Stock Picks Bob's Advice
Wednesday, 3 November 2004
"Trading Transparency" Cal-Dive (CDIS)
Hello Friends! If you know anything about ME, lol, you will know that when I have a nickel in my pocket, I got to spend it. Reminds me of that old Cracker-Jack commercial...."What do you want....".
I came across Cal-Dive (CDIS) earlier today and it seems to fulfill our criteria. I will post a full note on this one in a bit...but went ahead and purchased 200 shares of CDIS in my Trading account at $38.158 for a cost of $7,631.60.
As always remember that I am an amateur investor, so please consult with your 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 .
"Trading Transparency" AMHC
The market certainly does NOT like uncertainty. With John Kerry's gracious concession to President Bush this morning, the market has rallied and responded to the certainty of economic policies the next four years.
The "good news" about all of this is that my portfolio has just moved a position to a "sell point" and I sold 75 shares of my Amercan Healthways (AMHC) at $32.76 for net of $2,448.94. This represents 1/4 of my position of 300 shares (leaving 225 shares left) in my "current trading portfolio"
These shares were purchased at $23.53/share on 6/18/04 for a gain of $9.23/share or 39.2%. As you will recall, I use a price target of about 33% for my first sale of a stock and also use the sale of a stock at a gain as a market signal allowing me once again to buy another position...so I am on the lookout and will keep you posted.
Please always remember that I am an amateur investor, so please do your own thorough investigation on all stocks discussed on this website and consult with your professional investment advisors to make sure all of your stock investment decisions are appropriate, timely, and likely to be profitable for you. If you have any questions, comments, or words of encouragement, please feel free to email me at email@example.com .
Sunday, 31 October 2004
Hello Friends! I just wanted to wish all of you a safe and happy Halloween! Next week shall be quite exciting, as we are not sure who will be trick or treating at the White House, and who will be handing out candy next year!
"Looking Back One Year" A review of stock picks from the week of September 15, 2003.
Hello Friends! Thanks so much for stopping by. With the election coming up quickly for all of us, it is nice for me to look at the investment world and focus away from politics for a moment! As always, please remember that I am an amateur investor, so please do your own investigation into all stocks discussed on this website and consult with your professional investment advisors on all investments to make sure they are appropriate, timely, and likely to be profitable for you! Please feel free to email me if you have any comments, questions, or words of encouragement at firstname.lastname@example.org .
On September 15, 2003, I posted Aeropostale (ARO)
on my blog at $27.25/share. ARO split 3:2 on April 27, 2004, making my effective 'pick' price of $18.17. ARO closed at $31.55 on 10/29/04 for a gain of $13.38 or 73.6%.
ARO reported 2nd quarter 2004 results
on August 19, 2004. Net sales for the quarter increased an impressive 50% to $194.9 million vs. $129.9 million in the prior year same period. Even more impressive was the 20% same store sales gain in the quarter! Net income came in at $10.9 million for the quarter ended July 31, 2004, or $.19/diluted share compared to net income of $2.7 million or $.05/diluted share last year. These were GREAT results imho.
On September 16, 2003, I posted Frisch's Restaurants (FRS)
on Stock Picks Bob's Advice
at a price of $23.75/share. FRS closed at $23.00/share on 10/29/04 for a loss of $(.75)/share or (3.2)%.
On October 18, 2004, FRS reported 1st quarter 2005 results
. Revenues rose 9.1% to $84.5 million from $77.4 million last year. Net earnings, however, declined 11.8% to $2.9 million compared to $3.3 million in the prior year. Diluted earnings per share decreased to $.56/share this year, compared with $.65/share last year. Same store sales of the Big Boy Restaurants increased an anemic 0.6% during the quarter. These results were less than inspiring imho.
I posted Lexar Media (LEXR)
on this blog on 9/16/03 at a price of $19.73/share. LEXR closed at $6.76 on 10/29/04 for a loss of $(12.97)/share or (65.7)%.
On October 14, 2004, LEXR reported 3rd quarter 2004 results
. Revenue rose nicely to $165.2 million from $98.7 million during the same period the prior year. However, with operating costs growing, the company reported a net loss of $(3.5) million or $(.04)/diluted share compared with a net income of $9.7 million or $.12/share the prior year. These results are also somewhat less than stellar!
TALX (TALX) was posted
on Stock Picks on 9/17/03 at a price of $26.25/share. TALX closed at $28.35 on 10/29/04 for a gain of $2.10/share or 8%.
TALX reported 2nd quarter 2004 results
on October 27, 2004. Revenues for the quarter ended September 30, 2004, increased 16% to $36.6 million from $31.5 million last year. Earnings came in at $4.05 million in 2004, vs $3.29 million last year. On a per share fully diluted basis this came in at $.30/share vs $.24/share the prior year. These results are adequate to keep our interest!
I posted Endo Pharmaceuticals (ENDP)
on this blog on 9/17/03 at a price of $21.19. ENDP closed at $21.80 on 10/29/04 for a gain of $.61 or 2.9%.
On October 14, 2004, ENDP announced 3rd quarter 2004 results
. These were ahead of expectations. Revenue for the quarter ended September 30, 2004, came in at $160.3 million compared with revenue last year of $149.4 million. Earnings came in at $41.4 million or $.31/share, compared with earnings of $39.9 million or $.30/share the prior year. Although not spectacular, the stock still moved ahead as the results were ahead of "expectations".
I posted Gen-Probe (GPRO) on Stock Picks
on 9/17/03 at a price of $62.90. GPRO split 2:1 on 10/1/03, thus reducing our effective pick price to $31.45. GPRO closed at $35.04 on 10/29/04 for a gain of $3.59 or 11.4%.
On August 5, 2004, GPRO reported 2nd quarter 2004 results
. Total revenues for the quarter came in at $61.2 million compared to $50.7 million the prior year. Net income came in at $31.5 million or $.62/share compared with net income of $16.8 million or $.35/share the prior year. The company ALSO raised fiscal 2004 guidance. A great earnings report WITH raised guidance is all an investor could ask for! Third quarter earnings should be released on November 4, 2004, so watch those results closely!
On September 18, 2003, I posted Merge Technologies (MRGE)
at $18.99. MRGE closed at $17.965 on 10/29/04 for a loss of $(1.025) or (5.4)%.
On October 27, 2004, MRGE announced 3rd quarter 2004 results
. Net sales for the quarter came in at $9.3 million, a 22% increase over net sales of $7.6 million the prior year. Net income was $2.2 million of $.16/diluted share compared with $1.6 million or $.12/diluted share the prior year. These appeared to be solid results imho.IDX Systems (IDXC) was posted
on Stock Picks on 9/19/03 at a price of $26.20. IDXC closed at $33.535 on 10/29/04 for a gain of $7.335 or 28.0%.
On October 27, 2004, IDXC reported 3rd quarter 2004 results
. Revenues for the quarter increased 34% to $136.1 million compared to $101.4 million for the same quarter in 2003. Net income came in at $9.8 million or $.31/diluted share, compared with $10.3 million, or $.34/diluted share last year. These results were o.k. for the street but not exactly exciting in my humble opinion. As you know, I always prefer to see growing revenue AND earnings. Regardless of the reasons.
O.K. hang in there!....just 2 more to review.
On September 19, 2003, I posted Navigant Consulting (NCI)
on Stock Picks at a price of $14.53. NCI closed at $24.87 on 10/29/04 for a gain of $10.34 or 71.2%.
On October 19, 2004, NCI announced 3rd quarter 2004 results
. Revenues for the third quarter, 2004, were $126.3 million, a 55% increase compared with 3rd quarter, 2003, results of $81.4 million. Sequentially, this was also an increase from the $123.8 million in the prior quarter. Net income came in at $11.0 million or $.22/share compared with $10.5 million, or $.21/share the prior year. This was a satisfactory if not spectacular result!
Finally, the last stock selected that week was Stratasys (SSYS) which was posted on 10/19/03 on Stock Picks
at a price of $50.04. SSYS had a 3:2 stock split making our effective "pick price" at $33.36. SSYS closed at $29.28 on 10/29/04 for a loss of $(4.08) or (12.2)%.
On 10/28/04, SSYS reported 3rd quarter 2004 results
. Revenues climbed 37% to $17.7 million for the quarter ended September 30, 2004, compared with $12.9 million recorded the prior year. Net income was $2.5 million or $.24/diluted share compared with $2.0 million, or $.20/diluted share the prior year. Stratasys also went ahead and raised guidance for the full 2004 fiscal year. A great earnings report ALONG with increased guidance is almost ALWAYS a good portender of higher stock prices.
In conclusion, during the week of September 15, 2003, I made ten stock picks with review now showing six with gains and four with losses for an average gain of 10.86%. Please remember that for this exercise, I assume a buy and hold practice, and if you read anything on this blog, I am sure that my actual results are quite different because I do not hang onto my losers after an 8% hit.
If you have any questions or comments, please email me at email@example.com
Thursday, 28 October 2004
A reader writes "I am thinking of starting a stock picking blog"
Finishing up with my mail, Tom dropped me a line yesterday with a few questions and thoughts about writing a blog on investing. He wrote:Hi,
I was thinking of starting a stock picking blog. I am wondering when
started, how many visitors you get, do you make money from it, etc or
advice you have? I hope to hear from you, thanks!
First of all, I am quite frankly a bit weak on the number of visitors! I don't ask people to sign in, and I get a rough idea from the few stats I do have. My main website, Bob's Advice for Stocks
, gets only about 6 to 10 visitors each day. This number has been slowly increasing...but is not the main part of my website.
I do get some reports from Lycos on the Blog, Stock Picks Bob's Advice
, where this particular post is located (!). For instance, in the month of October, I have received 104,697 "requests" which I believe count each "link" on a page as a request, but only 1,555 "page requests". Thus, I figure I get about 50 page views/day on the Blog. This is up from about 938 page views and only 14,672 "requests" in March, 2004. Clearly, I am growing my audience but it isn't like it is a spectacular number of page views like some major websites. I am happy there are people like you who read what I write and are motivated to actually write in and comment.
Furthermore, you asked about making money. I think it would be easier and more profitable to work at minimum wage at McDonald's then to make money doing blogs! Now that might be a bit cynical, but I wouldn't get into writing for the profit aspect. Currently, I have two possible profit sources; one, I list some links to Amazon on my main page, and have also linked to the Elliot Wave website. Thus far, I haven't made any money on either!
Should you start a website? Or a blog? Why not? If you have something to say, and want to improve your writing and analytic skills, then by all means go ahead and write. You should also visit similar weblogs (like you are apparently doing) and enter into the discussions on those sites and mention you have a blog! It might just work! Also be sure to search out the "blog search engines" and make sure you register your site with those services.
What would I like to do? As many of you realize, I have a "day job" outside of the investment world and enjoy this as a hobby. Could this ever grow to something more? It all depends on the work I put into it, and whether the things I write even make sense. When you put it out into cyberspace, well you leave a record and it is a better way, if you like to pick stocks, to demonstrate to yourself and others that you might have some ideas worth considering. I guess that is what it is all about.
Thanks so much for taking the time to write. Let me know if you set up a blog, and I would be happy to drop by and let you know what I think!
Regards...and if you have any other comments, or questions, please feel free to email me at firstname.lastname@example.org
A Reader Writes, "What about AUO, BE, TLB or CGT?"
Hello Friends! I am sure delighted that you all could stop by and browse here. I will use this opportunity to encourage each and every one of you who live in the United States to get out and vote. Wait in line. Make sure your vote counts. That is what Democracy is all about. This artwork is from an M.I.T. course for "America in Depression and War."
This poster was created sometime between 1936 and 1940 as part of the WPA (Works Project Administration) Project. This time of year, even I have trouble concentrating just on stocks and investing!
As I wrote above, I have been away from my computer for about a week now. I did manage to check my own stocks in my trading portfolio to make sure they did not hit stops for sales on profit or loss situations. However, I wasn't doing much about NEW ideas on this blog. I did receive a couple of letters (which I absolutely love receiving....sort of lets me know you guys are really out there....and encourages me to keep writing!) On comment came from Mike who commented on my DP post in the blog.
Mike wrote:Hi Bob,
I recently discovered your site and I gotta tell you I used to be a regular reader of Bigtipper.com back during the late nineties tech boom, they later went to a pay model and I'm not even sure if they're still around but ever since I haven't found a good straight-up picks site till now. Keep up the great work. I like the motley fool too but they're too fluffy at times, your stuff cuts right to the chase.
I was wondering what your thoughts were on a few dogs in my portfolio, I usually follow your investment philosophy of only selling gainers but tax reasons I wouldn't mind dumping a dog or too this year. Do you think any of these dogs are ripe for a rebound: AUO, BE, TLB or CGT. Maybe you post an entry about it.
First of all, thanks so much for your kind words. I try to get "right to the chase"...but then again, I have started veering off a bit....note the current post right HERE with the election poster!
You asked about my thoughts about your "dogs", and mentioned my philosophy of "only selling gainers". To answer on my philosophy, I would like to emphasize again that I am an amateur investor, so take everything I write with at least a half grain of salt! However, personally, I believe in selling my LOSERS quickly, so none of my "dogs" grow up! In other words, I sell stocks, even if I have just held them a single day (!) if they hit an 8% loss from my purchase price. So I DON'T believe in holding onto my losers. Next, I DO sell my winners slowly. If you have read some of my other posts, you would know that I like to sell 1/4 of my holdings after the stock up about 30%, 1/4 at about 60%, 1/4 at about 90%, 1/4 at 120% gain. After that, I try to continue selling 1/4 positions at, instead of 30%, 60% intervals. That is 1/4 sold again after 180%, 240%, 300%....etc. etc. etc.
I also will sell my ENTIRE position, if a stock hits the 8% loss as I noted above, goes back to break-even if I have sold once at about 30% gain, and after that, selling my entire position if the stock retraces 50% of the largest gain recorded. I hope that all is clear.
Thus I don't wait until a stock has BECOME a dog, I sell at the first 'BARK'!
Now you have asked me some specific questions about specific stocks. For this discussion, I am going to look at the "5-Yr Restated" financials on Morningstar.com to see how the underlying fundamentals appear to be behaving. n (I do not own any of the stocks you have inquired about.)
First AUO. Looking at the "5-Yr Restated" financials on AUO
, we can see a pretty picture of steady revenue growth and the company earned $1.05 in the trailing twelve months.
However the free cash flow, while possibly improving (?) is still a negative $(65) million in the trailing twelve months. Not my kind of company. Also, the balancer sheet isn't that clean with $526.6 million in cash and $959.3 million in other current assets, while having $1.1 billion in current liabilities. Prefer to see a bit more assets! Taking a look at recent earnings, we can see that AUO announced 3rd quarter earnings
just yesterday! Net profit was up to NT$10.91 billion from NT$4.2 billion last year. However, net profit fell sequentially from NT$12.7 billion recorded in the prior quarter. In addition, they reduced guidance pointing out that they expected wafer shipments to be down 15 to 17% in the fourth quarter.
Thus we have a company that is cash flow negative, has a marginal balance sheet, is seeing sequential deterioration in profits, and is guiding LOWER regarding wafer shipments the next quarter. None of those things are encouraging me to suggest that this is anything but a stock to avoid. If you own a stock and wouldn't be buying it now, it goes to show that you should probably be thinking about SELLING. Just imho.
Next, how about BE? Bearing Point (BE) has a "5-Yr Restated Morningstar"
that shows an ERRATIC picture of revenue growth. Earnings are non-existent and apparently losses are actually increasing since 2002. Free cash flow has been deteriorating, and the balance sheet is a bit marginal imho with $122.7 million in cash and $739.6 million in other current assets, barely covering the $629.4 million in current liabilities. This one doesn't do too much for me!
Third, what about TLB? Looking at the Talbots "5-Yr Restated" financials
, we can see that revenue has plateaued at about $1.6 billion in 2001, and is still only $1.67 billion in the trailing twelve months. Earnings have gone nowhere, the dividend has grown fortunately, and the company is spinning off some free cash with an outstanding balance sheet on Morningstar.
Finally, on retail concepts, including restaurants, I am most concerned about the information on "same store sales". This lets you know whether existing stores are experiencing real growth or if perhaps the concept is in trouble. On October 7, 2004, three weeks ago, TLB TLB reported "same store sales" for September
. Same store sales actually fell 1.3% which was "good news" because the 'street' was actually expecting WORSE results of a drop of 4% in same store sales. Thus, even though total monthly sales were up 3%, the more important number, of how much existing stores were growing or shrinking was a resounding SHRINKING of 1.3%. Not exactly my cup of tea. You will have to decide whether you want to keep owning this stock!
The last stock you mentioned was CGT. CGT doesn't even have any information on Morningstar for "5-Yr financials"....so I wouldn't go any further in my rather strict approach (!) to investing. Looking to Yahoo for some news, I came across the CAE first quarter results
. In this case, this Canadian company reported increased revenue and earnings. However, since I don't have so much data I would like to review before commenting, I am left literally in the dark on this stock and would find a company with more information I could evaluate before making a comment one way or another!
PHEW....that was a long post, and I was JUST answering some comments. Thanks so much for bearing with me. If you have any comments, questions, or words of encouragement, please feel free to email me at email@example.com . And please remember to VOTE!
October 28, 2004 Cabot Microelectronics (CCMP)
Hello Friends! Just came back from a week in New Orleans. This beautiful photo is courtesy of the State of Louisiana Tourism Office, and it is certainly worth a trip to see the original in person! After being a regular blogger for the last 18 months, I really do go through a bit of withdrawal as I stay away from the 'net. I found myself going to internet cafes to catch up with what was going on...I really need to get myself a good laptop with a nice WiFi port. As always, please remember that I am an amateur investor so please do your own due diligence on all stocks discussed and consult with your professional investment advisors before making any decisions to make sure that all investments are appropriate, timely, and likely to be profitable for you! If you have any questions or comments, please feel free to email me at firstname.lastname@example.org.
Anyway, I am back in business! So, while scanning the list of top % gainers on the NASDAQ
this afternoon, I came across Cabot Microelectronics (CCMP) which closed at $35.70, up 13.15% on the day. I do not own any shares of Cabot, nor do I own any options. According to the Yahoo "Profile"
, CCMP "...is a supplier of high-performance polishing slurries used in the manufacture of integrated circuit (IC) devices within the semiconductor industry, in a process called chemical mechanical planarization (CMP)." O.K., I am not a wiz on this stuff, so it appears that this company's fortune is tied to the chip market. And they are doing just fine!
What drove the stock higher today, was the 4th quarter and year-end earnings announcement
. For the quarter ended September 30, 2004, revenue came in at $82.7 million, up 7.5% sequentially from $76.9 million in the prior quarter and up 21.8% from $67.9 million the prior year same quarter. Net income for the quarter was $13.2 million, up 7.5% from $12.2 million the prior quarter and up 36.5% from the $9.6 million the prior year. On a per share diluted basis, this came in at $.53/share this quarter, up sequentially from $.49/share the prior quarter and up from $.39/share the prior year. For the year, revenues were up 23.0% to $309.4 million, and diluted earnings per share came in at $1.88, up 22.9% from the $1.53 reported in fiscal 2003. These look like solid results to me!
How about longer-term? Looking at a Morningstar.com "5-Yr Restated"
financials, we can see the steady growth in revenue from $98.7 million in 1999 to the $294.6 million in the trailing twelve months (TTM). (as the above paragraph notes, as of today the TTM came in actually at $309.4 million!). Earnings have been fairly flat with $1.72 reported in 2001, and $1.88 reported in 2004. Free cash flow is a bit nicer with $27 million in free cash flow increasing to $46 million in the trailing twelve months.
Also attractive, the balance sheet per Morningstar looks solid to me with $155.9 million in cash, more than enough to cover both the $28.4 million in current liabilities and the modest $16.1 million in long-term liabilities more than 4 times over. In addition, CCMP is reported to have an additional $69.8 million in other current assets. Looks nice to me!
(The picture at right is a "Chemical Mechanical Polishing (CMP) Slurry Feeder Equipment made by Takada Corporation in Japan.)
How about valuation questions? Looking at "Key Statistics" on CCMP from Yahoo
, we can see that this is small cap corporation with a market capitalization of only $885.1 million. The trailing p/e isn't bad at 20.62, with a forward p/e of 18.03 (fye 30-Sep-05). With the current fast growth rate, the PEG comes in at an attractive 0.69.
Yahoo reports 24.79 million shares outstanding with 24.70 million of them that float. As of 10/8/04, there were 6.67 million shares out short, representing 27.00% of the float, or 8.164 trading days. This is certainly significant to me, both in the large % of the float out short as well as the greater than 3 days of trading volume. With the great results reported today, we could be seeing signs of a "short squeeze".
No cash dividend is paid, and no stock dividend is reported on Yahoo.com.
How about technicals? If we look at Stockcharts.com
for a "Point & Figure" chart on CCMP
, we can see that this stock has been trading LOWER since breaking through a support level at $56 in September, 2003. Recently it has broken through a resistance level at around $37, to possibly change its current price direction. This is not an overwhelming picture of strength technically, but the stock has certainly NOT gotten ahead of itself!
So what do I think? Well, the recent earnings and revenue report looks excellent, the company HAS been growing nicely the past five years, and the earnings while not growing steadily the past five years HAVE been growing nicely the past couple of years! The company is generating lots of cash and is quite solvent and the valuation is nice. It is just that the Industry the company has been in has been fairly week the past year, and this is holding back the stock price imho. Certainly valuation is also nice now with a PEG under 1.0. Personally, I am not buying this stock because I haven't sold any of my holdings at a gain...."allowing" me to add another position. However, I certainly would be game to pick up some shares if the timing WAS right!
Thanks again for stopping by! If you have any questions, comments, or words of encouragement, please feel free to email me at email@example.com. I am a bit behind in responding to the mail, so bear with me, I shall be trying to post a couple of the notes right here on the blog!
And don't forget to vote on Tuesday!
Posted by bobsadviceforstocks at 1:48 PM CDT
Updated: Thursday, 28 October 2004 7:04 PM CDT
Monday, 18 October 2004
October 18, 2004 Diagnostic Products (DP)
Hello Friends! Thanks so much for stopping by. It would not be fun for me to write if there wasn't a reader that was reading! I hope that the simple words I send out into cyberspace are somehow helpful to you. Please remember that I am an amateur investor, so please consult with your professional investment advisors to make sure that all investments discussed are appropriate, timely, and likely to be profitable for you. And if you have any comments, questions, or words of encouragement, please feel free to email me at firstname.lastname@example.org and I will try to get back to you either directly IN the blog, or by email!
Since so many people reading this blog are new to my methods let me review today's pick and then share with you my rationale. Generally, my first step in identifying a stock of interest is to scan the lists of "Top % Gainers"
. Lately, my bias is to avoid stocks under $10 and this narrows my list further. I also try to avoid re-reviewing stocks that I have listed already in Stock Picks Bob's Advice
. Skimming through the list, I noted that the fist stock on the list is an old favorite of mine, Select Medical (SEM) that I have reviewed here in the past. They are being taken private by a management leveraged buy-out, so we will soon be unable to follow that company! A little further down the list I came across Diagnostic Products (DP) which I have not previously reviewed. (If you can believe it, I have looked at SO MANY stocks that I have to look through my own lists of stocks reviewed to make sure!)
Diagnostic Products (DP) is having a great day, trading as I write at $42.18, up $1.90 or 4.72% on the day. I do not own any shares of this stock nor do I have any options. According to the Yahoo "Profile"
, DP "...develops, manufactures and markets immunodiagnostic systems and immunochemistry kits used in hospital, reference and physicians' office laboratories and in veterinary, forensic and research facilities."
What is my next step? One thing I have learned from being a fan of the CANSLIM method proposed by William O'Neil, is to check the latest quarter results. I do not follow O'Neil's technique closely in evaluating stocks, but have learned much from reading the IBD and some of his writing. I look for significant growth in both revenue and earnings in the latest result. If that isn't present, I look no further!
On July 23, 2004, Diagnostic Products announced 2nd quarter 2004 results
. Sales for the quarter were $110.5 million, a 15% increase over the same quarter last year, and earnings were $18.6 million, or $.62/diluted share, a 12% increase from the $16.6 million or $.56/diluted share in the second quarter of 2003. In my opinion, this was a solid earnings/revenue report from the company, and when I read it, I was still interested!
So what is my NEXT step? Well for me, I am looking for what I call "quality" companies. O.K., so you want to know what I call "quality". For me, consistency of results and a solid financial performance counts. Let me explain by discussing DP's "quality".
For this, I turn to the "5-Yr Restated" financials
on Morningstar.com. The first thing on this sheet I like to see is a steady improvement in revenue over the past five years as demonstrated by progressively larger blue bars in the top graph. Here we see that revenue was $216.2 million in 1999, and then increased sequentially to $415.1 million in the trailing twelve months (TTM). This looks great!
Next, earnings. Again, this is a BEAUTIFUL report, showing earnings of $.75/share in 1999, increasing EACH AND EVERY YEAR to $2.23 in the TTM. Not too many companies have both--consistent revenue AND earnings growth! As an added treat, I look at dividends. Well the company is reporting $.24/share since 1999. Ideally, they might be INCREASING their dividend, but while you can't always get everything, no harm in inquiring!
A good Optometrist friend of mine got me thinking about Free Cash Flow; in fact he showed me how to look at this on Morningstar! When the tech bubble was running its course, I don't know if you remember but I recall lots of discussions about the "burn rate". This was the rate at which start-ups were burning up their available cash. Needless to say, CREATION of cash is more important in picking a stock than the DESTRUCTION of cash reserves!
For DP, this is found under the main group of numbers in the section called Cash Flow $Mil". Here we see in the bottom of each column, that in 2001, DP was $6 million free cash flow positive, this has improved to $25 million in 2002 and 2003 and up to $37 million in the TTM. Thus, not only is this company CREATING free cash, it is creating increasing amounts of free cash each year! I like this information a lot!
Finally, a quick look at the balance sheet. Now, I have said ZILLIONS of times, that I am not a professional investment person, so my understanding is based on simple examination of obvious numbers. I hope that is clear. What I like to see is lots of assets and little liabilities. Furthermore, I am concerned about current stuff more than long-term stuff. In other words, for DP, here we see that the company, according to Morningstar, has $65.2 million in cash AND $200.6 milllion in OTHER current assets. This is balanced against $81.6 million (I believe this 3:1 ratio is referred to as the current ratio); and shows a solid balance sheet. In addition, their long-term liabilities is what I would call a 'measly' $9.8 million. This ALSO looks great!
Finally, a little examination of 'valuation'. This information I usually retrieve from Yahoo "Key Statistics"
. Here we can get some 'parameters' of this stock. For instance, this is a "mid cap" stock with a market capitalization of $1.23 Billion. The trailing p/e is 18.90. (For me anything under 20 is usually reasonable). Furthermore, estimates for future earnings (fye 31-Dec-05) results in a future p/e or forward p/e of only 15.67. From this information we can get the PEG raio, which is a ratio of P/E to the Growth rate (Thus PEG). For DP, this comes in at 0.99, suggesting that not only are the numbers we have reviewed solid, but the valuation is reasonable! (This is sort of like a restaurant with great food at a great price...excuse the comparison but I am finishing up lunch as I write :)).
Yahoo reports 29.11 million shares outstanding with 21.30 million that float. Of these, 1.01 million are out short representing 4.75% of the float or 13.849 trading days of volume. That means, since it is more than my 3 day cut-off, that there are a lot of BORROWED shares that have been pre-sold, and there will be a lot of buying pressure if the stock moves higher from people scrambling to cover their short sales. In other words, this is in general a good number to see! (Although it does concern me that so many people are negative on this stock!)
As I reported, this sheet also shows the small $.28/share dividend (I guess they ARE raising it) yielding 0.70%. For completeness, it is interesting to note that the last stock split was in June, 1989, about 15 (!) years ago when they split 2:1. Maybe it is time for another split?
Finally, I like to look at what I call "technicals". For me, this is looking at a "Point & Figure" chart from Stockcharts.com
If anything, this is a bit of a less-strong factor in this stock pick. The stock was moving strongly higher since late 2000, when it was trading at around $19.50. The price peaked and has had three episodes of bouncing against a high at around $52 and then turning lower, first in October, 2001, then May, 2002, and finally in February, 2004. I would like to see this stock trade strongly higher over $45 to break through its current resistance level before being confident about its upward course. But then again, I am not a pro at looking at stocks so I have it right here for you to review.
So what do I think? Well the stock is moving higher today, has a great recent earnings report, the Morningstar.com "5-Yr" looks solid with steady revenue and earnings growth, the free cash flow is positive and growing and they even pay a dividend. The balance sheet also looks nice with lots of assets and cash and only a small amount of current debt with very little long-term debt. In addition, valuation is reasonable, with a p/e in the teens, a PEG under 1.0, and lots of shares out short!
Why don't I buy some shares, you ask? Well, my own trading portfolio doesn't let me buy another position until I sell some of one of the ones I own at a gain. I built this into my trading methods to prevent me from buying into a declining market. So far it is working even though I do like this stock a lot!
Thanks so much for stopping by! If you have any questions or comments, please feel free to email me at email@example.com and come visit again!
Sunday, 17 October 2004
"Looking Back One Year" A review of stock picks from the week of September 8, 2003
Hello Friends! It is late Sunday, and I really got to get some shut-eye, but before I do, I wanted to post my "Weekend Review". It is one of the best ways I know to restore some humility to my sometimes inflated ego! Now of course, my reviews assume a buy and hold strategy, and I personally recommend selling if it drops 8%....so the performance of the picks isn't EXACTLY like it would be if it were in a managed account. But then again, there is not arguing witha stock price!
As always, please remember that I am an amateur investor so please do your own due diligence prior to making any decisions about any of these stocks and please consult with your professional investment advisors to make sure your ideas are timely, appropriate, and likely to be profitable for you! If you have any comments, questions, or words of encouragement, please feel free to email me at firstname.lastname@example.org . I should warn you, that I may be answering your comments or questions right here in the blog!
On September 8, 2002, I posted Merit Medical (MMSI)
on Stock Picks Bob's Advice
at a price of $23.10. MMSI had a 4:3 split in December, 2003, reducing our stock price to $17.325. MMSI closed on 10/15/04 at $11.23 for a loss of $(6.10) or (35.2)%. Not a very auspicious start to the week!
On July 22, 2004, MMSI announced 2nd quarter 2004 results
. Revenue came in at $38.9 million, up from $34.6 million last year. Net income was $5.1 million compared to $4.2 million the prior year, and on a per share basis, this came in at $.18/share vs $.16/share last year. However, a few days ago, Merit pre-announced 3rd quarter results
which were below expectations but still higher than last year. Revenue is anticipated to come in about $35-$36 million (down from the prior quarter but ahead of last year), and earnings about $.14-$.15/share. Management attributed this to "...reduced demand for Merit's products during the third quarter." Not exactly encouraging and the stock price has reflected this outlook!
On September 8, 2003, I wrote-up Hi-Tech Pharmacal (HITK)
at $28.75. HITK closed at $16.59 on 10/15/04, for a loss of $(12.16) or (42.3)%.
On September 8, 2004, HITK announced quarterly earnings
. Net sales for the quarter ended July 31, 2004, were $12.1 million, a 31% increase in the prior year's sales of $9.3 million. Net income, however, came in at $869,000, down from $953,000, last year, a decrease of 9%. Earnings per diluted share came in at $.10/share, down 9% from $.11/share last year as well. Again, this shows the importance of INCREASING earnings, and the stock price reflects this report.
I posted Scientific Games (SGMS)
on this blog on 9/12/03 at $11.55. SGMS closed on 10/15/04 at $19.36, for a gain of $7.81, or 67.6%.
On July 28, 2004, SGMS announced 2nd quarter 2004 results
. Revenues jumped 38% to $178.1 million from $128.8 million in the same quarter last year. Net income (before preferred stock dividend) jumped 55% to $19.5 million or $.21/share compared to $12.6 million or $.14/share the prior year. These were great results!
Finally, on 9/12/04, I posted Hanger Orthopedig Group (HGR) at $14.75. Hanger closed at $5.48 on 10/15/04 for a loss of $(9.27) or (62.8)% over the past year.
On August 16, 2004, HGR announced 2nd quarter results
. Unfortunately, they have had accounting irregularities that are being cleared up and have taken the "stuffing" out of this stock price. For the quarter ended June 30, 2004, net sales increased by $6.2 million, or 4.5%, to $145.1 million from $138.9 million last year. Unfortunately, net income DECREASED to $2.2 million or $.10/diluted share from last year's $7.8 million or $.34/diluted share. There are plenty of footnotes on this report, and this is not something that results in stock price appreciation to say the least!
Anyhow, I could have just skipped THAT week. Why don't we review our TASER pick again??? lol. But seriously, that was a rough week with three losing issues and one strong gain. The average performance for the week was a loss of (18.2)%. Nothing to write home about!
Please remember that this illustrates the risk of picking "momentum" stocks! However, if we had cut our losses at near 8% on the three losers, and had stayed with our one gainer, well then we wouldn't really have done so badly would we?
If you have any comments, questions, or words of encouragement, please feel free to write me at email@example.com . Have a great week investing everyone!
Friday, 15 October 2004
October 15, 2004 Dorel Industries "B" (DIIB)
Hello Friends! I am just getting geared up around here to push some voter interest! I cannot tell you how important I think it is that you all make sure you get your votes counted. It REALLY is a different sort of election!
As always, please remember that I am an amateur investor so please always consult with your professional investment advisors to make sure that all investments discussed are appropriate, timely, and likely to be profitable for you! If you have any questions or comments, feel free to email me at firstname.lastname@example.org .
I was scanning through the lists of top % gainers today and came across Dorel Inds "B" (DIIB). I do NOT own any shares or options in this company. DIIB is having a great day today trading as I write at $28.24, up $2.13 or 8.16% on the day. According to the Yahoo "Profile"
on DIIB, Dorel "...specializes in two market segments: juvenile products and home furnishings. Dorel's product offering includes juvenile products such as infant car seats, strollers, high chairs, toddler beds, cribs, infant health and safety aids, play-yards and juvenile accessories, and home furnishings such as a variety of ready-to-assemble (RTA) furniture for home and office use...." Among the brands that I recognized when I went to the Dorel website
included Schwinn bicycles and Cosco car-seats and strollers.
On August 4, 2004, DIIB reported 2nd quarter 2004 results
. For the quarter ended June 30, 2004, revenues came in at $403.5 million this quarter, compared to $264.7 million last year. Net earnings were up 11.3% to $18.1 million or $.55/share compared with $16.3 million or $.50/share last year. These are fairly solid results!
How about longer-term? Checking the Morningstar.com "5-Yr Restated" financials
, we can see that revenue has been increasing steadily with $.6 billion in revenue in 1999, increasing to $1.2 billion in the trailing twelve months (TTM).
Earnings dipped from $1.36 to $.61 between 1999 and 2000, however, since then, earnings have been steadily improving with $2.36 reported in 2003. Free cash flow has also been solidly positive with $36 million reported in 2002, increasing to $111 million in 2002, with $76 millin reported in 2003.
The balance sheet is solid if not spectacular with $13.9 million in cash and $445 million in other current assets as opposed to the $263.7 million in current liabilities and the $352.0 million in long-term debt.
What about valuation? Taking a look at "Key Statistics"
from Yahoo, we can see that this is a mid-cap stock with a market capitalization of $922 million. The trailing p/e is cheap at 11.93 and the forward p/e is even nicer at 8.26. Even the Price/Sales ratio is reasonable at 0.60 and the stock is elling at 1.63 times "book".
Yahoo reports 32.76 million shares outstanding with 32.50 million of them that float. There are currently 513,000 shares out short representing 1.58% of the float. However, due to the low daily trading volume, the short ratio is an astronomic 128.25 trading days of short volume. This would certainly be 'ripe' for a squeeze!
Yahoo does not show any cash dividend and the last split reported was a 2:1 in August, 1998.
How about "technicals"? Using Stockcharts.com
, we can review a "Point & Figure" chart on Dorel:
Here we can see that this stock broke down in price to about $11.50 in late 2000, Since that time it has successfully been trading higher to its current level at around $28. Looks nice to me!
So what do I think? Well, it IS a Canadian company, so that gives it a little bit of a currency spin...but that really shouldn't be a problem. I like and am familiar with their brands (a Peter Lynch moment!), the latest quarter looks nice, the last five years has been steadily improving, free cash flow is solid, the balance sheet is good, valuation is excellent and the chart looks nice! What is there NOT to like? lol. Now if I just had some money to invest! As you may know, I like to wait for a sale of one of my pre-existing positions prior to adding funds to establish a new position in this portfolio!
Thanks again for stopping by! If you have any questions, comments, or words of encouragement, please feel free to email me at email@example.com
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