetence by stating that the book value of the company (from December 31, 2007) is $10.40 a share.

As disclosed here, Primus is a MF Global Gains selection.

August 6, 2008

A Look at Metalico

Smallcapinvestor has an article on Metalico. This small cap is off 25% from its year high and has plenty of room to grow.

August 5, 2008

17.80 Price Target on Montpelier Re

Zacks has a six month price target of $17.80 on Montpelier Re. They also estimate the fair book value of the company at $19.75.

Disclosure: I own shares of Montpelier Re.

August 4, 2008

Growth is Coming to Electronic Arts

Shares of Electronic Arts (ERTS) have hit a new 52 week low this week, and are sitting just above historical two and five year lows. While this may prove to be frustrating for current EA stockholders, it will serve as an excellent entry point for new ones.


First Quarter Results: While rivals Activision and Take-Two Interactive have reported stellar earnings, EA has reported a first quarter loss of $95 million. This will be the fourth year in a row that EA has reported a net loss in the first quarter. Analysts were expecting revenue of $640 million, but EA earned $609 million.

MMO: More Money Online: The key to future growth for the company will be in the Massively Multiplayer Online (MMO) market. A MMO video game is one that requires players to pay a monthly fee after the initial purchase of the game in order to continue playing. The largest MMO game is World of Warcraft which has an estimated 11 million subscribers.

EA is set to enter the MMO market with not one game, but two. The first game, Warhammer Online is set to be released in the fourth quarter of 2008. While there is no guarantee that the game will be as successful as other MMO games, there has been a good amount of hype generated for the game. Even if EA can retain a few million recurring subscribers to the game, this will help contribute to their earnings.

However, EA may climb to the top of the MMO game market with the acquisition of VG Holdings, the parent company of game developer BioWare and Pandemic Studios. Although no official press released has been made, BioWare is developing a MMO based in the Star Wars universe that is based on the Knights of the Old Republic video game series. A video game that has requires a monthly fee to play on top of a initial $50 investment plus any future expansion packs based on an intellectual property as popular as Star Wars will generate hundreds of millions of dollars in revenue by itself.

Additional Growth Drivers: The Bioware purchase also gives EA the rights to publish other Bioware titles such as future installments of the Mass Effect series, which has sold close to 2 million copies for the XBOX 360. Bioware has also announced a role playing game called Dragon Age that does not have a release date yet.

On September 7, EA will release Spore a new "creature" based simulation game from Will Wright, the creator of Sim City and The Sims. A demo of the creature creator was sold for $10 at the end of June, and was the best selling PC game for the week ending June 21.

What To Do: With shares at historic lows and great products in store that will drive earnings growth, buy shares of Electronic Arts. Some patience may be required until its full arsenal of games are released, but based on future potential, EA looks cheap.

The Case for Hardinge

Seeking Alpha has an article on Hardinge, claiming that "Warren Buffett would love this company."

The Fool has picked Hardinge as a Hidden Gems Paydirt pick. Its main competitor, Hurco is also a Hidden Gems pick.

Much Love for CV Therapeutics

CV Therapeutics (CVT) is a MF Rule Breakers pick, who has a nice write up on the company's great second quarter. They also estimate that the company is potentially seriously undervalued.

Zacks appears to agree, noting that a lot of the company's future success hinges on the company's pipeline.

NYSE Euronext and NASDAQ are Cheap

The Fool reminds us that NYSE Euronext and NASDAQ are cheap. NASDAQ OMX Group is a MF Inside Value Pick and NYSE Euronext is a Rule Breakers pick.

ViroPharma Cheap and Promising

Zacks has an article on ViroPharma (VPHM) which they call "too attractive to ignore." They give a price target of $16.

Disclosure: I own shares of ViroPharma.