Stock Picks Bob's Advice
Saturday, 21 August 2004
A Reader Writes "Do you have an email newsletter?"
Hello Friends! I was delighted to go and check my blog mailbox and find a couple of new comments and letters! (I always like getting mail....don't you?)
I was browsing and stumbled on your blog. I was
wondering if you have an email list of what you post
on your blog, i.e. stock picks etc. Just curious
Well Corry, I am not at a level where I am writing an email newsletter. Frankly, I get so many of those newsletters, and solicitations, that I would suspect many people might not be interested. But then again if there is more interest expressed on this subject, I would be happy to look into getting it going!
Meanwhile, come back and visit often. I feel like my blog is a great big library of information, so please feel free to browse in the stacks! Remember I am an amateur investor, so please take everything I write with a grain of salt! Check with your professional investment advisors and above all good-luck with your investments!
August 21, 2004 Pixelworks (PXLW)
Hello Friends! It is Saturday afternoon here in Wisconsin and a beautiful one at that. The sky is sunny and the temperature was in the 70's. Unfortunately, the leaves are just showing a hint of yellow as Winter is peaking around the corner. Back to School sales are on and the kids are getting ready to return to their studies. I really wanted to get this post in yesterday, but you know how those things go. But before I get to any review this weekend let's take a look at a stock. As always, please remember that I am an amateur investor, so please consult with your professional investment advisors to make sure that investments discussed are timely and appropriate for you! If you have any questions or comments, please feel free to email me at firstname.lastname@example.org .
Scanning through the list of top NASDAQ gainers
, I came across Pixelworks (PXLW). I do not own any shares nor do I have any options on this stock. PXLW had a great day Friday closing at $10.96, up $1.62 or 17.34%. According to the Yahoo "Profile"
, Pixelworks "...designs, develops and markets semiconductors and software products for the advanced display industry, including advanced televisions, multimedia projectors and flat-panel monitors."
On July 20, 2004, PXLW announced 2nd quarter 2004 results
. For the quarter ended June 30, 2004, revenue came in at $48.5 milllion, a 49% increase over the $32.6 million reported in the same quarter in 2003, and a 7% sequential increase over the $45.3 million reported in the first quarter of 2004. Net income was $5.8 million, or $.12/diluted share, up from $420,000 or $.01/diluted share in the second quarter of 2003. The company also projected third quarter results with revenue of $47 to $50 million, a year over year increas of 32% to 41%. They announced expected GAAP eps of $.08 to $.11 for the upcoming quarter.
How about longer term? Taking a look at "5-Yr Restated" financials
, we can see a steady and impressive growth in revenue from $13 million in 1999 to $140.9 million in 2003 and $154.2 million in the trailing twelve months (TTM). Earnings have improved from losses of $(1.05) in 2001 through 2003 at $(.01) and has turned profitable at $.12/share in the TTM. Free cash flow has also been improving, according to Morningstar, with $5 million in 2001 increasing to $13 million in the TTM.
The balance sheet is absolutely gorgeous with $101.2 million in cash and $30.4 million in other current assets as opposed to $20.9 million in current liabilities and NO long-term liabilities reported on Morningstar.
How about valuation? Looking at "Key Statistics"
on Yahoo, we can first see that this is a Small Cap stock with a market cap of only $503.73 million. The trailing p/e is steep at 48.50 but the growth is so FAST that the forward p/e (fye 31-Dec-05) is only 18.58. Thus, the PEG looks great at 0.91. Price/sales is moderate at 2.52.
Yahoo reports 45.96 million shares outstanding with 41.20 million that float. As of 7/8/04, Yahoo reports 6.48 million shares out short, a significant number with a short ratio of 4.801, with 15.73% of the float out short. This number is up from 5.12 million shares out short reported the prior month. The short interest could be adding to the upwards price pressure noted Friday as short sellers may (?) be scrambling to cover.
Yahoo reports no cash dividend and no stock dividends are reported.
What about "technicals"? I like to look at Point & Figure charts for this, and looking at Stockcharts.com:
we can see that this stock was trading lower from March, 2002, when it was at the $14.5 level, down to a low of $4.00/share in October, 2002. The stock broke through a resistance level at $8.00 in November, 2002, and traded higher until recently when it broke through a support level at $15 in May, 2004. The stock appears to be finding a new support level at around $8.50, but needs to get through $18.00 to completely 'reverse' this trend. As you all know, I am NOT an expert technician, so review this chart as well and see what you think!
So what do I think about this stock? I actually like this stock a lot. Let me review: the stock had a great move yesterday, the latest quarterly report appeared outstanding, the five year revenue and earnings improvement is impressive, the growing free cash flow is attractive, and the balance sheet is beautiful! Valuation is a bit steep based on current p/e, but analysts are expecting such a rapid growth down the line that the PEG is actually under 1.0. Technically, the graph is less than ideal, with what appears to be a breakdown in price momentum.
Will I buy shares? Well, if you follow my trading strategy, you will know that I can't buy anything until I sell a portion of one of my current holdings at a gain....but if I was in the market, I probably would nibble on a few shares. The only other thing that bothers me about this stock is the price. I like to see stocks a little higher in price...makes the volatility a little more tolerable...less likely to quickly get stepped out on a small pullback causing me to hit my 8% loss limit.
Thanks so much for visiting my blog, Stock Picks Bob's Advice. As always, please make yourself at home and feel free to email me with any questions or comments at email@example.com . I will probably respond right in the blog itself!
Have a great weekend everyone!
Thursday, 19 August 2004
August 19, 2004 Petco Animal Supplies Inc (PETC)
Hello Friends! Thanks so much for stopping by! If you are new here, please feel free to browse my blog
. As always, please remember that I am an amateur investor, so please consult with your professional investment advisors prior to making any decisions regarding any information on this website. If you have any questions or comments, please feel free to email me at firstname.lastname@example.org .
Almost every day, when looking for stocks, I start with the list of top% gainers on the NASDAQ
. (I also usually take a look at the NYSE and AMEX lists as well!) Emphasizing stocks with prices over $10 (my preference to avoid excessive volatility and hopefully to improve the quality of the underlying companies), I then check many of these stocks on Morningstar.com to see if they have solid fundamentals as well.
Today I came across Petco Animal Supplies (PETC) which had a great day closing at $32.90, up $3.18, or 10.70% in an otherwise weak trading day. I do NOT own any shares nor do I own any options on this stock. As an added plus, the stock is trading up $.20 as I write in after hours trading another gain of 0.61%.
What drove the stock higher today, was that yesterday, after the close, PETC reported 2nd quarter 2004 results
. Net sales for the second quarter ended July 31, 2004, came in at $438.5 million, a 12.9% increase over the second quarter of fiscal 2003. Pertinently, the same-store net sales increased 6.7% during the quarter which was quite solid imho. Net earnings came in at $19.3 million, or $.33/diluted share, compared with $13.5 million, or $.23/diluted share in the same period a year earlier. The company forecast continued 5%-6% sames store sales growth for the third quarter, and RAISED GUIDANCE for fiscal 2004 to $1.48 to $1.49, over the previous guidance of $1.43 to $1.44/diluted share...representing a greater than 25% increase over last year's results. The "street" like what it heard and the stock price responded!
If we look at Morningstar.com "5-Yr Restated" financials
, we can see that revenue growth has been steady from $1.0 billion in 2000, increasing to $1.7 billion in 2004. Earnings per share are reported at $1.11 in 2004 and $1.19 in the trailing twelve months. Free cash flow has been also improving with $24 million reported in 2002, and $87 million in the trailing twelve months.
The balance sheet, as reported on Morningstar.com, appears adequate if not spectacular with $65.1 million of cash and $189.1 million of other current assets reported as compared with $189.3 million in current liabilities, and $312.2 million in long-term liabilities. Enough to cover the current liabilities easily, but not so lucky as to have enough current assets to cover the long-term liabilities as well. (Aren't these animal pictures from the Petco website
For a "valuation" assessment, I like to check the easily understandable "Key Statistics" on Yahoo.com
. Here we can see that the market cap is a Mid-Cap $1.89 billion. The trailing p/e isn't bad at 25.56, and the forward p/e (fye 31-Jan-06) is even nicer at 18.59. With the solid earnings growth, the calculated PEG comes in at a pretty 0.83. The Price/Sales ratio is also cheap at 1.00.
According to Yahoo, there are 57.49 million shares outstanding with 51.60 million of them that float. Currently there are 1.42 million shares out short, which sounds like a lot, but with the solid daily volume, comes in at 2.75% of the float or 2.385 trading days. (Using my 3 day trading cut-off...totally arbritrary on my part...this isn't quite as bad a short interest as in some stocks.)
No dividend is paid, and Yahoo does not report any stock splits.
How about a graph? Looking at a Point & Figure chart from Stockcharts.com
we can see that the stock was really trading sideways between 2002 and 2003 when in April, 2003, it broke through a resistance level at about $20/share and has traded higher since that time. Recently it has run into the same support level at around $28 and now is trading higher once again. The graph looks fine to me at this time.
So what do I think? Well, I like this stock. The earnings report is great with same store sales exceeding 5% in this week retail market, and with the company raising guidance...so important for subsequent stock price appreciation. The record this past five years is solid, the company is generating increasing free cash flow, while the balance sheet which is good, may very well be improving in the face of the free cash flow generation. Valuation-wise, the P/E isn't bad and the PEG is even nicer at 0.83. Finally, the graph looks fine to me!
Well, I am NOT in the market to buy any shares, but if I were....well you never know, I might just pick up a few!
Thanks so much for stopping by! Remember, I am an amateur investor, so take everything I write with a grain of salt and consult with your investment advisors! Regards to all of my friends!
Tuesday, 17 August 2004
A reader writes "What does the NASDAQ National Market mean?"
Hello Friends! Thanks for stopping by. Please remember that I am an amateur investor, so please consult with your professional investment advisors prior to making any investment decisions based on information on this website. As always, if you have any quesations, comments, or words of encouragement, please feel free to email me at email@example.com and I will try to get back to you, most likely right here on the blog.
Vishwa, a previous letter-writer, was kind enough to drop me another line. Vish' writes:Dear Bob,
Thanks for answering my question (about DHB Industries) patiently on
blog. Although I'd like to agree with you about the fact that the
weak market might have resulted in pulling down DHB inspite of
quarter earnings, the 18% drop (and more in the days since) is what
me as jaw-dropping. If the drop was around the 5-7% range, I'd have
dismissed it off as the weak market's influence.
In any case, I have another question for you, if you may be kind
What does it mean when a company's listing is elevated from the
cap market index to the NASDAQ National market index? Does it speak
the company's future growth prospects or is there any other advantage
the company (like wider exposure, hence greater chance for stock
movement...). How about any disadvantages?
First of all, DHB closed today, in an otherwise strong market at $12.16, down another $(.30) or (2.41)%. I don't see any news to explain this move. In fact DHB was mentioned
favorably YESTERDAY on BusinessWeek online.
If we look at an updated point and figure chart:
you can see that this stock was very extended from its support levels and is having a pullback without breaking down. If the stock were to traded under $10, then I would really be concerned. Unfortunately, the system I use does not allow for these large swings and with an 8% stop, I would stop right out of this stock long before it reached $10. However, don't you agree that the point and figure chart does NOT show that the stock has broken down? One lesson on stocks, is that they often trade HIGHER in ANTICIPATION of news, and then trade LOWER on the release of the news. Doesn't always make sense in the short run, but that is how it works.
On your other question, I really had to hit my Google to get an answer. The NASDAQ Small Cap Market consists of "...securities of smaller, less-capitalized companies (small caps) that do not qualify for inclusion in the NASDAQ National Market" according to the ADFN financial glossary.
Here is the scoop from the internet: Website for NASDAQ listing requirements. You can see that basically, there is a large number of requirements for market capitalization, number of shares, minimum bid price, and continued listing. You can review the details.
Basically, when stocks are not meeting requirements from the NASDAQ National Market, they can drop to the NASDAQ Small Cap Market, and if they fail THAT test, they start listing as a Bulletin Board or Pink Sheet stock...suggesting even lower quality of the underlying business. It really doesn't have much to do with the growth prospects but rather of the quality of the underlying financials. Since many people, or at least some investors may not wish to invest in the most speculative of issues, when a stock is listed on the National from the SmallCap Market, this will open up its market for its shares to more attention both from Institutions and from Individual Investors.
I hope that is helpful. The link above gives a lot of the exact details!
Good-luck investing and thanks for writing!
Monday, 16 August 2004
August 16, 2004 Lowe's Companies (LOW)
Hello Friends! It seems like we have been going through a bit of a "dry spell" around these parts. I have been successfully been "sitting on my hands" trying to avoid breaking my own trading rules in my "Trading Portfolio"
which I really need to update on the website. As you probably know, I am an amateur investor, so PLEASE consult with your professional investment advisors prior to making any investment decisions based on any information on this website. As always, if you have any comments or questions, please feel free to email me at firstname.lastname@example.org and I will try to get back to you, usually by posting a response on this blog. If you use the links to the left side of the main website, "Bob's Advice for Stocks"
, you may find it interesting to browse through the over 600 entries on this blog (can you believe it?). Hopefully, as that old Ronald Reagan joke goes, "There is a pony in there somewhere!"
Scanning through the USA Today list of top % gainers on the NYSE
, I came across Lowe's Companies (LOW), which as I write is trading at $49.11, up $2.46 or 5.27% on the day. I do NOT own any shares nor have any options on this stock. Lowe's is a competitor to Home Depot (HD), which I posted on Stock Picks Bob's Advice
on May 20, 2003. According to the Yahoo "Profile"
on Low, this company "...is a home improvement retailer, with a specific emphasis on retail do-it-yourself (DIY) and commercial business customers."
Just a few moments ago, LOW reported 2nd quarter 2004 results
. Total sales rose 17% to $10.2 billion, and sales in stores open at least a year, rose 5.1%, which although below Lowe's expected 6 to 7% estimate, firmed towards the end of the quarter, and Lowe's went ahead and indicated current sales were running ahead of guidance. Net income was $704 million, or $.89/share, compared with $597 million, or $.75/share the prior year. These results were good enough to push the stock higher in trading today!
If we take a look at Morningstar.com "5-Yr Restated" financials
, we can see the steady and impressive growth in revenue from $15.4 billion in 2000 to $32.4 billion in the trailing twelve months (TTM). Earnings have also steadily increased from $.88/share in 2000 to $2.38 in the TTM. Just as nice, LOW has paid a dividend and raised its dividend each and every year from $.06/share in 2000 to $.12/share in the TTM.
Free cash flow, which was a negative $(600) million in 2002, has improved and is currently at $575 million in the TTM.
The balance sheet shows $2.0 billion in cash and $6.1 billion in other current assets, plenty to cover the $5.9 billion in current liabilities and make a large dent in the $4.4 billion in long-term liabilities.
What about valuation? Looking at "Key Statistics"
from Yahoo.com, we can see that the market cap is a large $38.30 billion. The trailing p/e isn't bad at 20.75, the forward p/e (fye 30-Jan-06) is even nicer at 14.66. The PEG (5 yr expected) is gorgeous at 0.78. (I really like a PEG under 1.0), and Price/sales is reasonable at 1.12.
There are currently 779.63 million shares outstanding with 771.80 million that float according to Yahoo. As of 7/8/04, there were 14.99 million shares out short, representing 4.807 trading days, or 1.94% of the float. I like to use 3.0 trading days as a point of reference, and thus, at least in my opinion, this is a significant number of shares out short, and may contribute to upward buying pressure as we are seeing today on good news.
As noted earlier, the company pays a dividend of $.16/share yielding 0.34%. The last stock split was a 2:1 in July, 2001.
How about Technicals? If we look at a Point and Figure chart from Stockcharts.com:
we can see that this chart has actually broken through its support level at around $52 in May, 2004, and has traded lower recently. It may be forming a new support level, but it would be nice to see this get through the $54 level, the current resistance line, to confirm the breakout to new heights. Again, I am not a technician, so please review and be aware of the current graph!
So what do I think? Well, I have never shopped at Lowe's so on a Peter Lynch level, I can't say much. However, the earnings report is good, I especially like today's announcement raising guidance, the Morningstar 5-yr record is beautiful. The free cash flow and balance sheet is very nice. The PEG is under 1.0 and the P/E itself is just over 20.0. Except for the graph, which is reflecting the current market's malaise, everything looks nice for LOW. As you know, I am not in the market to buy ANYTHING until I get a "signal" from my current portfolio telling me to buy. (My signal occurs when a portion of an existing position is sold at a gain!).
Thanks so much for stopping by and visiting. I really do appreciate all of you who visit and especially write, which lets me know about who you guys are and what you all are thinking! If you have any comments or questions, please feel free to email me at email@example.com Have a great week everyone!
Saturday, 14 August 2004
"Looking Back One Year" A review of stock picks from the week of July 28, 2003 (Including July 26, 2003)
Hello Friends! Sorry about missing the "review" last weekend. I was away from my computer and thought it best to take a week off! It didn't really help the market lol but a guy just has to take a break once in awhile! Thanks again for stopping by! If you are new here, and even if you are a return visitor, please remember that I am an amateur investor, so please consult with your professional investment advisors prior to making any investment decisions based on information on this website, Stock Picks Bob's Advice
On July 26, 2003, I posted Zoran (ZRAN)
on Stock Picks at $27.28. ZRAN closed at $15.57 on 8/13/04, for a loss of $(11.71) or (42.9)%. (Not a very auspicious start for THAT week!)
On July 27, 2004, ZRAN announced 2nd quarter 2004 results
. Revenues for the quarter came in at $103.7 million, an increase of 132% over the same quarter in 2003. However, under GAAP, the Company reported a net loss of $(6.1) million or $(.14)/share compared with net income of $4.2 million or $.15/share the prior year. This actually is improved from the prior quarter, but as you know if you are a reader of this blog, I am looking for stocks that are PROFITABLE along with growing revenue!
I posted Quality Systems (QSII)
on Stock Picks on 7/28/03 at a price of $30.67. (I also purchased some shares in my "Trading Account"
as well as had my stock club pick up some shares!) QSII closed at $47.92 on 8/13/04 for a gain of $17.25 or 56.2%.
On August 3, 2004, QSII reported 1st quarter 2005 results
. Net revenues were $20.1 million, an increase of 23% over the $16.3 million in revenue last year. Net income was $3.4 million, a 49% over net income of $2.3 million last year in the same quarter. Fully diluted earnings per share came in at $.51/share for the quarter, an increase of 46% over the fully diluted $.35/share earnings recorded last year. These were great results and the stock price reflects this!
Community Health Systems (CYH) was posted on Stock Picks
on 7/29/03 at a price of $19.79. CYH closed at $23.70 on 8/13/04 for a gain of $3.91 or 20.0%.
On July 21, 2004, CYH announced 2nd quarter 2004 results
. Net operating revenues for the quarter ended June 30, 2004, were $813.7 million, a 23.8% increase over the $657.3 million reported in the same quarter last year. Net income jumped 25.6% to $38.4 million or $.37/diluted share, compared to $30.6 million or $.30/diluted share last year. These look like great results to me!Coventry Health (CVH) was posted
on Stock Picks on 7/29/03 at a price of $55.77. CVH split 3:2 in February, 2004, so our effective stock pick price was actually $37.18. CVH closed at $48.87 on 8/13/04 for a gain of $11.69 or 31.4%.
On July 26, 2004, CVH announced 2nd quarter 2004 results
. Operating revenues totaled $1.31 billion for the quarter, up 19% over the 2nd quarter 2003. Earnings came in at $84 million or $.93/share (beating Thomson First Call estimates of $.87), compared to last year's $63.4 million or $.70/share on revenue of $1.1 billion.
On July 30, 2003, I posted Guitar Center (GTRC)
on Stock Picks at $33.26. GTRC closed at $40.75 on 8/13/04 for a gain of $7.49 or 22.5%.
On July 28, 2004, GTRC announced 2nd quarter 2004 results
. Consolidated net sales for the quarter ended June 30, 2004, increased 16.5% to $339.6 million from $291.6 million for the same period last year. Net income for the quarter increased 97.5% to $12.1 million or $.47/diluted share compared with $6.2 million or $.25/diluted share last year. These were indeed great results!
On July 30, 2003, I posted Charles River Laboratories (CRL)
on Stock Picks at $35.60. CRL closed at $41.76 on 8/13/04 for a gain of $6.16 or 17.3%.
On July 28, 2004, CRL announced 2nd quarter 2004 results
. Second quarter net sales were $180.2 million, a 16.7% increase over the $154.4 million reported in the same period last year. Net income for the quarter increased 27.9% to $26.3 million or $.52/diluted share up from $20.6 million or $.42/diluted share last year. Another great quarter for CRL!
On July 31, 2003, I posted ManTech (MANT)
at $24.86. MANT closed at $12.33 on 8/13/04, for a loss of $(12.53) or (50.4)%.
On July 19, 2004, MANT announced it expected a loss for the 2nd quarter
. Subsequently, it also delayed the earnings report. The street does NOT like losses and does NOT like uncertainty. The stock has traded lower!
On July 31, 2003, I posted Chico's FAS (CHS)
on Stock Picks at $27.22. CHS closed at $39.20 on 8/13/04 for a gain of $11.98 or 44%.
On May 27, 2004, CHS announced 1st quarter 2004 results
. Net sales for the quarter ended May 1, 2004, increased 52.0% to $257 million from $169 million for the same quarter last year. Net income was up 52.6% to $36 million, or $.40/share from $23 million or $.27/share last year. Comparable store sales were reported to increase 20.1% for the 13 week period ended May 1, 2004 (in the same earnings report). These were all great numbers, and the stock has appreciated since we listed it last year!
On August 1, 2003, I posted Alliance Data Systems (ADS)
on Stock Picks at $28.45. ADS closed at $36.12 for a gain of $7.67 or 27.0%.
On July 21, 2004, ADS announced 2nd quarter 2004 results
. For the quarter ended June 30, 2004, revenue increased 20% to $300.5 million from $251.0 million for the second quarter 2003. Net income was up 99% to $28 million or $.33/diluted share for the second quarter compared to $14.1 million or $.18/diluted share the prior year. In addition ADS RAISED GUIDANCE (notice the caps!) for 2004. This is a great earnings report and great guidance for this company! My kind of stock. (unfortunately I don't own any!)
Finally, on August 1, 2003, I posted United Online (UNTD)
on Stock Picks at $33.64. UNTD has been one of our WORST performers (!) and closed on 8/13/04 at $9.03/share for a loss of $(24.61) or (73.2)%.
On August 4, 2004, UNTD reported 2nd quarter 2004 results
. Total revenues were $110.6 million, up 39% vs. $79.6 million for the same quarter the prior year. Net income came in at $12.3 million or $.19/share compared to $14.6 million or $.21/share the prior year. However, the stock dropped after they also trimmed guidance for subscriber-growth for 2004.
I always prefer (!) to see POSITIVE guidance in association with great results!
So how did we do for these ten stock selections? We had gains in seven and losses in three for an average gain of 5.19%. O.K. not so spectacular but not bad for a mediocre market this past year! Remember, I suggest selling all losing stocks at 8% loss levels, so this would actually improve our performance, but for the sake of review, I evaluate as if we had a "buy and hold" strategy!
Thanks again for stopping by! If you have any questions, comments, or words of encouragement, please feel free to email me at firstname.lastname@example.org . Wishing all of my friends a GREAT WEEKEND!
Thursday, 12 August 2004
A Reader Writes "What about IDEV"
Hello Friends! Thanks again for stopping by. I received a note from a rather sophisticated reader asking me about my opinion on IDEV. First of all, I am an amateur investor, so please consult with your investment advisors before making any decisions based on information on this website. But let me get to the letter:
Bob D. writes:Hi Bob:
I just recently came across your site and I like it. I most likely will subscribe.
I guess I'd like a little personal attention beforehand. I'd like to know if you would buy IDEV on 8/12 at the open (or soon after) with just taking into consideration the following factors (to be brief) from my perspective and then your own analysis:
1.) IDEV recvd. FDA approval for Sanctura (a best-in-class drug for a $1.3B market) about a month ago and the stock has pulled back sharply (profit-takers after the run-up before the anticipated approval?). Stock is currently ~$6. Stock traded as high as $10 on the day of approval.
2.) Sanctura officially launches next week. 500 new sales reps, etc.
3.) IDEV revcd. a total of $300M cash infusion from Pliza (a Eurpoean pharma.) in a joint-venture co-op fund for the launch of Sanctura.co-op.
4.) Downtrend seems to be reversing (last 2 days) and I believe the target price is $15. by factoring in a capture of 25% marketshare by the end of 2005. They say the drug is that good against its competition.
5.) Cash position is about $4.50 a share (w/cash infusion).
6.) Dry powder is there doing nothing and this stock seems compelling. The sizzle is there.
Would you please let my know what you think tomorrow morning?
Sincerely & TIA,
Let's take a look at IDEV.
Well technically, the graph looks nice having broken through its recent resistance level. What about the earnings?
(I do not own any shares of this stock by the way). IDEV currently trading up $.17 or 2.81% on the day at $6.23 in an otherwise weak market. Earnings are to be released on 8/16/04. On May 11, 2004, IDEV announced 2nd quarter 2004 results. They reported a net LOSS of $(11,370,000) or $(.24)/share for the quarter ended March 31, 2004, compared to a net loss of $2.9 million or $(.06)/share the prior year. Not only are they LOSING money, but they are LOSING MORE MONEY than last year. This isn't material for this website. I don't pick stocks that are losing money.
Furthermore, if we look at the "5-Yr Restated" financials on Morningstar.com, we can see that revenue peaked at $27.8 million in 2000, and has dropped to $5.4 million in the trailing twelve months. Again an "F" in my department. I am looking for growing revenues.
Free cash flow has grown increasingly negative from $(2) million in 2001 to $(32) million in the trailing twelve months.
Cash looks o.k. to cover their increasing liabilities for the time being.
What do I think? I think this website is increasing its readership. However, my investing techniques are based on investing discipline, staying with a strategy, using rational methods to assess a stock, and not going with hype or possible future markets. These may be profitable investment techniques for some, but I am looking for a specific type of company with progressive earnings and revenue growth, free cash flow, balance sheet, valuation, technicals and not just a bunch of potential products with a "great story".
Bob, I hope I have not disappointed you in your suggestion, and good-luck to you if you choose to pursue this one....it may turn out to be a "ten-bagger", it is just not my style! Thanks so much for stopping by. If you have any questions, comments, or words of encouragement, please feel free to email me at email@example.com
Tuesday, 10 August 2004
A Reader Writes "What happened to DHB?"
Hello Friends! Well, we got a little reprieve from the market today. Thanks so much for stopping by! As always, please remember that I am an amateur investor sorting out investments so please consult with your professional investment advisors before making any investment decisions based on information on this website! If you have any questions or comments, please feel free to email me at firstname.lastname@example.org and I will try to get back to you as soon as possible.
Speaking of email, I had a note this weekend from one of my readers here, who pointed out that almost as soon as I had posted DHB Industries, the stock was down 18%.
Vishwa wrote:Hello Bob,
Keep up your good advice!
I have a question on DHB industries. Despite amazing 2nd quarter earnings yesterday (Aug. 5) why did the shares of this company fall 18% today (Aug 6)?
I don;t quite understand what's going on! Could you throw some light on what to expect from this company's shares in the near future and in the next 1 year?
On August 2, just 8 days ago, I posted DHB Industries (DHB)
on Stock Picks at $17.05. The stock was up 12% that day and made the list of top gainers. As Vish points out, DHB dropped 18% on 8/6/04. Today, DHB closed at $14.13, up $.18 or 1.29% on the day. However, it is still trading DOWN $(2.92) or (17.1)% from my post in just a week.
Vish points out that on August 6, DHB reported earnings
for the 2nd quarter 2004. Earnings came in at $7.7 million or $.17/share vs. $4.1 million or $.09/share the prior year. Sales were up 52% to $86.1 million from $56.5 million. I also don't see any other news to explain the drop in the stock price.
I already dropped Vish a note saying that the market was weak and it was sloppy. What does all of that mean? Well, as William O'Neill, the brilliant stock-picker and founder of Investors Business Daily likes to point out it is the M in CANSLIM that affects so many stocks in so many ways. In other words, the overall bearish tone of the market this past weak has dragged down DHB. I mention "sloppy" in terms of trading action, which in my opinion means that the market is ignoring fundamental factors in its action, that is, punishing the good with the bad! There really WASN'T any good reason that I am aware of to explain the price action on this stock!
So how does an investor AVOID such punishing price moves? First of all, I personally sell stocks that hit an 8% or greater loss as soon as they pass that threshold. I don't care HOW MUCH I like the stock, out it goes. If I had puchased shares in DHB and it dropped the next day, out the shares would go. I would take my loss, "lick my wounds" and not look back.
What else can an investor do? I use internally generated signals from my OWN portfolio to let me know whether I should even be making a purchase! That is, if you have been reading my blog, you will know that my latest trade was a sale of Sanderson Farms on weakness. Thus, I am sitting on my hands waiting for a sale of one of my stocks at a gain to "give me the green light" to add a new position. This avoids me going against the market, which is a foolhardy move...and results in again what I call "sloppy" trading, with lots of traders "throwing out the baby with the bath water!"
If we look at the latest Point and Figure Chart on DHB:
we can see that the stock has NOT actually broken down, in spite of its recent pull-back, the overall trend upwards appears uninterrupted at least at the current levels.
Vish also asked me about what to expect from DHB now and in the future. I am NOT a soothsayer or fortune teller....so your guess is as good as mine! However, I can tell you that the current PEG as reported on "Key Statistics" is only 0.80, suggesting that analysts who may know something about future prospects are predicting results such that the Price/earnings compared to the growth rate is under 1.0 suggesting that the growth rate is anticipated to be growing faster than the current p/e which is at 32. Thus earnings are expected to be greater than 32% over the next five years. As with all of my stock picks, I would hope that this would mean that the price would appreciate, and I am confident that a portfolio of such stocks will perform well, however, any particular stock can be higher or lower than when I "pick" it for my blog.
Thanks so much for stopping by! I hope my thoughts are helpful as you have asked very good questions and raised concerns regarding the whole process! Good luck investing and you are welcome to keep me posted regarding your own experiences in investing!
Posted by bobsadviceforstocks at 4:08 PM CDT
Updated: Tuesday, 10 August 2004 4:15 PM CDT
Friday, 6 August 2004
"Trading Transparency" SAFM
Hello Friends! Just wanted to update you on a recent transaction. I just sold 135 shares of SAFM at $44.92. These shares were purchased at $35.86 on 2/3/04. Thus they were sold with about a 25% gain. I sold these shares as my new sell point on this issue was at a 30% level...I had sold twice at gains and allowing the stock to retrace 50% gives me a new sell point at around 30%.
Thanks so much for stopping by. If you have any questions, or comments, please feel free to email me at email@example.com
Tuesday, 3 August 2004
August 3, 2004 Mentor Corp (MNT)
Hello Friends! Thanks very much for stopping by. I have grown discouraged about the NASDAQ recently. Who wouldn't?
It appears that the NASDAQ rolled over sometime in late January, 2004, and since then we have had a series of lower highs and lower lows. I really would like to see this reversed on the next rally. As always, please remember that I am an amateur investor so please do your own investigation into all stock market ideas discussed here and please consult with your professional investment advisors prior to making any investment decisions.
Mentor (MNT) was at the top of the list of top % gainers on the NYSE. MNT closed today at $34.45, up $3.10 or 9.89% on the day. I do not own any shares nor do I have any leveraged position in this stock. According to the Yahoo "Profile", Mentor "...manufacturers and markets products serving the medical specialties market." Some of their more notable products include breast implants, implantable prostheses, and impotence and incontinence devices.
As I have pointed out many times on this blog, what often drives stocks higher over the short-term is announcements of good news or favorable earnings reports. Yesterday, after the close, Mentor announced 1st quarter 2005 results. Sales jumped 16% to $122.4 million compared to the prior year sales figure of $105.1 million. Diluted earnings per share for the quarter came in at $.39, up 18% from last year's $.33/share. At the same time, Mentor reaffirmed that it expected fiscal year 2005 sales to grow at a low double-digit growth rate with sales over sales of $422.2 million in the 2004 fiscal year. This was a nice announcement for Mentor, and the stock responded positively, even on a very weak day otherwise.
How about longer-term? If we review a "5-Yr Restated" financial statement from Morningstar.com, we can see that revenue has grown steadily from $249.3 million in 2000 to $422.2 million in 2004. Earnings have not been as consistent but have grown from $.73/share in 2000 to $1.15 in the trailing twelve months.
MNT even pays a small dividend and has increased it from $.05/share in 2000, to $.85/share in the trailing twelve months.
Free cash flow has been positive, increasing from $43 million in 2002 to $56 million in the trailing twelve months.
The balance sheet, as reported on Morningstar, appears solid to me. MNT has $118.4 million in cash and $209.6 million in other current assets as compared to liabilities of $129.9 million in short-term debt, and $170.5 million in long-term liabilities.
What about valuation? If we look at Yahoo "Key Statistics", we can see that this is a Mid-Cap stock with a market cap of $1.45 billion. The trailing p/e isn't bad at 28.38, with a forward (fye 31-Mar-06) p/e of 22.08. Thus, the PEG is reasonable at 1.53.
Yahoo reports 42.21 million shares outstanding with 40.50 million of them that float. There are 2.96 million shares out short as of 7/8/04, representing 13.436 trading days. This level of shorts might well explain the bit of a panic today of some buyers (?). As noted above, MNT does pay a small dividend of $.60/share yielding 1.91% return. The last stock split was a 2:1 on 1/21/03.
And what does the chart look like? Well, if we look at a nice Point and Figure Chart,
Per the chart, MNT last showed significant weakness through late 2000 when it dropped from $17.50 to a low of $6.50. Since that time, MNT has headed steadily higher.
Well, in conclusion, the stock actually looks nice to me. The recent earnings report was strong, the Morningstar 5-Yr record looks quite good, although earnings were NOT that consistent, they have been strong recently. The free cash flow is attractive and the technicals imho look fine. There is even a large level of short-sellers, poised to drive the stock even higher if the news on this company pushes the stock higher in the short-term.
Thanks so much for stopping by! If you have any comments, questions, or words of encouragement, pleae feel free to email me at firstname.lastname@example.org.
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