July 18, 2005 Charles & Colvard (CTHR)
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 NASDAQ this morning and came across Charles & Colvard Ltd (CTHR). I do not own any shares nor do I have any options in this company.

CTHR is having a great day in the face of an otherwise negative market; trading at $27.87, up $1.93 or 7.44% on the day as I write.

What is moving the stock higher today is a company report that earnings will be released tomorrow (7/19/05) and an earlier press release that upped guidance for sales.

According to the Yahoo "Profile" on CTHR, the company "...engages in the manufacture, marketing, distribution, and sale of moissanite jewels. It sells moissanite (also known by its chemical name, silicon carbide) jewels principally in the United States and Canada."

CTHR reported 1st quarter 2005 results on April 18, 2005. For the first quarter ended March 31, 2005, CTHR reported a 100% increase in sales to $11.2 million from $5.6 million the prior year same quarter. Net income came in at $2.01 million or $.14/diluted share, a 262% increase over the last year's $555,000 or net income or $.04/diluted share.

Examining the "5-Yr Restated" financials on Morningstar.com for CTHR, we can see that revenue did drop slightly from $12.8 million in 2000 to $11.5 million in 2001, but has rather rapidly expanded to the $29.5 million reported in the trailing twelve months (TTM).

Earnings per share have also been a bit erratic, increasing from $(.94)/share in 2000 to $.66/share in 2002. However, this was followed by a drop to $.08/share in 2003, and subsequent increases from that level.

Free cash flow has been flat with $3 million reported in 2002, dropping to $0 in the TTM.

According to Morningstar.com, the balance sheet is impeccable, with $13.5 million in cash alone, enough to cover the $3.0 million in liabilities more than four times over! There are NO long-term liabilities reported. In addition, CTHR has $34.9 million in other current assets.

Taking a look at Yahoo "Key Statistics" on CTHR, we can see that this is a small cap stock with a market capitalization of only $403.44 million. No P/E is reported and thus no PEG ratio either.

Reviewing the Price/Sales ratio with data from
Fidelity, in the "Recreational Goods, Other" industrial group, we have CTHR at the top with a Price/Sales of 12.7. This is followed far back by RC2 Corp (RCRC) at 1.9, Fossil (FOSL) at 1.7, Orange 21 (ORNG) at 1.3, Movado (MOV) at 1.1, and LJ International (JADE) at 0.4. Thus, the stock is a bit pricey on this particular parameter.

Looking at other statistics on CTHR, we find that there are 14.39 million shares outstanding with 10.69 million shares that float. Of these, there are 604,430 shares out short representing 5.10% of the float or 4.5 trading days of volume, which will just be adding some buying pressure on this already strong stock.

The company does pay a small dividend of $.05/share yielding 0.19%. No stock dividends are reported on Yahoo.




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

we can see that this stock was trading sideways between 2001 through August, 2003, when it broke through "resistance" at $4.50 and has moved strongly higher since then. This is a strong chart, albeit a bit overextended imho.

So what do I think? Well this is a very small company and I cannot tell what the potential is for synthetic jewels. However, the last quarter was strong, the company is raising guidance, the balance sheet is impeccable, revenue has been growing steadily, and the chart looks strong.

Valuation is a bit questionable, but this is often the case in stocks that move strongly!

Thanks so much for stopping by and visiting my blog! Be sure to email me or leave your comments right here if you have any!

Bob

"Looking Back One Year" A review of stock picks from the week of May 24, 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 truly an amateur investor so PLEASE consult with your professional investment advisors prior to acting on any information on this website!

If you are new to this blog, well "Welcome!" and please make yourself at home. I have lots of stocks that I have taken a look at you are welcome to my thoughts. If you have any questions or comments, please feel free to email me at bobsadviceforstocks@lycos.com and I will try to get back to you.

One of the things I like to do on this blog is to review my past "picks" and see how they have done over the year since posting. These analyses assume a buy and hold approach that I do not in fact employ in practice. I believe in selling losing stocks quickly and gaining stocks slowly. I use an approximately 56 week trailing period for review and each week review the next week of selections.

On May 24, 2004, I posted PetMed Express (PETS) on Stock Picks at a price of $7.36. PETS closed at $8.07 on 7/15/05, for a gain of $.71 or 9.6% since posting.

On May 16, 2005, PETS announced 4th quarter 2005 results. For the quarter ended March 31, 2005, net sales increased 10% to $23.5 million, from $21.5 million in the prior year same quarter. Net income came in at $2.4 million or $.10/diluted share, up 67% from $1.3 million or $.06/diluted share.

On May 25, 2004, I posted Coldwater Creek (CWTR) on Stock Picks at a price of $25.40. CWTR has been a VERY strong stock since posting and has had TWO 3:2 stock splits: the first on 7/26/04, and the second on 3/21/05, since posting. This makes our effective stock pick price actually $11.29/share. CWTR closed at $23.70 on 7/15/05, giving me a gain of $12.41 or 110% since posting!

On May 25, 2005, CWTR reported 1st quarter 2005 results. Net sales increased 25% for the quarter ended April 30, 2005, from $124.5 million in the same quarter last year. Net income increased 60% to $3.2 million or $.14/diluted share up from $5.3 million or $.09/diluted share the prior year same quarter.

On May 26, 2004, I posted Copart (CPRT) on Stock Picks at $23.02. CPRT closed at $24.83, for a gain of $1.81 or 7.9%.

On June 1, 2005, CPRT announced 3rd quarter 2005 results. For the quarter ended April 30, 2005, revenues increased 12% to $130.4 million from $116.6 million the prior year. Earnings grew 24% to $30.9 million or $.33/diluted share, up from $25.0 million or $.27/diluted share last year.

The last stock pick that week was Wendy's (WEN) which I posted on Stock Picks on May 28, 2004 at a price of $37.43. WEN closed at $45.88 on 7/15/05 for a gain of $8.45 or 22.6% since posting.

Because of the "finger in the chili" case scandal, sales at Wendy's restaurants were adversely affected, and sales grew during the 1st quarter 2005, results of which were posted on 4/28/05. Revenue grew 7.1% to $894 million. Earnings, however, were flat at $.45, compared with $.45/share a year ago.

So overall, this was another great week for Stock Picks! All four stocks discussed that week had nice gains ranging from a 7.9% gain for Copart to a 110% gain for Coldwater Creek. The average performance of all four stocks "picked" that week works out to a gain of 37.5%.

Thanks so much for visiting here! Please remember that past performance is NO guarantee of future performance, that I am truly an amateur and that you should check with your professional investment advisors, and always do homework on all stock market ideas yourself prior to investing!

Have a great week trading everyone!

Bob

July 15, 2005 Cintas (CTAS)
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.

The first place I go to find a new stock pick is the top % gainers list. I use the Cnn.money site, but the USA Today site, or other internet sources are certainly workable. This afternoon, looking through the list of top % gainers on the NASDAQ, I came across Cintas (CTAS) which closed at $44.00, up $4.20 or 10.55% on the day. I do not own any shares or options in this company.

According to the Yahoo "Profile" on CTAS, this company "...engages in the manufacture and provision of corporate identity uniform programs, entrance mats, restroom supplies, promotional products, first aid and safety products and services, and document management services."

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 climbed 9.6% to $809.2 million, and earnings jumped 14% to $83 million or $.48/share from $72.7 million, or $.42/share in the 4th quarter of 2004. The company also guided revenue estimates for the upcoming year slightly higher.

Looking a bit longer-term, reviewing the "5-Yr Restated" financials for CTAS on Morningstar.com, we can see a very steady improvement in revenue, with growth from $1.9 billion in 2000 to $3.0 billion in the trailing twelve months (TTM).

Earnings have also progressed in a remarkably steady fashion from $1.14 in 2000 to $1.68 in the TTM.

As a BONUS, the company also has been steadily increasing its DIVIDEND...raising it each year from $.19/share in 2000 to $.32 in the TTM.

Free cash flow has also been solid with $270 million in 2002 reported, increasing to $309 million in the TTM.

Looking at the balance sheet, we can see that CTAS has $367.8 million in cash according to Morningstar.com, and $824.5 million in other current assets. This is plenty to cover both the $385.4 million in current liabilities and the $385.4 million in long-term liabilities combined.

Reviewing "Key Statistics" from Yahoo on CTAS, we can see that this is a large cap stock with a market capitalization of $7.57 billion. The trailing p/e isn't bad at 26.17, with a forwar p/e (fye 31-May-06) at 19.47. thus, the PEG is just a bit over 1.0 at 1.25.

Looking at the Price/Sales ratio in the context of a Paul Sturm perspective, that is in the context of other companies in the same "industry group", we can see that Cintas is fairly reasonably valued as well. Cintas is in the "Business Services" group per Fidelity, and the steepest Price/Sales ratio in that group is Equifax (EFX) at 3.7 Price/Sales, Global Payment (GPN) at 3.3, Cintas (CTAS) at 2.3, Certegy (CEY) at 2.2, and IPAYMENT (IPMT) at 1.4. Thus, CTAS is in the middle of this group in regards to this particular valuation parameter.

Other "numbers" from Yahoo, show that there are 172.09 million shares outstanding with 140.68 million that float. As of 6/10/05, there were 5.29 million shares out short, up slightly from the prior month. This represents 3.70% of the float, or a significant (imho) 6.7 trading days of volume.

The company, as noted, does pay a small dividend of $.32/share yielding 0.80%. The last stock split was a 3:2 split in March, 2000, per Yahoo.

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

I see what looks like a long-term declining trend in stock price from $56, all the way back in May, 2002, to the $44 level where it closed today. What concerns me is what appears to be a series of declining highs, but the recent move breaking through a resistance level is moderately encouraging. Certainly the stock chart is not ahead of itself, and I wouldn't call this one over-extended. Yet the question remains whether this shows any significant upward momentum at all!

So in summary, the stock moved higher today on a positive earnings report and guidance yesterday. Other positives include the steady growth in revenue the past five years, the steady growth in earnings, and even the growth in dividends each and every year! Free cash flow is solidly positive and the balance sheet looks healthy. Valuation numbers are reasonable and there are even a lot of shares out short that need to be covered. In fact, my only particular concern is the less-than-convincing point and figure graph. But over the short-term, the chart does show the stock breaking past resistance levels....but can is sustain this advance?

In any case, I don't have any cash or a market signal to be investing! Thanks again for stopping by. I hope you all have a wonderful weekend. As always, please feel free to leave comments right here on the blog or feel free to email me at bobsadviceforstocks@lycos.com.

Bob

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

"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

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

"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

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

"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

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