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Stock Picks Bob's Advice
Wednesday, 13 July 2005
A Reader Writes "Can you give me an opinion on the chances of this stock to rise?"
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.

Checking my mail earlier this week, I came across a letter from Jean B. who wrote:
Dear Bob,

My brother had recommended dogpile.com as a search engine a while
ago. He works at aa hospital, and the interns recommended it to him.
While the name leaves a smelly taste, I checked it again today, and
figured they could challenge Google. It's a branch of InfoSpace
(INSP), and I checked their earnings and point and figure chart. It
has a mouth-watering P/E of 9.x. Can you give me an opinion on the
chances of this stock to rise? I couldn't wait for the earnings
announcement on July 26th, and already bought some.

Sincerely,
Jean B
First of all, thank you Jean for writing. As you know, I cannot tell you the chances any particular stock will rise. I simply don't know and would be just guessing. However, I would be happy to look at this stock through my perspective and let you know what I think.

Some basics: InfoSpace (INSP) closed today (7/13/05) at $33.70, down $.48 or 1.40% on the day.

According to the Yahoo "Profile" on INSP, the company is "...a technology and services company, engages in the development and marketing of internet and wireless solutions for a range of customers, including consumers, merchants, wireless operators, content brands and financial institutions. The company has two units, Search and Directory, and Mobile."

About the first place I go to research a stock is the latest quarterly result. Apparently INSP will be reporting their latest quarter in the next couple of weeks. However, as far as reported results, INSP reported 1st quarter 2005 results on April 26, 2005. Revenue for the quarter ended March 31, 2005, came in at $87.0 million, an 81% increase over the $48.1 million in the first quarter of 2004. Net income for the first quarter came in at $93.9 million or $2.52/diluted share, compared to net income of $36.7 million or $1.03/diluted share the prior year. However, much of this was from settlement of litigation, and excluding the gain from litigation, net income came in at $16.6 million or $.45/diluted share vs. $5.4 million, or $.15/diluted share in the first quarter of 2004.

However the company guided lower for the second quarter than what analysts had been expecting. As reported on Thestreet.com:
However, the company's near-term guidance disappointed. For the second quarter, InfoSpace said it expects to earn 36 cents to 39 cents a share on revenue of $83 million to $85 million. This was below analysts' expectations of earnings of 42 cents a share and revenue of $91.7 million.
This was enough to drive the stock lower in the short-term.

Looking at the "5-Yr Restated" financials from Morningstar.com for INSP, we can actually see that revenue fell from $201.2 million in 20002, to a low of $115 million in 2002, before resuming its progression with $288.3 million reported in the trailing twelve months. The last few years are solid, but I prefer to see longer periods of growing revenue prior to a purchase of stock.

The company was losing money betweek 2000 and through 2003, improving from a loss of $(9.28)/share in 2000, decreasing to a small loss of $(.20)/share in 2003. Since then, the company reported $2.26 in earnings in 2004 and $3.75 in the trailing twelve months (TTM).

Free cash flow is also attractive with $(23) million in 2002, improving to $126 million in the TTm.

The company is loaded with cash and has a beautiful balance sheet, at least as presented by Morningstar with $366 million in cash and $93.4 million in other current assets, with a relatively paltry $58.8 million in current liabilities and $12.2 million in long-term liabilities. Thus this looks good too!

Taking a look at "Key Statistics" on INSP from Yahoo, we can see that this is a mid cap stock with a market capitalization of $1.12 billion. The trailing p/e, as you noted, is only 8.92. However, I am sure that is due to the inclusion of litigation earnings....so it is a bit higher than that. Thus, the forward p/e is 14.72 (fye 31-Dec-06), and the PEG (5 yr expected) is still low at 0.67. The stock indeed looks to be a good "value".

According to the Fidelity Brokerage information I use, INSP is in the "Online Financial News Industry" and sports a Price/Sales ratio of 3.9, midway between the top stock CNET (CNET) at 5.7, above the Street.com (TSCM) at 2.5, and ahead of Dow Jones (DJ) at 1.8.

Going back to Yahoo, we can see that there are 33.20 million shares outstanding with 33.17 million that float. Of these, 2.83 million are out short, representing 2.3 trading days or only 8.70% of the float. The short interest does not look significant imho.

No cash dividends are paid and the last stock dividend was a reverse stock split, a 1:10 on 9/13/02.

What about a chart? Taking a look at a "Point & Figure" chart on INSP from Stockcharts.com:


we can see what appears to be a relatively weak graph that hit a peak of around $57 in November, 2004, seemingly 'rolled over' and has been trading lower to its current level. I am not encouraged by what I see. I cannot tell if the stock will be trading higher from the graph in the near future, but it appears that trading higher would require the company to reverse the current trading trend.

So what do I think? Well, let's review: the latest quarter was very strong, but then the company revised lower for the next quarter (a negative imho). The past five years are a bit of a roller-coaster of revenue growth, with a sharp decrease, followed by an equally strong increase in revenue. Earnings appear to be increasing, and free cash is positive while the balance sheet looks excellent. Valuation-wise, the low p/e is a bit misleading due to the one-time settlement of litigation. However, the forward p/e is still low, and the PEG is under 1.0. The price/sales is also moderate within its group.

Finally, the graph looks weak.

Thus, I am not ready to endorse this stock. This does not mean it may not appreciate in the near future. In fact, if they come through with a solid quarter in the next two weeks, I would not be surprised to see this stock rally higher. It certainly is a good value. But that is not really my style of investing. Doesn't mean you are wrong to buy this stock. Just not my style.

I hope that what I wrote was helpful. I do not mean to be negative. I am frankly unable to predict price moves :). Good luck and I hope that your "value" purchase works out for you! I bet it will if that next quarter surprises on the upside!

Bob




Posted by bobsadviceforstocks at 5:31 PM CDT | Post Comment | Permalink
"Revisiting a Stock Pick" Resources Connection (RECN)
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 like to share with you some of my own ideas about investing and encourage you to participate in this discussion. As always, please remember to consult with your professional investment advisors prior to making any investment decisions based on information on this website.

I first posted Resources Connection (RECN) on Stock Picks Bob's Advice(RECN), which does business under the Resources Global Professionals name, On January 8, 2004, when it was trading at $34.50. RECN had a 2:1 stock split on 3/2/05, making my effective stock pick price actually $17.25. Today, RECN made the list of top % gainers on the NASDAQ , closing at $29.42, for a gain of $5.57 or 23.35% on the day. The stock is trading at $12.17 higher than my pick price, for a gain of 70.6% since posting here. I do not own any shares nor any options on this company.

What drove the stock higher today, was the 4th quarter 2005 earnings report which was released after the close of trading yesterday. For the quarter ended May 31, 2005, revenue grew 40.2% to $150.0 million, from $107 million for the same quarter in fiscal 2004. Net income came in at $15.7 million, up from $10.7 million last year, or $.31/diluted share, a 41% increase over the $.22/diluted share reported last year. This was an impressive quarter and the "street" voted with its pocketbook, driving the stock price higher!

Looking at the "5-Yr Restated" financials from Morningstar.com, we can see a steady growth in revenue, except for a small dip between 2001 when revenue dropped from $191 million to $182 million in 2002, climbing to $495 million in the trailing twelve months (TTM).

Earnings have increased from $.29/share in 2002 to $1.01 in the trailing twelve months.

Free cash flow has also been increasing from $13 million in 2002 to $51 million in the TTM.

The balance sheet is "gorgeous" with $66.8 million in cash and $86.1 million in other current assets reported on Morningstar, balanced against $52.5 million in current liabilities and $4.7 million in long-term liabilites.

Looking at Yahoo "Key Statistics" on RECN, we can see that this is a large mid-cap stock with a market capitalization of $1.40 Billion. The trailing p/e is 29.17, and the forward p/e (fye 31-May-06) is better at 23.86. In fact the company is anticipated to be growing so quickly that this p/e results in a PEG under 1.0 at 0.92.

While the Price/Sales ratio looks nice at 2.3, looking at other stocks in this industrial group of "Management Services", we find RECN at the top of the pack. Following RECN is Ceridian (CEN) at 2.2, Heidrick & Struggle (HSII) at 1.4, Accenture (ACN) at 1.4, Hewitt Associates (HEW) at 1.1, and BearingPoint (BE) at 0.5. Thus, in this measurement, RECN isn't that cheap a stock at all!

Other statistics from Yahoo show that this company has 47.59 million shares outstanding with 44.56 million that float. Currently there are 7.56 million shares out short as of 6/10/05, representing 16.90% of the float, or 11.7 trading days of volume. This short interest, using my own "3 day rule" looks significant and may be adding to the buying frenzy as shorts get "squeezed".

No cash dividend is reported, and as I noted earlier, the last stock split was just a few months ago when the stock split 2:1 on 3/2/05.

Taking a look at the Stockcharts.com "Point & Figure" chart on RECN:


we can see that this stock was trading sideways between much of 2001 and 2002, and actually more or less "rolled over" hitting a low of $5.50 in September, 2002. The stock has traded strongly higher since that time, and appears to be poised for further appreciation without being very over-valued. Of course, that is just my take on the chart :).

So what do I think? Well, reviewing: the latest stock report that came out yesterday was phenomenal. The company has shown almost perfect growth in revenue and earnings (except the dip in 2002 as noted) the last five years. Free cash flow is positive and growing and the balance sheet is gorgeous. Valuation looks nice in terms of the p/e and PEG ratio (under 1.0), but the Fidelity review shows that the Price/Sales ratio is a bit rich within its particular group. Finally, the short interest is high, adding buying pressure, and the graph looks nice.

Now of course, I cannot buy any new stocks as I am up to 25, my current maximum # of holdings, but if I were in the market, well this is the kind of stock I would be buying! Thanks so much for stopping by. If you have any questions, comments, or words of encouragement, please feel free to comment right here on the blog, or email me at bobsadviceforstocks@lycos.com.

Bob




Posted by bobsadviceforstocks at 3:27 PM CDT | Post Comment | Permalink
Monday, 11 July 2005
July 11, 2005 Arrhythmia Research Technology (HRT)
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.

Looking through the list of top % gainers on the AMEX today, I came across Arrhythmia Research Technology, which as I write, is trading at $14.55, up $.64 or 4.60% on the day. I do not own any shares of this stock nor do I own any options.

According to the Yahoo "Profile" on HRT, the company "...engages in the licensing of medical software which acquires data and analyzes electrical impulses of the heart to detect and aid in the treatment of lethal arrhythmias."

On May 11, 2005, HRT announced 1st quarter 2005 results. Revenue for the quarter ended March 31, 2005, grew 44% to $3.1 million, compared to revenue of $2.1 million the prior year. Net income increase 35% to $429,000 compared to $318,000 for the same quarter in 2004. On a per share basis, this was a 33% increase to $.16/share, up from $.12/share the prior year.

Looking at the Morningstar.com "5-Yr Restated" financials on HRT, we can see that revenue did dip from $9.5 million in 2000 to $7.2 million in 2001. However, since that reporting period, HRT has showed steady growth in revenue to $12.1 million in the trailing twelve months (TTM).

Earnings/share also dropped from $.18/share in 2000 to $.07/share in 2001, but increased steadily since to $.64/share in the TTM.

Free cash flow has stayed above water with $1 million reported in 2002-2004, with $0 in free cash flow in the trailing twelve months.

The balance sheet also emphasizes the small nature of this company with $1.5 million in cash and $3.7 million in other current assets, balanced against only $900,000 in current liabilities and no long-term liabilities at all.

Looking at "Key Statistics" from Yahoo on HRT, we can see that this is a TINY "micro-cap" stock with a market capitalization of only $38.79 million. This would make this company one of the smallest I have ever reviewed on this website!

The trailing p/e is 22.73, which isn't bad, but there are no forward p/e's nor any PEG ratios to consider, most likely due to the probability that there are few analysts who follow this tiny company.

The Price/Sales ratio is 3.07. This also makes the company appear reasonably priced in the "Medical Appliances/Equipment" industrial group. At the top of this group is St. Jude (STJ) at 6.7 Price/Sales, Medtronic (MDT) at 6.3, Zimmer (ZMH) at 6.3, Biomet (BMET) at 4.8, followed by Arrhythmia Research (HRT) at 3.1, and Edwards Lifesciences (EW) at 2.7.

Other key statistics confirm the tiny nature of this company with only 2.67 million shares outstanding and 2.03 million that float. Currently there are 590,750 shares out short as of 6/10/05, representing 30.70% of the float (!) or 7.7 trading days of volume. You can see how a little bit of good news could cause these shorts to scramble to cover! The company does pay a small dividend of $.12/share yielding 0.86%. No stock dividend is reported on Yahoo.

Taking a look at a "Point & Figure" chart on HRT, we can see that the stock has been trading fairly sideways, until last month when it broke down under support levels at $16, and traded as low as $13.50. The stock is trading slightly higher now, but is still below support levels. The chart does not look encouraging to me!




So what do I think? Well this is certainly what I would call a "mixed bag" of results! Some of the positive things about this stock include the nice move today, the great quarterly report, the past 4-5 years of solid growth in both revenue and earnings, the nice balance sheet and the reasonable valuation both in terms of p/e and Price/Sales ratios. The significan short interest may be included in the "plus column".

On the downside, the company does not generate any free cash flow, the chart looks weak, and the fact that there are so few shares outstanding makes it vulnerable to volatility and price manipulation. This would certainly be a more speculative investment, but it may be worth putting on your horizon to watch and see how future earnings return.

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 1:32 PM CDT | Post Comment | Permalink
Updated: Monday, 11 July 2005 1:37 PM CDT
Saturday, 9 July 2005
"Looking Back One Year" A review of stock picks from the week of May 17, 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.


In this image provided by commuter Alexander Chadwick, taken on his mobile phone camera, passengers are evacuated from an underground train in a tunnel near Kings Cross station in London, Thursday. (AP/Alexander Chadwick)


Before I go on to review anything, I would like to express my condolences to those who have lost loved ones or who have experienced injuries in the London bombings. We truly are one interconnected world around here. I hope that the rest of 2005 finds all of you safe and in good health.

These weekend reviews are my method of trying to determine how the stock picks selected here are performing in practice. These reviews assume a buy and hold technique which is not what I employ in my own trading portfolio. I advocate selling losing stocks quickly (I use an 8% loss as my limit) and selling gaining stocks at targeted appreciation ranges, slowly.

On May 18, 2004, I posted Staples (SPLS) on Stock Picks at $26.39. SPLS had a 3:2 stock split on 4/18/05, making my effective pick price actually $17.59. SPLS closed at $21.92 on 7/8/05 for a gain of $4.33 or 24.6% since posting.

On May 17, 2005, Staples reported 1st quarter 2005 results. Total company sales for the quarter ended April 30, 2005, grew 13% to $3.90 billion from $3.45 billion for the same quarter in 2004. Net income came in at $159 million, this worked out to $.21/diluted share, up 24% from the first quarter of 2004.

On May 19, 2004, I posted Advanced Neuromodulation Systems (ANSI) on Stock Picks at $33.03. ANSI closed at $41.21 on 7/8/05 for a gain of $8.18 or 24.8% since posting.

On April 28, 2005, ANSI announced 1st quarter 2005 results. Revenue increased 21.4% for the three months ended March 31, 2005, to $32.3 million from $26.6 million in the same quarter in 2004. Excluding a gain on a sale of Cyberonics common stock, earnings for the first quarter came in at $.22/diluted share, up from $.19/diluted share last year.

On May 20, 2004, I posted PetSmart (PETM) on Stock Picks at $28.40/share. PETM closed at $31.43/share on 7/8/05, for a gain of $3.03 or 10.7%.

On May 18, 2004, PetsMart (PETM) reported 1st quarter 2005 results. Sales climbed 13.4% to $903.2 million during the quarter, from $796.3 million in the same quarter last year. Importantly, same store sales growth for the quarter came in at 5.7%. Net income grew to $44.7 million or $.30/share, up from $31.9 million or $.21/share last year.

Finally, on May 21, 2004, I posted Marvell Technology Group (MRVL) on Stock Picks at a price of $42.99. MRVL had a 2:1 stock split on 6/29/04, making my effective "pick price" actually $21.50. MRVL closed at $39.91 on 7/8/05 for a gain of $18.41 or 85.6% since posting!

On May 19, 2005, MRVL reported 1st quarter 2006 results. For the quarter ended April 30, 2005, revenue came in at $364.8 million, a 35% over net revenue of $269.6 million in the first quarter of fiscal 2005. Net income (GAAP) was reported at $63.5 million, or $.20/diluted share, up strongly from $14.5 million, or $.05/diluted share in the first quarter of 2005. These were strong results imho, and help explain the strong stock performance.

So how did we do that week? Well nothing short of spectacular. My only disappointment is that these four stocks are not in my own portfolio...I can't own everything :(. Anyhow, the average performance of these four stocks works out to a gain of 36.4%!

Certainly past performance is NO guarantee of future price movement, but this is certainly encouraging for what I am trying to do on this website. Also, this represents just four picks from one particular week, so take it all with a grain of salt!

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

Bob







Posted by bobsadviceforstocks at 2:05 PM CDT | Post Comment | Permalink
Friday, 8 July 2005
A Reader Writes "Comment on LSCP?"
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.

Looking through my email (you can drop me a line at bobsadviceforstocks@lycos.com and I shall try to answer you if possible, most likely right here on the blog!), I wanted to answer a question from P.C. who writes:
Bob,

I am enjoying your blog. I am wondering if you can
comment on LSCP.

Thanks in advance.

Regards,
P.C.
First of all, thanks for the kind words on the blog! I very much appreciate any and all feedback from readers so the comment is noted. Insofar as Laserscope (LSCP) is concerned, this is an old favorite of mine, I have actually owned it in my trading portfolio (until I hit my 8% loss), and I still have a few shares of it in one of my son's accounts, and I am pretty sure my stock club owns some shares of this as well. I do not personally have any LSCP stock or options as I write.

I first posted Laserscope (LSCP) on Stock Picks on December 31, 2004, when it was trading at $35.99. Laserscope is currently trading at $38.70, down $3.43 or (8.14%) on the day, on the heels of an "underperform" rating by Jefferies today. Even with this large drop, LSCP is trading up $2.71 from where I posted it, or 7.5% ahead. There was a recent and timely article on Motley Fool, pointing out the high "beta" of this stock, which is a measurement of volatility. My own sale on an 8% loss, and today's precipitous move confirms this volatility!

Let's take another brief look at this company! According to the Yahoo "Profile" on LSCP, the company "...engages in the design, manufacture, sale, and service of medical laser systems and related energy devices for the medical office, outpatient surgical center, and hospital markets worldwide. The company's product portfolio consists of lasers and other light-based systems for applications in the urology, dermatology, and aesthetic surgery markets."

The first place I go in checking a stock out is the "headlines" section of Yahoo looking for the latest quarterly report. What do I require of a stock? That the revenue and the earnings are positive and growing!

On April 27, 2005, Laserscope reported 1st quarter 2005 results. In summary, revenue grew 50% to $28.2 million from $18.8 million the prior year. Net income rose over 100% to $5 million or $.22/share, from $2.2 million or $.10/share the prior year same quarter. These results look "solid" to me!

My next step is to go over to the Morningstar website and check out some of the longer-term financials. In particular, looking at the "5-Yr Restated" financials on Morningstar.com, we can note the following: a beautiful progression of revenue growth the past five years, except for a small dip from $35.4 million in 2000, to $35.1 million in 2001, climbing steadily since then to $103.2 million in the trailing twelve months (TTM).

Earnings, which also dipped from $.01/share in 2000 to a loss of $(.05)/share in 2001, have climbed steadily since then to $.77/share in the TTM.

Free cash flow has also been improving, growing from $1 million in 2002 to $8 million in the TTM.

The balance sheet, as presented on Morningstar.com is nothing short of gorgeous! The company is reported to have $22 million in cash and $46.6 million in other current assets, balanced against $24 million in current liabilities and NO long-term liabilities at all!

Generally, my next step in looking at a stock is to 'travel' back to Yahoo, in particular looking at the "Key Statistics" on LSCP. Here we can see that this is a "mid cap" stock with a market capitalization of $851.34 million.

The trailing p/e is a bit rich at 50.50, with a forward p/e of 35.72. The PEG is also a bit steep at 1.94, and the Price/Sales ratio is 9.01.

Yahoo reports 22.07 million shares outstanding with 20.16 million that float. Currently there are 3.13 million shares out short (!) representing 15.10% of the float (as of 6/10/05) or 13.8 trading days of volume. I use a 'three day rule' on short interest for my own purposes of determining significance, and this looks like a lot of shares out short that will need to be covered.

Yahoo does not report any cash nor any stock dividend by Laserscope.

Finally, I like to take a look at the price chart. I am in no way at all a technician, and I simply try to roughly see if the stock looks like the latest trend is higher, sideways, or lower!

Looking at the "Point & Figure" chart on LSCP from Stockcharts.com, we can see what looks like an uninterrupted move higher for LSCP, which is currently undergoing some price correction. The overall upward trend appears intact.


So what do I think?

Well in review, this is an old stock pick and a favorite of mine from this blog. I do not currently own any shares. However, the latest quarter was beautiful, the past five years have been solid, the company is growing its free cash flow, the balance sheet looks nice, but the valuation is a bit rich. Even with the correction today, the chart looks nice!

I generally buy stocks making strong moves higher on the day I purchase them, so I wouldn't personally be buying a stock moving down so strongly. However, the rest of the story is intact, and except for valuation including PEG, P/E, and Price/Sales, which are all a bit "rich" the stocks still looks nice to me!

I hope that was helpful for you! Thanks again for stopping by and if you or anyone else has any questions, please feel free to leave them right on the blog, or you can email me at bobsadviceforstocks@lycos.com.

Bob


Posted by bobsadviceforstocks at 1:34 PM CDT | Post Comment | Permalink
"Trading Transparency" KYPH

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.

My Kyphon (KYPH) stock is having a nice day today (as are lots of other stocks) trading at $38.20 as I write, up $2.88 or 8.15% on the day. A few moments ago, I sold 50 shares of my 200 shares of Kyphon at $38.20. This is 1/4 of my position, a portion that I regularly sell as my stocks hit their price targets. I acquired these shares on 5/20/05 at a cost basis of $29.21, so this was a gain of $8.99/share or 30.8%. As you may recall, my target gains are 30, 60, 90, 120, then 180, 240, 300, 360, and then by 90% etc.

Since I am at my full complement of stock in my portfolio (25 positions), I shall be at long last, using these proceeds to start paying down my very high margin level. I will not be adding any new positions until either I fall back to less than 25 positions, and then go back to 25 on a buy signal, or I have paid off my margin entirely.

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

Bob


Posted by bobsadviceforstocks at 11:46 AM CDT | Post Comment | Permalink
Tuesday, 5 July 2005
July 5, 2005 Bausch & Lomb (BOL)
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 was looking through the list of top % gainers on the NYSE today and came across Bausch & Lomb (BOL) which closed at $87.50, up $5.72 or 6.99% on the day. I do not own any shares nor do I have any options on this stock.

According to the Yahoo "Profile" on BOL, the company "engages in the development, manufacture, and marketing of eye health products. The company offers its products in five product categories: contact lens, lens care, pharmaceuticals, cataract and vitreoretinal, and refractive."

What drove the stock higher today, in addition to the strong overall tone of the market, was the news report that Bausch & Lomb was acquiring a "55-percent controlling interest in the Shangdong Chia Tai Freda Pharmaceutical Group (CTF), the leading ophthalmic pharmaceutical group in China..." This will cost BOL $200 million in cash and accelerate BOL's penetration into the Chinese market.

On April 19, 2005, Bausch & Lomb reported 1st quarter 2005 results. First quarter sales came in at $554.3 million, a 9% increase over last year's $510.3 million (a 6% increase when currency adjustments are made), and earnings per share rose 47% to $.63 from $.43/share in the same quarter a year ago.

If we look at a bit of a longer-term financial picture, using the "5-Yr Restated" financials from Morningstar.com, we can see a fairly steady picture of revenue growth except for a slight dip from $1.72 billion in sales in 2000 to $1.67 billion in 2001. However, since 2001, revenue has grown steadily with $2.28 billion reported in the trailing twelve months (TTM).

Earnings have also increased, except for a dip from $1.52 in 2000 to $.39/share in 2001, earnings have otherwise grown steadily from that $.39/share level in 2001 to $3.13 in the trailing twelve months (TTM).

Free cash flow, per Morningstar, has been solid with $145 million in 2002 growing to $160 million in the TTM.

The balance sheet is also pretty solid with $483 million in cash and $900.4 million in other current assets, easily covering the $794.2 million in current liabilities and "making a dent" in the $758.3 million in long-term liabilities as well.

Looking at "Key Statistics" on BOL from Yahoo, we can see that this is a large cap stock with a market capitalization of $4.69 billion. The trailing p/e isn't too highat 28.04, and the forwar p/e (fye 25-Dec-06) is even lower at 21.77. The "5 yr expected) PEG is 1.57.

Within the "Medical Instruments/Supplies" Industrial group, Bausch & Lomb is very reasonably valued with a Price/Sales ratio of 1.9. Other companies in the same group include Alcon (ACL) with a ratio of 8.3, Guidant (GDT) at 5.6, Stryker (SYK) at 4.3, Boston Scientific (BSX) at 3.6, and Baxter (BAX) at 2.4. Bausch & Lomb (BOL) is the cheapest with a Price/Sales ratio of only 1.9.

Other "Key Statistics" from the same Yahoo page reveal that BOL has 53.45 million shares outstanding with 52.32 million of them that float. Of these, 1.82 million shares are out short, representing 3.40% of the float or 3.6 trading days of volume. This is just over my own level of 3 trading days for significance.

The company does pay a small dividend of $.52/share yielding 0.64%. The last stock split was a 2:1 split in July, 1991.

What about a chart? If we take a look at the Stockcharts.com "Point & Figure" chart on B&L, we can see that the stock was trading "sideways" between late 2001 through May, 2003, with a range of $27 to $42. The stock broke through resistance and then trading strongly higher through the last half of 2003, until the present time, when it now is testing new highs in the $87 range.



So what do I think? I do find it intriguing that the company is entering the Chinese market with its acquisition. In summary, the last quarter was strong, the past five years have shown steady growth in both revenue and earnings, free cash flow is positive and slowly growing, and the balance sheet is solid. Valuation is a bit steep insofar as the PEG is concerned, but the Price/Sales puts BOL as the most reasonable of its industrial group in terms of valuation. And the chart looks strong!

This is the kind of stock I probably would enjoy owning long-term. (I already own Cooper (COO) which is at least partly a competitor to BOL). I do not have any cash to invest, and more important am fully invested, so no matter what the "signal", I shall not be buying any new stocks until I drop back to 24 positions.

Thanks again 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 11:26 PM CDT | Post Comment | Permalink
Updated: Tuesday, 5 July 2005 11:32 PM CDT
"Looking Back One Year" A review of stock picks from the week of May 10, 2004
Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. I hope that you all had a very happy and safe 4th of July. For those of you in other countries, I still wish you a happy 4th! But I suppose it just doesn't mean the same thing! :)

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 am just sneaking in my weekend review. It is late, and in a few hours, the markets will open for trading once again here in the States. In order to determine whether what I am writing is working, I like to go back about a year and see how the stock picks actually would have done if I had purchased them. I do purchase some of them, but far from a majority of issues that are discussed.

For the sake of review, I assume a buy and hold strategy for all stock picks on the blog. This is done even though I actually follow a strategy of selling any losing stocks quickly at an 8% loss level, and selling gaining stocks slowly at a series of price appreciation targets.





The first stock selected that week was Hewitt Associates (HEW), which I picked for Stock Picks on May 10, 2004, when it was trading at $30.26. HEW closed at $26.76 on 7/1/05, for a loss of ($3.50) or (11.6%).

On May 4, 2005, HEW reported 2nd quarter 2005 results. Total revenue for the quarter jumped to $712.6 million, from $559.5 million the prior year same quarter. Net income, however, dropped to $27.2 million from $30.4 million last year. On a diluted earnings per share basis, this worked out to $.23/share, down 25.1% from $.31/share last year.


On May 11, 2004, I posted Rayovac (ROV) on Stock Picks at a price of $27.20. On April 27, 2005, Rayovac shareholders passed a resolution to change the corporate name from Rayovac (ROV) to Spectrum Brands (SPC) as of 5/2/05. SPC closed at $33.70 on 7/1/05 for a gain of $6.50 or 23.9% since posting.

On May 4, 2005, Spectrum announced 2nd quarter 2005 results Looking for both earnings and revenue growth to get a "thumbs-up" on this blog, SPC reported a large increase in net sales from $278.0 million to $534.5 million, in large part due to the acquisition of United Industries. The net loss for the quarter came in at ($1.9) million, compared to net income of $2.6 million last year, or on a per share diluted basis, this worked out to ($.04)/diluted share loss, vs. a gain of $.08/share the prior year.

On May 13, 2004, I posted MapInfo (MAPS) on Stock Picks at a price of $10.50. MAPS closed at $10.515 on 7/1/05, virtually unchanged from the post price, with a gain of $.015/share or .14% since posting.

On April 21, 2005, MapInfo reported 2nd quarter 2005 results. Revenue grew to $35.5 million, compared with $31.4 million the prior year. Net income more than doubled at $2.5 million or $.12/share, up from $1.07 million, or $.07/diluted share. (There were 1/3 more shares outstanding in 2005 than in 2004, explaining the discrepancy in growth.)

The last "pick" for that week was Panera Bread (PNRA) which was posted on Stock Picks on May 14, 2004, at a price of $35.63. PNRA closed at $61.50 on 7/1/05 for a gain of $25.87 or 72.6%.

On May 17, 2005, PNRA reported 1st quarter 2005 results. Revenue for the quarter ended April 19, 2005, jumped 37% to $178.1 million from $129.9 million last year. Net income jumped 47% to $13.9 million from $9.5 million last year. On a per share basis, diluted earnings grew 42% to $.44/share, up from $.31/share in the prior year same quarter. The company also raised guidance both for revenue and earnings, a very positive event!


So how did I do with my four selections for the week of May 10, 2004? Three out of four of the stock picks showed gains, ranging from almost unchanged at .14%, to a solid gain of 72.6% by Panera. Only Hewitt showed a loss, dropping by (11.6%) since posting the stock a little over a year ago. Averaging all four performances gives us an average return of 21.26% for the four stocks selected!

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

Bob


Posted by bobsadviceforstocks at 1:08 AM CDT | Post Comment | Permalink
Updated: Tuesday, 5 July 2005 1:18 AM CDT
Saturday, 2 July 2005
A Reader Writes "Can I get your opinion on the company EZPW?"
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.

Looking through my mail, I found a question from S.Y.L., who was interested in learning about a company EXPW. SYL wrote:
Hi,

Can I get your opinion on the company: EZPW? I completely understand that you are not a professional, but I'm still interested in getting an opinion from a more seasoned investor than me. I found this one doing some basic screening and it looks quite good. Good earnings growth, low debt, and very very low valuation ratios. Am I missing anything or is this stock as good as it seems to me? Please be as open as possible. I'm interested in hearing about how you would go about researching this company further.

I'm looking forward to your reply.

Regards,

SYL
Thanks so much for writing again SYL! I will tell you how I go about looking at a stock, but this is certainly not the only way!

EZPW stands for Ezcorp, Inc. EZPW closed at $11.03, up $.28 or 2.60% on 7/1/05. According to the Yahoo "profile" on EZPW, the company "...operates pawnshops and payday loan stores in the United States."

My first step is to check the latest quarterly report. On April 20, 2005, EZCORP (EZPW) announced 2nd quarter 2005 results. Some of the basic things I look at are: revenue growth and earnings. For the quarter ended March 31, 2005, EZPW reported revenue growth of 8% to $63.1 million compared with $58.3 million the prior year. Net income jumped 32% to $4.0 million ($.29/share) compared with $3.0 million ($.23/share) the prior year same period. These appeared to me to be fairly solid results.

Generally, my next step in the process is to go over to Morningstar.com, in particular the "5-Yr Restated" financials, which for EZPW is located here. By the way, I do not own any shares or options in EZPW, nor am I "picking" this stock for my blog. I just want to answer a question from a reader!

The financials show some good information and are also deficient for this particular stock. We can see on the Morningstar page that revenue, except for a small drop between 2000 and 2001, has been steadily increasing. $197.4 million was reported in revenue in 2000, dropping to $186.2 million in 2001, but has increased each year to the $235.9 million in the trailing twelve months (TTM).

Earnings have also steadily improved, increasing from a loss of ($2.71) in 2000 to a net positive income of $.90/share in the TTM.

Free cash flow appears to be positive if we can apply a mathematical subtraction of capital spending from operating cash flow, however, I don't extrapolate anything on these financial reports on my blog. In fact, the balance sheet is also absent from Morningstar. You might be able to get this information elsewhere, but relying on Morningstar, I generally avoid stocks completely with incomplete financial reports. There are plenty with complete numbers to choose from!

My next step is to review some basic parameters of this company. For this purpose, I like to use Yahoo "Key Statistics" on EZPW. Here we can see that this company is virtually a "micro-cap" stock with a market capitalization of only $137.07 million.

As you noted in your question, the P/E is certainly cheap at 12.21, with a forward p/e of 8.48. Thus the company has a PEG ratio of only 0.52. Price/sales is also cheap at 0.56.

EZPW has only 12.43 million shares outstanding with 11.10 million that float. Currently there are only 183,010 shares out short, representing 1.70% of the float or only 1.1 trading days of volume. No cash dividends and no stock dividends are noted on Yahoo.

Finally, I like to take a look at a "Point & Figure" chart from Stockcharts.com. For EZPW, this is located here.


Here we can see that the stock bottomed at around $.75/share in late 2000. The stock has been moving higher recently, with a peak at $22 recorded in February, 2005. The stock has actually been looking weaker recently, with a breakdown, decline below the "support" line at $11.50 in May, 2005. The stock appears to be still trading weakly.

So what do I think of this stock? I like the recent quarterly report, the five year growth in revenue in earnings, and the valuation. Things I am uncomfortable with regarding this stock is the tiny nature of the company, the fact that possibly because of the size, I do not have any reported free cash flow, nor is the balance sheet specified. With the graph looking weak, I would not be inclined to be buying any of these shares. In addition, I suspect that the stock might be looking weak due to concerns over tightening of credit market with the repeated increases in the interest rates by the "Fed". But I frankly don't know!

In conclusion, this stock is an interesting candidate but I just don't have enough information to recommend this stock. I am unable to get all of the information that would help me make an investment.

Thanks again for stopping by and taking the time to write me a question! If you or anyone else have questions regarding a stock or one of my posts, please feel free to email me at bobsadviceforstocks@gmail.com.

Bob


Posted by bobsadviceforstocks at 11:51 PM CDT | Post Comment | Permalink
Wednesday, 29 June 2005
A Reader Writes "Why does the percent gain appeal to you?"
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 was checking my mail this evening and I found an interesting question from S.Y.L. who writes:
Bob,

Greetings from Minnesota. I have become a regular reader of your blog
recently, after finding a link to it from the blog at Wealthcast.com. What
interests me most about your stock picking ways is that they closely
resemble my own, except for one thing which I wanted to ask you about. A
good starting point for me is Yahoo! Finance's volume leaders list. It
interested me to learn you take a different approach, and look at Yahoo!
Finance's percent gainers list. Why does the percent gain appeal to you?
I'm very interested in reading your reply.

Good night

Regards,

S.Y.L.
First of all, thanks so much for writing! I have been fortunate to receive a link from Jack Rothstein who is a well-regard professional investment advisor, so this might be a great question for him as well :). However, since this is my strategy, I probably should try to tackle this question.

A few years back, before the dot.com "bust" I found that I could literally buy stocks on the top percentage gaining lists and sell them the same day a few hours later for a profit. What I realized was that many of these stocks have what we refer to as "price momentum" and after these large gains, would have a high probability to go higher yet.

More recently, I have used this "price momentum" screen, as we could call it, as a starting point. In other words, it is my belief that among these strong stocks, there may be things we can determine that will allow us to more safely predict that stocks like these will continue to advance. At least that is my working hypothesis.

Thus, after looking at stocks on the top % gainers list, I go on to check some very important fundamental issues, like earnings and revenue growth, free cash flow, and the balance sheet. With these looking positive, I make my educated "guess" that the stock is likely to be moving higher and that today's price action is not a fluke.

Is high volume a good or better indicator? I really don't know. I don't know if what I am doing will be successful long-term. I don't know if there are many better ways to pick stocks. There is so much that I don't know!

However, thus far, I have been pleased with the results I have experienced with this approach and if you go through the many stocks I have examined, I am sure that you will find among them some of the strongest stocks in the market the past couple of years!

I hope this answers your question. I am sure that you can tell by my answer that I am truly an amateur investor! If you have another approach, and think it is maybe "better", please feel free to email me and let me know how you approach stock picking and how your results have been!

Bob


Posted by bobsadviceforstocks at 10:30 PM CDT | Post Comment | View Comments (1) | Permalink

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