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Stock Picks Bob's Advice
Thursday, 19 May 2005
A Reader Writes "LifeCell.....what do you think?"
Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am truly an amateur investor and that you need to check with your professional investment advisors prior to making any decisions based on information on this website!

We had another good day in the market with the Dow and the Nasdaq, and particularly our stocks :), trading higher! Will the stock market go higher or pull back? Beats me! I do not believe I can predict the direction of the stock market. I just believe that we all will have the best performance simply by owning stocks with solid fundamentals and a bit of price-momentum to boot!

Looking through my mail, I realized that there was a question that I haven't addressed. My good friend George K. dropped me a note about LifeCell (LIFC). I don't know, but I suspect that he owns some shares. I do not own any LIFC shares. George wrote:
Hi Bob,
I've been enjoying your blog...it's very informative...here is a stock I would like your opinion on: LifeCell corp LIFC. It had a blowout last quarter, and the fundamental charts on Morningstar looked not too bad to me. What do you think?

George
Well, first of all thank you for writing George! I very much enjoy discussing stocks with you and you have certainly educated me about many different investments!

First of all, I am very familiar with LIFC. I did purchase some shares back in 2003 but didn't hold on to them for long. Actually, I did post LifeCell on Stock Picks on 6/18/03 when it closed at $5.82/share. LIFC closed today (6/19/05) two years later (!) at $13.08, up $7.26, or 124.7% since it was selected for Stock Picks two years ago!

Let's take a look at LIFC and see what's going on now.

First of all, according to the Yahoo "Profile" on LIFC, LifeCell "...develops and markets products made from human tissue for use in reconstructive, urogynecologic and orthopedic surgical procedures to repaid soft-tissue defects."

How about the latest quarter? LIFC reported 1st quarter 2005 results on April 26, 2005. For the quarter ended March 31, 2005, revenue came in at $19.9 million, up 45% from the $13.8 million of revenue in the same quarter the year earlier. This revenue number beat analysts expectations of $17.6 million.

Net income for the quarter rose to $2.1 million or $.07/share up from $883,000 or $.03/share last year. Analysts were looking for $.04/share, so the company again beat expectations.

To top it off, the company raised guidance both for sales and earnings above current analyst targets.

How about longer-term results? Looking at "5-Yr Restated" financials from Morningstar.com, we can see the beautiful ramp-up of revenue from $22.8 million in 2000 to $67.3 million in the trailing twelve months (TTM).

Earnings improved from $(.54) in 2000 to a peack of $.70/share in 2003. The earnings dipped to $.22/share in 2004, but is on the rise again.

Free cash flow, while erratic, has improved from $2 million in 2002 to $6 million in the TTM.

The balance sheet is impeccable! Morningstar shows $27.8 million in cash, enough to pay off both the $9.3 million in cash and the $.2 million in long-term liabilities several times over. In addition, Morningstar reports an additional $27.1 million in other current assets.

How about valuation? What are the investment statistics on this stock? For this I like to turn to Yahoo "Key Statistics" on LIFC. Here we can see that this is a small cap stock with a market capitalization of $382.68 million. The trailing p/e is a bit rich at 50.11, the forward p/e (fye 31-Dec-06), is a bit better at 31.90. The PEG ratio (5-yr estimated) is great at 0.84.

The Price/Sales ratio appears high at 5.66. But if we look at other stocks in the same Industry, "Biotechnology", we can see that LIFC is actually towards the bottom of the P/S ratio stocks. At top is Genentech (DNA) at 18.5, Gilead (GILD) at 12, Amgen (AMGN) at 12, Biogen Idec (BIIB) at 6, and below LIFC is Medimmune, at 5.6. Thus valuation isn't bad when you consider the particular industry group.

Other statistics on Yahoo reveal that there are 29.26 million shares outstanding with 29.10 million of them that float. Currently, there are (4/8/05) 993,000 shares out short, representing 3.41% of the float or 5.773 trading days of volume. If I use my "3-day" rule, this is a significant backlog of shares "pre-sold" that need to be covered! No cash dividend is reported. No stock splits are reported on Yahoo.

So what does the chart look like? If we check a "Point & Figure" chart on LIFC from Stockcharts.com:


We can see that this stock was actually acting quite week from March, 200, when it was at $13, and then traded lower steadily, bottoming at $1.25 in December, 2000. The stock traded in a tight range through 2001, 2002 and into 2003. In May, 2003, the stock broke through resistance at around $3.25, and traded higher.

So George, what do I think? I still like LIFC! The recent quarter, as you noted was GREAT. The company is raising guidance on both earnings and revenue, the Morningstar 5-Yr evaluation looks great except for a bit of recent sloppiness on the earnings side of things. The company is quite solvent, generating significant free cash with a beautiful balance sheet! I guess I might even be buying some shares if the company was just fitting in to my rules...that is if I were selling a portion of my holdings at a targeted gain, and the stock was making it to the top % gainers list!

If you or anyone else has any questions or comments, please feel free to email me at bobsadviceforstocks@lycos.com!

Bob


Posted by bobsadviceforstocks at 10:19 PM CDT | Post Comment | Permalink
Wednesday, 18 May 2005
"Revisiting a Stock Pick" FactSet Research (FDS)

Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As I always remind you, you should consult with a professional investment advisor prior to making any investment decisions based on information on this website because I truly am an amateur! Not all investments discussed here will be appropriate, timely, or even profitable for you!

The market truly came out with a roar today, with the Dow moving up strongly along with the NASDAQ! We have had a very strong week and my investment in my trading account certainly have participated.

I was reviewin the list of top % gainers on the NYSE today, and saw a familiar name show up on the list! FactSet Research Systems (FDS), closed at $31.53, up $2.39 or 8.20% on the day. I do not own any shares or options of FDS.

I first posted FactSet on Stock Picks on June 17, 2003, when it was trading at $40.39. FDS had a 3:2 split 2/7/05, making the effective stock pick price $26.93. Thus, the stock hasn't really gotten away from us :) since the pick price.

According to the Yahoo "Profile" on FDS, FactSet "...supplies financial intelligence to the global investment community. The Company combines more that 200 databases, including content regarding tens of thousands of companies from multiple stock markets, research firms, governments and other sources into a single online source of information and analytics."

On March 22, 2005, FDS reported 2nd quarter 2005 results. For the quarter ended February 28, 2005, revenue jumped 24.6% to $76.5 million, net income was up 16.5% to $17.2 million, and on a diluted per share basis, climbed 17.2% to $.34/share.

How about longer-term? Reviewing the "5-Yr Restated" financials, we can see the steady "ramp-up" of revenue from $134.2 million in 2000 to $281.8 million in the trailing twelve months (TTM).

Earnings have also grown nicely during this period, increasing steadily from $.49/share in 2000 to $1.27 in the TTM.

Free cash flow has been positive, although it has declined since 2002 when it was $57 million to $21 million in the TTM. This reduction of free cash flow is due to an increase in Capital Spending from $10 million in 2002 to $40 million in the TTM.

How about the balance sheet? Again, reviewing the same Morningstar.com page, we can see that assets, particularly current assets handily outnumber the liabilities. In fact, FDS has $63.4 million in cash and $75.8 million in other current assets, balanced against $49.2 million in current liabilities and only $16.4 million in long-term liabilities reported.

What about "valuation" questions? As I like to do, let's review some of the numbers on Yahoo "Key Statistics" on FDS. Here we can see that the market cap is a mid-cap $1.52 billion. The trailing p/e isn't bad at 24.83, and the forward p/e (fye 31-Aug-06) is even better at 20.47. The PEG is thus reasonable at 1.26.

What about the Price/Sales ratio? As I have discussed elsewhere, and as analyst Paul Sturm has written, one of the important valuation questions of a number like this is what the other stocks in the same industry have...in other words, is this "valuation" reasonable relative to similar stocks?

FDS has a Price/Sales ratio of 4.97. In the "Information Delivery Services" industry, this is actually a bit pricey, with DST Systems (DST) at 1.6, Proquest (PQE) at 2, Alliance Data Systems (ADS) at 2.5, and only Jupitermedia (JUPM) higher at 7.2.

Other data from Yahoo reveal that there are 48.07 million shares outstanding with 35.20 million that float. Currently there are a lot of shares out short, actually 4.33 million as of 4/8/05, representing 12.30% of the float, or 8.625 trading days of volume. Today's upward price action might be supported by short-sellers scrambling to cover to buy back shares (?) to replace their 'pre-sold' holdings. Just a thought :).

FDS pays a small dividend of $.20/share yielding 0.69%. The last stock split, as noted above, was a 3:2 split on 2/7/05.

What does a chart look like? Looking at a Stockcharts.com "Point & Figure" chart on FDS:


We can see that the chart actually looks pretty strong, with a move from $16.50 in February, 2003, to a peak of $39 in December, 2004. The stock recently traded lower but is now moving higher again.

What do I think about FDS? Well, I like the move today, I liked the stock two years ago, the latest quarter report was solid, the Morningstar numbers are impeccable, the valuation a la Price/Sales is a bit rich but the PEG isn't bad. The chart also looks nice to me.

I am not currently "in the market" for a new stock, although if I were, I might be nibbling on this stock.

Thanks again for stopping by! If you have any questions or comments, please feel free to email me at bobsadviceforstocks@lycos.com.

Bob






Posted by bobsadviceforstocks at 5:03 PM CDT | Post Comment | View Comments (2) | Permalink
Monday, 16 May 2005
"Revisiting a Stock Pick" American Healthways (AMHC)

Hello Friends! Thanks so much for visiting my blog, Stock Picks Bob's Advice. I have written that line so many times, that I am sure there are some of you who suspect I just say it. :) But I really do mean it! Thank you for visiting!

I also do really mean it when I say that I am an amateur investor. I am an amateur not a professional and you really do need to check with your professional investment advisors prior to making any investment decisions based on information on this website. I am not qualified to decide whether any particular investment is a good idea for you! So please follow that advice as well!

I am now starting my third year posting here on Stock Picks! And I find it helpful to revisit some prior picks that show up in the lists of top percentage gainers.










I first posted American Healthways (AMHC) on Stock Picks on 6/18/04 when it was trading at $24.11. I own shares of AMHC in my "Current Trading Portfolio" and recently I introduced it to my stock club and they bought a few shares as well. The numbers are pretty compelling imho.

AMHC made the list of top % gainers on the NASDAQ today, closing at $39.42, up $3.40 on the day or 9.44%.

According to the Yahoo "Profile" on AMHC, American Healthways "...provides specialized comprehensive care enhancement and disease management services to health plans and hospitals in all 50 states, the District of Columbia, Puerto Rico and Guam."

What drove the stock higher today was an announcement of an arrangement with Cigna regarding management of diabetes and congestive heart failure patients in Maryland and Washington D.C. This resulted in the lowering of guidance for the third quarter 2005 but was viewed favorably by the "street".

On March 17, 2005, AMHC reported 2nd quarter 2005 financial results. Revenue for the second quarter ending February 28, 2005, came in at $75.3 million, a 32% increase over the $57.1 million in the same quarter the prior year. Net income climbed 59% to $8.4 million from $5.3 million the year earlier. On a diluted per share basis this came in at $.24/share up 60% from $.15/share the prior year. These were solid results!

How about longer-term? Taking a look at the "5-Yr Restated" financials on Morningstar.com, we can see a beautiful ramp-up of revenue from $53 million in 2000 to $283.7 million in the trailing twelve months (TTM).

Earnings have also shown an absolutely gorgeous (am I being overboard here?) progression of growth from $.01/share in 2000 to $.94 in the TTM.

Free cash flow has also been positive and growing with $10 million in 2002 growing steadily to $42 million in the TTM.

As for the balance sheet, AMHC has $35.6 million in cash, plenty to cover the current liabilities of $26.4 million and an additional $55.3 million in other current assets, easily covering the $36.9 million as well in long-term liabilities. This is solid if not spectacular.

What about valuation questions? Looking at "Key Statistics" from Yahoo on AMHC, we can see that this is a mid-cap stock with a market capitalization of $1.3 billion. The trailing p/e is a bit rich at 41.98, but the forward p/e at 29.86 (fye 31-Aug-06) isn't too bad at 29.86. Thus, the PEG is nice at 1.34. (5 yr expected).

Price/sales is 4.21. Using the relative valuation of the group, in this case, per Fidelity, the "Specialized Health Services" industry, we can see that AMHC is in fact a bit pricey in here with a Price/Sales of 4.2. Other stocks include United Surgical Partners (USPI) at 2.9, Renal Care Group (RCI) at 2.1, DaVita (DVA) at 1.8, Caremark Rx (CMX) at 0.6, and Express Scripts (ESRX) at 0.5. Thus, it isn't a bargain on this particular measurement, but those numbers are still compelling!

Going back to the Yahoo page, we can see that there are 33.17 million shares outstanding, with 31.10 million that float. Currently there are a lot of shares out short at 6.05 million, representing 19.47% of the float (as of 4/8/05). This amounts to 6.05 trading days of volume, and if the price movement remains strong, there could be a bit of a "squeeze" on these short-sellers which would only add to the buying pressure on this stock.

The company does not pay a dividend and the last stock split reported on Yahoo was a 2:1 split on December 22, 2003.

How about "technicals"? Taking a look at a "Point & Figure" chart from Stockcharts.com, we can see that this stock has been quite strong since breaking through a resistance level in April, 2003, at around $11.00 and has traded steadily higher since. The graph looks strong to me!


Well what do I think? Well, I like this stock to own it :), so that makes me a biased observer. However, I also liked this stock before I owned it as well! The latest story about more trial management programs today is bullish, the latest quarter was extremely strong, the Morningstar.com financials are beautiful and steady, and valuation-wise, the PEG isn't too bad, the short-interest is "interesting", and the graph looks great!

On the downside, the P/E is certainly rich at its current price and the Price/Sales is also a bit rich compared to other stocks in its "industry". No bargain, but I like that Morningstar report!

Thanks so much for stopping by! If you have any questions, comments, or words of encouragement, please feel free to email me at bobsadviceforstocks@lycos.com.

Bob




Posted by bobsadviceforstocks at 5:36 PM CDT | Post Comment | Permalink
Sunday, 15 May 2005
"Looking Back One Year" A review of stock picks from the week of March 22, 2004






Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor. I am not a professional investment advisor so please consult with your professional investment advisor prior to making any decisions based on information on this website.

It is late Sunday, and I really should have gotten this done earlier. But let me see if we can cover this quickly and get right down to business!

What I like to do on weekends, is to go back and look at prior stock picks with about a year trailing period, and see how the stocks have done since they were "selected" on this blog. This discussion assumes a buy and hold strategy which is not what I employ nor do I recommend this approach. I much rather sell my losers quickly and my winners slowly!

Red Hat (RHAT) was selected on 3/24/04 (you can go to the list of dates along the left side of the main blog, and see the original posts if you like!) at a price of $21.44. RHAT closed on 5/13/05 at $12.35 for a loss of $(9.09) or (42.4)%.

On March 31, 2005, RHAT reported 4th quarter 2004 results. Revenue for the fourth quarter was $57.5 million, a 56% increase over the prior year, same quarter revenue. Net income came in at $11.8 million, up from $4.8 million the prior year, or on a diluted basis, up 100% to $.06/diluted share from $.03/diluted share the prior year.

On March 24, 2004, I posted Artisan Components (ARTI) at $18.88/share. ARTI was acquired by ARM holdings for $36.32/share on 12/24/04 for a gain of $17.44 or 92.4%. I had to chase down the acquisition price and that is the best I can determine from the ARM website!

Avon Products (AVP) was "picked" here on Stock Picks at $75.35/share on 3/25/04. AVP closed at $38.65/share after a 2;1 split on 6/1/04. Thus, the effective pick price was $37.68, so the stock has gained only $.97/share or 2.6%.

On May 2, 2005, AVP reported 1st quarter 2005 results. Revenue for the quarter was up 7% to $1.88 billion. Net income grew to $172.0 million this quarter from $148.1 million the prior year. Diluted eps grew 16% to $.36/share up from $.31/share the prior year same quarter. In addition, the company raised the full year 2005 earnings outlook.

Finally, National Medical Health Card (NMHC) was selected on stock picks at $25.06 on 3/26/04. NMHC closed at $24.20 on 5/13/05, for a loss of $(.86) or (3.4)%.

On May 9, 2005, NMHC posted 3rd quarter 2005 results. Revenue for the 2005 fiscal 3rd quarter grew to $199.3 million, up from $159.7 million the prior year. Net income was up over 100% to $3.3 million, from $1.6 million the prior year. On a diluted EPS basis, this came out to $.27/share, up from a loss of $(11.17)/share the prior year.

So how did we do during that week in March a bit over a year ago? Averaging the four stocks gives us a gain of 12.3% since posting.

Thanks again for stopping by! If you have any questions or comments, please feel free to email me at bobsadviceforstocks@lycos.com.

Bob




Posted by bobsadviceforstocks at 10:56 PM CDT | Post Comment | Permalink
Saturday, 14 May 2005
A Reader Writes "Have you an opinion on NTE?"
Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, 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.

I received an email last week from Argee who had this to say:
In reading your comment on ParTech. you mentioned Nam Tai Technology (NTE)which I see is making unbelievable numbers according to Schwab.P/E 12.7, 35% projected growth '05,dividend 6.2%.Have you an opinion on NTE?


Well, first I would like to thank Argee for writing. If you have a question and would like to email me feel free to do so at bobsadviceforstocks@lycos.com. I will try to answer your questions but cannot always respond to all of the email that I receive!

Again, I am going to remind you that I am an amateur investor. Thus, I cannot predict whether investing in NTE would be a good investment or not. The price may decline in the near future, or it may be climbing, all I can do is point out whether it fits into my investing strategy! Anyhow, let's take a look at Nam Tai (NTE).















First of all, I do not own any shares or options in Nam Tai. NTE closed at $21.66, up $.27 or 1.26% on the day.

According to the Yahoo "Profile" on NTE, Nam Tai Electronics "...is an electronics manufacturing and design services provider to original equipment manufacturers (OEMs) of telecommunications and consumer electronic products."

First, lates quarter: Nam Tai reported 1st quarter 2005 results on May 3, 2005. Net sales climbed 64.4% to $156.9 million, from $95.4 million the prior year. Beautiful!

Net income climbed 86.9% to $13.8 million from $7.4 million last year. Gorgeous.

Diluted earnings per share were up 77.8% to $.32/share from $.18/share the prior year. Spectacular!

Thus far, I am surprised that this company has not made my list!

How about "longer-term"? Looking at the Morningstar.com "5-Yr Restated" financials: revenue has grown nicely from $214 million in sales in 2000 to $534 million in the trailing twelve months (TTM).

Earnings which dropped from $.78/share in 2000 to $.26 in 2001, has climbed steadily since then to $1.57 in the TTM.

Free cash flow has also been positive and growing from $21 million in 2002 to $37 million. The balance sheet is solid as well with $202.6 million in cash and $132.2 million in other current assets balanced against $116.5 million in current liabilities and $38.9 million in long-term debt.

Morningstar.com report looks just fine!

How about "valuation"? Looking at Yahoo "key statistics" on NTE, we can see that this is a mid-cap stock with a market cap of $924.12 million. The trailing p/e is cheap at 12.80, the forward p/e (?) isn't bad (I don't know why Yahoo shows it higher) at 17.06 (fye 31-Dec-06).

Price/sales is 1.53, and the PEG is 0.84, all reasonbly cheap values.

Yahoo reports 42.67 million shares outstanding with 23.50 million that float. Of these, as of 4/8/05, there were 811,000 shares out short representing 2.668 trading days or 3.45% of the float.

The company is reported to pay a dividend of $1.32 (6.09%), and last split 3:1 on 7/8/03. Hey, what is there not to like???

What about a chart?


Just looking at the graph, it appears the stock broke down in late 2003 when it declined from a peak of $40 down to a low of $13.50. The stock has subsequently gotten through "resistance" at around the $21.60 level in August, 2004, and has been moving higher since. Graph, doesn't really look bad!

What do I think? Well, I hate to admit it, since I didn't pick this one :), but the latest earnings were solid, the five year track record looks nice, both in revenue and earnings growth, the free cash flow is solid, the balance sheet looks nice, valuation is reasonable, the chart looks ok, and the company even pays an above-average(!) dividend! I shall have to put this one on my watch list, and if I ever get around to buying a new position....well if the stock makes the top % gainers list....

Thanks so much for stopping by and writing! If you have any questions or comments, please feel free to email me at bobsadviceforstocks@lycos.com.

Bob


Posted by bobsadviceforstocks at 7:45 AM CDT | Post Comment | Permalink
Friday, 13 May 2005
"Happy Birthday to Me!" Two Years Young!


Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor, so PLEASE remember to consult with your professional investment advisors prior to making any investment decisions based on information on this website.

It is hard to believe that I have passed the two year mark around here, starting my third year writing "Stock Picks". I hope it has been a good couple of years for you all too! I appreciate your visits, and especially your emails and comments which let me know that you are all out there reading and thinking about what I write. Of course, please never forget that I truly am an amateur! So do your own investigations and consult with your professional advisors prior to acting on what I write.

Yesterday marked the two year anniversary of Stock Picks, and I would like to share with you my first pick on Stock Picks on 5/12/03 (St Jude STJ):

May 12, 2003 St Jude Medical
This is one I picked up today. STJ is the stock symbol. I do not as I write and publish this own any shares. Am thinking about suggesting this to my stock club. Company had a great day today with a nice move on the upside. Last Quarter was good and the past five years have been steady growth. Closed at $55.30 up $2.92. So the daily momentum helped it make the list.
It is my belief, that if we can assemble portfolios of stocks that consist of companies that are growing steadily and profitably, we have an above average chance of having a profitable investing strategy.

The stocks that I write up are all stocks that I might consider buying. Of course I cannot own them all and in fact own just a small portion of the many issues that I discuss on this blog.

I also believe that some sort of portfolio management system is appropriate that lets you move more towards stocks when times are good and more towards cash when the market is retreating.

In addition, at all costs, I avoid "falling in love" with any particular stock. I sell my losing stocks quickly and my winning stocks slowly. Thus, the bias is to keep profitable stocks in the portfolio.

Does all of this work? Time will tell. In my own trading portfolio, it is not 100%, but it appears to be a profitable strategy!

I would love to hear from all of you readers as to what your own investment strategy is working, how what I write affects your own thinking, and ways that I can improve this blog. You can email me at bobsadviceforstocks@lycos.com or leave your comments right here on the website.

Thanks so much for stopping by and visiting!

Bob


Posted by bobsadviceforstocks at 12:12 PM CDT | Post Comment | Permalink
Thursday, 12 May 2005
May 12, 2005 Pall Corporation (PLL)

Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always please remember that I am an amateur investor so PLEASE consult with your professional investment advisors prior to making any decisions based on information on this website. I cannot be responsible for any of your trading decisions!

What I try hard to do around here is to look around at stocks which are doing well on that particular day, and of those, decide which stocks might have characteristics to suggest that they will continue to do well. And as for that, I mean continue to perform in a business sense, and secondarily, to hopefully appreciate in price! I combine this with a bit of rudimentary portfolio management in my own holdings, selling losers quickly, and selling winners slowly at set price targets. Nothing on this blog is about "getting rich quick". As I have commented elsewhere, if this were a baseball game, my approach is to get base hits one after another.

Looking through the list of top % gainers on the NYSE today, I came across Pall Corporation, which, as I write, is trading at $28.58, up $2.18 or 8.26% on the day. I do not own any shares of Pall currently, but have owned them in the past. In fact, I came across Pall reading one of my favorite books by Gene Walden, 100 Best Stocks to Own in America. I really owe a lot to Mr. Walden, who presents a common-sense approach to investing, an approach that I subscribe to for the most part...finding companies with consistent earnings and revenue growth may result in great stock picks!

According to the Yahoo "Profile" on Pall, PLL "...is a supplier of fine filters, principally made by the Company using its own filter media, and other fluid clarification and separations equipment for the removal of solid, liquid and gaseous contaminants from a variet of liquids and gases."

One of the first places I go in my analysis, is to review the latest quarterly results of any prospective company. (This stuff is not genius material imho...just sort of common sense!).

On March 1, 2005, PLL reported 2nd quarter 2005 results. Sales for the quarter jumped 9.5% to $469.5 million, from $428.1 million last year. Earnings came in at $32 million or $.26/share, up from $24.9 million, or $.20/share last year. These were nice results imho.

How about "longer-term results"? For this I like to review the "5-Yr Restated" financials from Morningstar.com. First thing is revenue growth, and here we can look for, and for Pall find, a nice ramp-up of purple bars indicating a steady growth in revenue from $1.2 billion in 2000 to $1.9 billion in the trailing twelve months (TTM).

My next step is earnings growth evaluation. This often does not follow revenue exactly, and unless lately, the earnings are also growing, I will not continue looking at a stock. In PLL's case, we can see that earnings actually dropped from 2000 when they earned $1.18/share down to $.59/share in 2002. However, since then earnings have been growing and came in at $1.24/share in the TTM.

Next step is free cash flow. Pall has fairly solid free cash flow performance with $86 million in free cash flow in 2002, increasing to $120 million in the TTM.

And balance sheet? Here we look at current assets, consisting of "cash" and "other current assets" as compared to "current liabilities". I prefer to see the sum of current assets outweighing at least the current liabilities and if possible, the long-term liabilities as well!

For Pall, according to the Morningstar information, cash stands at $227.1 million and "other current assets" are at $886.3 million. Thus, there is a total of about $1.1 billion in current assets. This is balanced against $400 million in current liabilities and $691.8 million in long-term liabilities. Pall could pay off both the current and the long-term liabilities with just the current assets. Thus, the balance sheet looks solid to me on my perspective.

What about some "valuation" parameters? For this information, I have been using Yahoo Finance again, in particular the Yahoo "Key Statistics" for Pall. Here we can see that this is a large cap stock with a market capitalization of $3.52 Billion. The trailing p/e is modest (imho) at 22.90, and the forward p/e (fye 31-Jul-06) is even nicer at 17.58. The PEG (5 yr expected) is reasonable, if not cheap, at 1.54.

The Price/Sales ratio is 1.77. Lately, I have been looking at other companies in the same "industry group" to see what kind of valuation this represents.

According to my my Fidelity source, PLL is a part of the "Diversified Machinery" industry group. The Price/Sales of Pall at 1.8 is midway between a low for Eaton (ETN) at 0.9, Ingersoll-Rand (IR) at 1.3, Illinois Tool Works (ITW) at 2.0, and Roper (ROP) at 3. Thus valuation per this parameter is "fair". Not cheap, not expensive, sort of Goldilocks "just right!"

Other numbers from Yahoo show 124.45 million shares outstanding with 121.60 million that float. Currently there are 2.97 million shares out short (as of 4/8/05) representing 2.44% of the float, or 6.105 trading days of volume. Thus, in my own 3 day rule, this is a significant short interest, and any upward movement of the stock price, might induce other short sellers to scramble trying to cover their "presold" shares.

The company does pay a small dividend of $.40/share yielding 1.52%. The last stock split was a 4:3 split, according to Yahoo, way back in December, 1992.

How about "technicals"? How does the chart look like? I have been using "point & figure" charts from Stockcharts.com for this purpose. This chart actually is interesting to me. The company really went nowhere between 1999 and 2003 when it traded in a range between $15.50 and $25/share.


It was only in september, 2003, when it failed to return to the mean and then in what appears to be about October, 2004, when it broke through the $26 level and headed higher. The stock chart actually looks quite nice and does not appear over-valued. (always imho).

So what do I think? Well, you know I wouldn't list the stock on this blog unless I liked it :). The latest quarterly report was solid, the Morningstar sheet looks good with growing revenue, earnings, free cash flow, and a solid balance sheet. The valuation looks nice. And the chart looks pretty solid to me. I guess I like it :).

Thanks so much for stopping by! If you have any questions or comments, please feel free to leave them right here on the blog or email me at bobsadviceforstocks@lycos.com.

Bob


Posted by bobsadviceforstocks at 2:41 PM CDT | Post Comment | Permalink
Wednesday, 11 May 2005
"Revisiting a Stock Pick" Varian Medical Systems (VAR)

Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, PLEASE remember that I am an AMATEUR investor, so that means you need to check with a PROFESSIONAL investment advisor prior to making any decisions based on information on this website. I CANNOT be responsible for any of your trading activity, and shall not ask for any portion of your gains, nor be responsible for any part of your losses incurred using ANY trading method!

Looking through the list of top % gainers on the NYSE today, I saw that an old pick of mine, Varian Medical Systems (VAR) had made the list, closing at $35.10, up $1.38 on the day or 4.09%. I do not own any shares nor do I own any options on this company.

I first listed VAR on Stock Picks on 10/20/03, when it was trading at $60.78. VAR had a 2:1 split 8/2/04, making my effective stock pick price $30.39.

According to the Yahoo "Profile" on Varian, the company "...is engaged in designing and manufacturing advanced equipment and software solutions for treating cancer with radiation, as well as cost-effective x-ray tubes for original equipment manufacturers, replacement x-ray tubes and flat-panel digital subsystems for imaging in medical, scientific and industrial applications."

On April 27, 2005, VAR reported 2nd quarter 2005 results. Revenues came in at $351 million, up 9% from the prior year same quarter. Net earnings were $54 million or $.39/diluted share up from $44 million or $.31/diluted share the prior year. In addition, the company reported a strong $395 million of net orders for the quarter, up 13% from last year. The backlog of orders stood at $1.05 billion, up 20% from the prior year!

To top off a great earnings report, the company raised guidance in earnings for fiscal 2005, to a 26% increase expected. Revenue for 2005 should rise 13% over 2004 totals. Subsequent quarter results were also raised with earnings and diluted eps to rise about 20% and revenue to grow by 14%. This was a bullish call and the stock responded!

How about "longer-term"? Taking a look at the "5-Yr Restated" financials on Morningstar.com, we can see the beautiful 'ramp-up' of revenue with the series of violet bars growing with time on the chart, from $0.7 billion in 2000 to $1.2 billion in the trailing twelve months (TTM).

Earnings, except for a slight dip from $.41/share in 200 to $.40/share in 2001, have been steadily growing: $.67 in 2002, $.92 in 2003 and $1.18 in 2004.

Free cash flow has been positive and growing from $130 million in 2002 to $210 million in 2004.

The balance sheet is also solid with $351.9 million in cash and $533.2 million in other current assets, easily covering the $461.3 million in current liabilities AND the $95.1 million in long-term liabilities with about $300 million left over!

What about some "valuation" numbers on this stock? Looking at Yahoo "Key Statistics" for VAR, we can see that this is a large cap stock with a market capitalization of 4.69 Billion. The trailing p/e isn't bad at 26.08, and the forward p/e is also reasonable (fye 1-Oct-06) at 20.77 (imho). Thus the PEG (5 Yr Estimated) is 1.46.

Yahoo shows the Price/Sales ratio at 3.47. Seemingly high, I have started thinking about Paul Sturm from SmartMoney.com on Price/Sales ratios. Instead of looking at them in absolute terms, it is helpful to view valuation in the context of a stock's relative P/S ratio in its industry group.

VAR is in the "Medical Appliances/Equipment" group (per Fidelity), and other stocks in the group have mostly higher Price/Sales ratios: Medtronic (MDT) at 6.3, Zimmer Holdings (ZMH) at 6.3, St. Jude (STJ) at 5.7, Biomet (BMET) at 5.2, and Edwards Life Sciences (EW)(the only stock in this group with a lower price/sales) at 2.9. Thus, by this parameter, VAR looks reasonably valued!

Some other facts from the Yahoo site include the number of shares: 133.56 million, with 132.90 million shares that float. Currently, as of 4/8/05 there are 5.12 million shares out short, representing 3.85% of the float or 4.986 trading days of volume. I have personally been arbitrarily using 3 days as a level of significance, and this stock thus has a significant number of shares out short, which, with the bullish earnings report, adds some buying support for the stock.

No cash dividend is paid, and as I noted above, the last stock split was a 2:1 split in August, 2004.

How about the chart? Taking a look at the Stockcharts.com "Point & Figure" chart


we can see that this stock has generally been quite strong, especially between August, 2000, when it was trading at $11, until late 2002 when it rose to $19.50/share. After that point, the stock soared to a high of $46/share in April, 2004, consolidating throught the last 12 months to its current level of $35.10. Overall, the stock is holding its support line, does NOT appear to be over-extended, and appears strong to me!

What do I think? Well, if I could buy a stock today, this one would probably be high on my list. The stock showed strong price action today, had a great earnings report recently, raised guidance at the same time, has shown consistent earnings and revenue growth, generates growing amounts of free cash flow, and has a solid balance sheet. Valuation-wise, the p/e doesn't look bad, and the Price/Sales ratio makes it relatively cheap within its group. And finally, the chart looks just fine to me!

Thanks again for stopping by! If you have any questions, comments, or words of encouragement, please feel free to post them right here on the blog or email me at bobsadviceforstocks@lycos.com.

Bob


Posted by bobsadviceforstocks at 5:31 PM CDT | Post Comment | Permalink
Monday, 9 May 2005
May 9, 2005 Par Technology (PTC)

Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, 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. They will be able to tell you if these decisions are appropriate, timely, and likely to be profitable for you!

Looking through the list of top % gainers on the NYSE today, I came across Par Technology Corporation (PTC), which, as I write is trading at $22.17, up $.92 today, or 4.33%. I do not, nor do any of my family members, have any shares or options on this stock.

According to the Yahoo "Profile" on PTC, the company "...operates through its subsidiary ParTech, Inc., which is a provider of management technology solutions, including hardware, software and professional services to businesses in the hospitality and retail industries."

As I always point out, the first "screen" that I like to use in picking a stock for the blog is to check the latest quarterly report. On April 27, 2005, Par reported 1st quarter 2005 results. Revenue grew 29% to $48.8 million from $37.9 million last year. Quarterly income grew to $1.3 million or $.14/share this year, from $736,000, or $.08/share in the same quarter last year.

How about longer-term? In other words, it is great that they had a nice quarter, but can the company continue to deliver outstanding results? The best approach that I have found, is to examine the past five years through Morningstar. Hopefully, most companies that do well this quarter and have done well the past several years will continue to do well. Now as you know, past results are NO guarantee of future results, but imho, they are about as good an indication as you can get.

Checking the "5-Yr Restated" financials from Morningstar.com on PTC, we can see the nice "ramp-up" of revenue fromn $101.5 million in 2000 to the $174.9 million in the trailing twelve months (TTM).

Earnings also show steady growth from $.04/share in 2001 to $.61/share in 2004.

Free cash flow is positive and growing from $3 million in 2002 to $18 million in 2004.

The balance sheet, as reported on Morningstar.com, also looks nice with $8.7 million in cash and $69.0 million in other current assets, plenty to cover both the current liabilities of $45.2 million and the $3.0 million in long-term liabilities with current assets left over.

What about "valuation" questions? For this information, I find the Yahoo "Key Statistics" page on PTC very helpful!

Here we can see that the market capitalization of this company is a small $197.82 million. Many people would put this in the "micro-cap" range.

The trailing p/e isn't bad at 33.08, the forward p/e (fye 31-Dec-06) is estimated at 20.09, and thus, the 5-Yr PEG is also estimated at 1.15. The Price/Sales ratio is nice at 1.02.

As I have written elsewhere, and as Paul Sturm has written in Smart Money, the Price/Sales ratio is only helpful in regards to relative valuation within an industry group.

Par Technology (PTC) is in the "Business Equipment" industry. Other stocks in this group, include Nam Tai Electronics (NTE) with a P/S ratio of 1.7, Diebold (DBD) with a P/S ratio of 1.5, Herman Miller (MLHR) at 1.4, HNI Corp (HNI) at 1.3, and only Xerox is lower than PTC at 0.8. Thus, the valuation of this company actually looks quite attractive!

Also from Yahoo, it is reported that there are only 8.95 million shares outstanding with 4.90 million of them that float. As of 4/8/05 there were only 33,000 shares out short representing 0.67% of the float or only 0.75 trading days of volume. This doesn't look significant to me.

No stock nor any cash dividends are reported on the Yahoo page.

How about "technicals"? In other words, does the chart look promising? I have found that the point and figure charts from Stockcharts.com are the most helpful. Looking at the Stockcharts Point & Figure Chart on PTC:


we can see that this stock was actually moving lower between December, 1999, when it peaked at around $6.00, to a low of $1.75, which was hit in March, 2001. Since that time, the stock has traded steadily higher in a very strong chart pattern. Currently, the stock appears to be right at its highs at the $22.00 level. If anything, the chart looks a bit over-extended, but I wouldn't be fighting this chart pattern!

In summary, this stock looks attractive to me because of the nice price move today, the great earnings report released last month, the five year record of growing revenue and earnings, free cash flow, and a solid balance sheet. Valuation looks reasonable, and the chart is gorgeous! What is there not to like? On the downside, this is a tiny company, and in my experience, tiny companies are subject to considerable volatility.

Besides, I am not in the market to buy anything at this time. I am sitting on my hands, waiting for one of my current investments in my trading account to hit a price target so that I can sell a portion and add a new position!

Thanks again for stopping by! Please feel free to leave any comments you might have on the blog or feel free to email me at bobsadviceforstocks@lycos.com.

Bob


Posted by bobsadviceforstocks at 12:57 PM CDT | Post Comment | Permalink
Sunday, 8 May 2005
"Looking Back One Year" A review of stock picks from the week of March 15, 2004






Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, 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.

It is the weekend and for me, that means a time to stop looking for new stock picks and instead a chance to review past selections. This analysis assumes a buy and hold approach to investing which is not what I employ in my own investment portfolio. In fact, I sell stocks that decline (which is NOT infrequent) quickly, and sell stocks that gain (also NOT infrequent!) slowly. But for the sake of reviewing what happened to these stocks, "buy and hold" works just fine. Also, some people think that I am reviewing stocks that I actually have purchased. In fact, most of the stocks that I review, the great majority in fact, I have never purchased! You can view my current "Trading Portfolio" elsewhere on this website. I am a bit behind updating the list, but those are stocks that I have actually purchased!

On March 15, 2004, I posted Toro (TTC) on Stock Picks at a price of $58.96. TTC had a 2:1 split on 4/13/05, with a resultant adjusted stock pick price of $29.48. TTC closed at $42.86 on 5/6/5 for a gain of $13.38 or 45.4%.

On February 22, 2005, Toro reported 1st quarter 2005 results. Sales jumped 10.6% to $346.9 million from $313.6 million the prior year. Net earnings came in at $11.2 million, up from $9.3 million, or $.47/diluted share this year, compared with $.36/diluted share the prior year.

On March 17, 2004, I posted Autobytel (ABTL) on Stock Picks at a price of $12.93. Autobytel (now listed as ABTLE), closed at $4.79 on 5/6/05 for a loss of $(8.14) or (63.0)%.

On April 1, 2005, ABTLE announced a request for an extension on filings of financial statements. The company is busy restating results, many officers have resigned, litigation is pending, and it will take a lot to clear this one up! An unfortunate pick for the blog!

Finally, on March 17, 2004, I selected VCA Antech (WOOF) for Stock Picks at $34.69. WOOF had a 2:1 stock split on 8/26/04 making my effective "pick price" only $17.35. WOOF closed at $23.55 on 5/6/05, for a gain of $6.20 or 35.7%.

On April 26, 2005, WOOF announced 1st quarter 2005 results. Revenue increased 30% to $186.9 million from $144.4 million the prior year same quarter. The company earned $17.5 million or $.21/share in the quarter, up from $14.7 million or $.18/share the prior year. In addition, the company raised outlook for the remainder of 2005!

So how did we do for that week a year ago? Well, of the three stocks "picked", two had solid gains and one just fell apart! Averaging the three selections still gives us an average gain of 6.03%. Not too bad, and would have been even better if we were stopping out that ABTLE at the (8)% loss level!

Thanks again for stopping by! Remember that I AM an amateur, so please consult with your professional investment advisors prior to using this website for investment decisions. If you have any questions or comments, please feel free to leave them here on the blog or email me at bobsadviceforstocks@lycos.com.

Bob


Posted by bobsadviceforstocks at 4:04 PM CDT | Post Comment | Permalink

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