A New ***PODCAST*** for Thoratec (THOR) and Neoware (NWRE)
Hello Friends! Here is my PODCAST on my Blue Coat Systems (BCSI) Sale, and Neoware (NWRE) and Thoratec (THOR). Thanks for stopping by!

Bob

January 3, 2006 Neoware Systems (NWRE)
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 decisions based on information on this website.

With indications that the Fed might be soon over its series of rate tightenings, the stock market moved strongly higher in the late portion of the session. Looking through the list of top % gainers on the NASDAQ, I came across Neoware, which has been showing up not infrequently on the gainers list the last several trading sessions. Neoware (NWRE) closed at $25.63, up $2.33 or 10.0% on the day. I do not own any shares nor do I have any options in this company.

According to the Yahoo "Profile" on Neoware, the company

"...provides software, services, and solutions to enable thin client appliance computing, an Internet-based computing architecture targeted at business customers. Its software and management tools secure and manage a smart thin client appliances that utilize the open, industry-standard technologies used to create alternatives to full-function personal computers and green screen terminals used in business."

Looking for the latest quarterly report, Neoware reported 1st quarter 2006 results on November 2, 2005. Revenue grew 63% to $26.5 million from $16.3 million in the prior year same period. GAAP net income for the quarter was $1.84 million or $.11/diluted share, up from $1.39 million or $.09/diluted share in the same quarter last year.

Looking longer-term at the Morningstar.com "5-Yr Restated" financials on NWRE, we can see the beautiful progression in revenue from $17.7 million in 2001 to $89.0 million in the trailing twelve months (TTM).

Earnings during this period have been a bit erratic, increasing from $(.05)/share in 2001 to $.48/share in the TTM. The total number of shares have also increased somewhat from 10 million in 2001 to 16 million in the TTM.

Free cash flow has been positive but not increasing with $10 million reported in 2003, and $8 million reported in the TTM.

The balance sheet, as reported by Morningstar.com, appears solid to me with $44.1 million in cash alone, enough to cover both the $16.4 million in current liabilities and the $1.4 million in long-term liabilities almost 2 1/2 times over! In addition, Morningstar reports NWRE with $24.2 million in other current assets.

Taking a look at Yahoo "Key Statistics" on Neoware for some additional valuation numbers on the company, we can see that this is a small cap stock with a market capitalization of only $417.9 million. (I am using the Ameritrade definition for a Small Cap stock, which is under $500 million in market cap, with mid cap being from $500 million to $3 billion, and Large cap being over $3 billion. The market capitalization is calculated by multiplying the current market price by the number of outstanding shares.

The trailing p/e is rich at 52.85, with a forward p/e (fye 30-Jun-07) of only 30.15 and a PEG of 1.34. Thus, even though the p/e is quite high, the rapid growth anticipated will be bringing it down fast enough that the PEG is not really that high at all.

Looking at the Price/Sales ratio, and comparing it to its Industrial Group of "Networking and Communication Devices" according to the Fidelity.com eResearch website, we find that Neoware is actually moderately priced by this parameter. Neoware (NWRE) has a Price/Sales ratio of 4.3, midway in the group led by Sycamore Networks (SCMR) at 15.4, Juniper Networks (JNPR) at 7, Blue Coat Systems (BCSI) at 5.4, then Neoware (NWRE) and Cisco (CSCO) at 4.3, and 3Com (COMS) at 2.1.

Looking at some additional statistics from Yahoo, we find that there are 16.31 million shares outstanding with 1.73 million (as of 11/10/05) our short representing 10.80% of the float or only 3.7 trading days. This is a bit significant (using my arbitrary 3 day rule) but is not overwhelming.

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

We can see that the chart has been very erratic, trading down to support levels and up to resistance levels several times, and only since about July, 2005, the stock has been trading steadily higher as it broke to the upside. The stock chart looks strong short-term but not particularly overvalued.

So what do I think? Well this is an interesting small cap stock. The steady revenue growth is impressive. As often is the case, as I have found, earnings are more erratic in many small companies. However, at least for the last few years, the company is showing steady growth. Free cash flow is positive and the balance sheet is quite solid. The company has plenty of cash. In addition, the PEG is just over 1.0, and the Price/Sales ratio is towards the bottom of its group. The chart looks strong as well.

If I were in the market to be buying shares, this is the sort of company that I would be buying. However, I actually sold a stock at a loss today (BCSI) and thus am once again sitting on my hands, waiting for a partial sale at a gain instead to signal me to be out in the market buying a new position.

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

Bob

January 3, 2006 Thoratec (THOR)
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.

Looking through the list of top % gainers on the NASDAQ today, I came across Thoratec (THOR) that is currently trading at $22.52, up $1.83 or 8.84% on the day. I do not own any shares nor do I have any options on this stock.

According to the Yahoo "Profile" on THOR, the company

"....manufactures circulatory support products for use by patients with congestive heart failure. The company operates in two segments, Cardiovascular and International Technidyne Corporation (ITC). The Cardiovascular segment develops, manufactures, and markets medical devices used for circulatory support products, which include ventricular assist device for the short-term and long-term treatment of congestive heart failure, as well as vascular graft products for use as a shunt between an artery and a vein. It offers a product portfolio of implantable and external circulatory support product devices, including the Thoratec Implantable Ventricular Assist Device, a biventricular implantable blood pump; the HeartMate Left Ventricular Assist System (LVAS), an implantable device for mid to long-term cardiac support for those patients ineligible for heart transplantation; and the HeartMate II, an implantable LVAS consisting of a miniature rotary blood pump that is designed to provide long-term support."

Taking a look at the latest quarterly result, the company announced 3rd quarter 2005 results on October 25, 2005. Sales for the quarter ended October 1, 2005, grew 20% to $48.8 million vs. $40.7 million in the prior year. GAAP net income was $3.1 million or $.06/diluted share, up from a loss of $(398,000) or $(.01)/diluted share in the same period the prior year. The company also announced that, according to the report, "...will achieve or exceed the high end of these ranges." regarding prior guidance. In other words they reported a solid earnings report and raised guidance.

How about longer-term? Taking a look at the "5-Yr Restated" financials on THOR from Morningstar.com, we can see a steady increase in revenue from $83.4 million in 2000 to $195.2 million in the trailing twelve months (TTM).

Earnings during this period have been a bit erratic, as we often see with small companies, but have increased from a loss of $(.04)/share in 2003 to $.22/share in the TTM. The company has increased the # of shares outstanding from 33 million in 2000 to 52 million in 2001, but has not expanded the float since, with 51 million shares outstanding in the TTM.

Free cash flow has improved from $(5) million in 2002, to $12 million in 2004 and $34 million in the TTM.

The balance sheet looks solid with $184.4 million in cash, enough to cover the $30.2 million in current liabilities and most of the $204.1 million in long-term liabilities reported on Morningstar. In addition, the company has an additional $88.7 million in other current assets.

What about valuation numbers? Looking at Yahoo "Key Statistics" on THOR, we can see that this is a mid cap stock with a market capitalization of $1.14 billion. The trailing p/e is rich at 100.85 (the company is just turning profitable) with a forward p/e (fye 01-Jan-07) of 46.85. The PEG is also a bit steep at 2.07 (5 yr expected).

According to the Fidelity.com eResearch website, Thoratec is in the "Medical Instruments/Supplies" Industrial Group. Within this group, the Price/Sales of THOR is near the top at 5.5. At the top of this group is Alcon at 9.5, Guidant at 5.9, then Thoratec at 5.5, Stryker at 3.9, Boston Scientific at 3.2, and Baxter Intl at 2.4.

Looking at other key statistics from Yahoo, we can see that the company has 50.63 million shares outstanding. Currently there are 3.60 million (11/10/05) shares out short representing 8% of the float or 6 trading days of volume (the short ratio). This is significant imho and may be supporting the price rise. No cash dividend is reported. And no stock splits are noted on Yahoo.

What about a chart? Taking a look at a "Point & Figure" chart from Stockcharts.com on THOR, we can see a very volatile graph with the company now just once again breaking out to the upside. This correlates with their financial fortunes, if you review the Morningstar.com earnings trends.

So what do I think? This is a very interesting stock that deserves to be on our blog. They have great earnings, revenue growth, have an interesting product, and might well be an acquisition target of a company like Medtronics (MDT). I do NOT have any kind of inside information on anything like that. But wouldn't it make a nice fit in a company that works with defibrillators and other heart products?

Anyhow, that's the pick for the morning. Of course, since I just sold a stock at a loss, I am NOT in the market to buy anything. But if I were, this might be the kind of stock I would be buying! Thanks again for visiting. Please feel free to comment on the blog or email me at bobsadviceforstocks@lycos.com if you have any questions!

Bob

"Trading Transparency" Blue Coat Systems (BCSI)
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.

A few moments ago I sold my 160 shares of Blue Coat Systems (BCSI) at $41.95 after they hit my 8% loss limit. I had acquired these shares on 11/22/05 for a cost basis per share of $45.87. Thus, I had a loss of $(3.92) or (8.5)% since purchase. Now I shall once again be waiting for a sale on "good news" at a gain, before replacing this position with another stock.

I really hate to start out the New Year this way, but then again, my trading strategy is about discipline. About setting up rules and parameters and sticking with them. And that is one of the biggest reasons I blog, to keep myself accountable to someone else, which in this case is you the reader!

What drove the stock lower today was the news that BCSI was to be acquiring Permeo Technologies. In general, whenever a company announces an acquisition, the acquiring company usually experiences a dip in its price and the target of the acquisition climbs in price.

Even as I write, BCSI is bouncing back. Should I have waited before selling? Perhaps. But I believe my success or failure in this process will be dependent on my willingness to have the discipline in following my own trading rules.

Please let me know if you have any comments or questions. You can leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Bob

New ***PODCAST*** for St. Jude Medical (STJ) Weekend Portfolio Trading Analysis
Hello Friends! Here is the LINK for my ***PODCAST*** on St. Jude Medical (STJ) my weekend trading portfolio review.

Bob

"Looking Back One Year" A review of stock picks from the week of October 18, 2004





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

Besides looking at my actual trading portfolio, as I did in my previous post, I also like to review the stock picks that I discuss on this blog. Stocks, that for the most part, I do not and have never actually owned. But it is from this larger list of stocks and the techniques involved in their selection, that I actually pick stocks for my own portfolio.

Please remember that in practice I sell my losing stocks quickly and completely and my gaining stocks slowly and partially. This will affect performance considerably. For this discussion, I always assume a "buy and hold" approach, which does manage to give me an idea about how the stocks have generally been performing.


During the week of October 18, 2004, I only discussed one stock, Diagnostic Products (DP), which I reviewed on Stock Picks Bob's Advice on October 18, 2004, when it was trading at $42.18. DP closed at $48.55, on December 30, 2005, up $6.37 or 15.1% since posting.

On October 24, 2005, Diagnostic Products announced 3rd quarter 2005 results. Sales for the quarter ended September 30, 2005, grew 7% to $116.3 million from the same quarter in 2004. Earnings for the quarter came in at $17.1 million or $.56/diluted share, up from $16.5 million or $.55/diluted share the prior year. The company showed growth year-over-year, but it certainly appeared to be a bit anemic.

Since this was the only stock discussed on the blog that week, the performance of the stock picks was the performance of DP which was a gain of 15.1%. Thanks so much for stopping by and visiting! If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Bob

"Weekend Trading Portfolio Analysis" St Jude Medical (STJ)
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's the weekend, and in fact, it's the New Year's Eve weekend! Time for partying and for resolutions. I know there are many things I can do to improve myself this upcoming year. I hope that we all are able to fulfill our own resolutions and find good health and happiness in 2006!

This year I have been using the weekend as a time to take a look at my actual holdings in my trading portfolio. I do this to share with you what I actually own, in addition to the many stocks I like to discuss. And it is also gives me a chance to review my holdings in a more analytic fashion than I might otherwise be doing.

St Jude Medical (STJ) is a special stock for me especially in regards to this blog. On May 12, 2003, I made my very first post on this stock website and discussed St Jude Medical. This is what I wrote:

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.

I "Revisited" St Jude (STJ) on April 20, 2005, when STJ was trading at $39.67.

I currently own 180 shares of St Jude Medical (STJ) which were acquired 10/15/03 with a cost basis of $28.90. STJ closed on 12/30/05 at a price of $50.20, for a gain of $21.30 or 73.7% since my original purchase. As is my strategy, I have sold portions of my STJ position as the stock appreciated, selling 30 shares on 1/28/04 at a price of $69.84 (STJ had a 2:1 split on 11/23/04). I sold 60 shares of STJ on 7/20/05 at $46.54. These shares were sold at the 30% and 60% appreciation levels. My next sale will either be back at the 30% level on the downside or at 90% appreciation, when I plan on selling 1/6th of my existing position.

So how is St Jude doing right today? Let's take another look at this stock and see what we can find out.

First, according to the Yahoo "Profile" on St Jude, the company

"...engages in the development, manufacture, and distribution of cardiovascular medical devices for the cardiac rhythm management (CRM), cardiac surgery (CS), and cardiology and vascular access (C/VA) therapy areas worldwide. It offers a range of CRM products, such as bradycardia pacemaker systems, tachycardia implantable cardioverter defibrillator systems, and electrophysiology catheters; various CS products, including mechanical and tissue heart valves, valve repair products, and epicardial ablation systems; and C/VA products,that include vascular closure devices, angiography catheters, guidewires, and hemostasis introducers."

And what about the latest quarterly result? On October 17, 2005, St. Jude reported 3rd quarter 2005 results. Net sales came in at $738 million, up 28% from $578 million the prior year. Net earnings for the quarter came in at $168 million, or $.44/diluted share up from $91 million or $.25/diluted share in the same quarter in 2004. This was a solid quarter imho for St. Jude.

What about the Morningstar.com information? Does that still look encouraging?

Reviewing the Morningstar.com "5-Yr Restated" financials on STJ, we can see a beautiful picture of revenue growth from $1.2 billion in 2000 to $2.7 billion in the trailing twelve months (TTM).

Earnings during this time have grown uninterrupted from $.38/share in 2000 to $1.36/share in the TTM. Free cash flow has also grown steadily from $355 million in 2002 to $568 million in the TTM.

The balance sheet shows that STJ has $712.5 million in cash, enough to cover all of the $682.4 million in current liabilities and some of the $243 million in long-term liabilities. In addition to the cash, STJ has $1.3 billion in other current assets, meaning that there is over $1 billion in excess of current assets after covering both the current and long-term liabilities combined. This is a solid balance sheet imho.

And what about a chart? Reviewing the "Point & Figure" chart on STJ from Stockcharts.com, we can see a beautiful chart!

The stock moved strongly higher between March, 2001, when the stock bottomed at around $11.50, then hit resistance around $20 in May, 2002. The stock consolidated until December, 2003, when it broke through resistance at around $18 and has moved steadily higher since.

In summary, St. Jude Medical has been a strong stock in my trading portfolio. I was fortunate to buy shares in October, 2003, prior to the latest strong price move higher. I have sold portions of this stock twice as the stock appreciated in value, and am close to a third sale. The latest earnings report is solid, and the Morningstar.com "5-Yr Restated" page also is very strong. To top it off, the chart looks bullish if a bit over-extended.

Anyhow, that's St. Jude! I don't see any reason to sell off the remaining shares and shall be waiting for the stock to either appreciate to another sale point, or backtrack to a sale point on the downside. The price action will determine my future strategy with this company.

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

Bob

New ***PODCAST*** for Tutorial on Selling Short: A Reader Inquires
Hello Friends! This is the ***PODCAST*** for the Tutorial on Selling Short.

Please email me at bobsadviceforstocks@lycos.com if you have any questions or comments.

Bob

A Reader Writes "Could you give us a tutorial on shorts?"
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.

Prudy, who goes by the name of Ydurp on Xanga, wrote me a nice comment and included a question. I want to comment on what she wrote and open up this discussion on short interest, and when to sell stock once again. Her comments:

Hi, Bob. I just listened to the Podcast and was pleased to hear my name. Well, it was backwards but it was me. Hey, I think I finally got it; the rationale behind your system. Two things drove it home. The first was your mention of greed:) And I have to say it's been all about greed for me. The second was your attitude about the long haul, how you were okay following the stock all the way up and then back down to your selling point because you had already taken your profits. Hmmmm, I finally got it: a kinder, gentler trader.

As always, I am grateful for your help. I have another question and it is about shorts. I watched Mad Money last night and the guy he interviewed was talking about shorts. I gathered people were betting on a stock's failure but the conversation was geared toward stocks that were good companies that didn't stay down. The focus, and this is where they lost me, was when the stock started to pick up. Could you give us a tutorial on shorts? Is it the same as puts and holds?

First of all, thank you for writing Prudy! And I thought your name was ydurp :).

Let me comment first on what you wrote about selling. I do believe that we all need to get over our "greed" in dealing with stock performance. When a stock appreciates, it is a happy moment for us. We feel vindicated by our decision to buy the shares. In face we feel "smarter" than the next guy. Heck, I love that feeling. In the same way, I hate to have that feeling of loss, literally, when a stock declines.

In my perspective, feelings quite interfere with our rational management of our stocks. When a stock moves higher, we either want to buy some more shares and really make a lot of money, or we want to sell the whole thing and cash in on the jackpot. Have you ever felt that way?

I think it is far more rational to sell a small portion of a stock that has moved higher, and leave the rest to appreciate some more if that is what the shares are going to do. Sort of like picking the ripe oranges off a tree (I just visited my brother in California who has a great set of navel orange trees....is that spelling correct?)

I sort of explain it like the guy that goes to Vegas to gamble at the slots. He (perhaps me..) arrives at the casino with a roll of quarters in his right pocket. He doesn't want to put all of his winnings right back into the machine, so he puts his winnings in his left pocket, only allowing himself to gamble with the right pocket quarters. I try to do the same when investing. Sort of keep selling off the gains, while leaving the original investment on the table. Do you follow?

As far as the "long haul" is concerned, I don't really know how long that will be. Sometimes I have a stock holding for only a day. Others I have held for years. It depends on how the stock performs. Not on how I feel about the company :).

In other words, if the stock doesn't hit any sale points to unload all of the shares (on "bad news"), then I shall continue to own at least a portion of my original investment.

Now let me review once again when I sell a stock on "bad news". First of all if there really is some bad news....like fraud, or product problems, or accounting irregularities, I might just unload my entire position on the spot regardless of the price movement. I always leave myself that out.

Otherwise, after purchasing a stock, I only let it decline 8% before unloading my position completely. If the stock goes past 8% on the loss, well I unload it as soon as I find out :). My son says I should be doing things more automatically. Once again, he is correct, and you might want to set up some automatic sales of stock; I continue to monitor this manually.

Other cases: if I have sold a portion of a holding once on "good news", that is, I sold 1/6 of my position at the first sale point which for me is at a 30% gain, then instead of letting the stock drop to an 8% loss, I sell if it retraces back to the original purchase price, the "break-even" point.

If I have sold a stock more than once, for example if I have sold a stock three times with the latest sale point at a 90% appreciation level, I allow the stock price to only retrace back to 1/2 of the highest appreciation level....in this case, letting it drop back to where I had a 45% gain, and then I would sell ALL of my remaining shares.

O.K....now to your question about shorts.

Short sellers do the opposite of what all of average folk do in regards to stocks. That is they actually SELL the stock FIRST and plan on BUYING the stock LATER to COVER their "SHORT SALE".

Do you follow? I don't sell stocks short, but will not rule out ever doing it in the future. Basically, when an investor or speculator buys a stock first, we are gambling on the possibility that the stock will APPRECIATE in value, so that we can sell the stock and pocket the difference. That is, we make money when the stock price goes UP.

Short-sellers do the opposite. Basically, they ask a broker to BORROW the shares from another account and SELL them. They pledge their own assets against this sale, promising to buy the shares back for the account that is missing the shares at a future date. Meanwhile, they are liable for any dividends the stock might be paying to the investor that has had his shares sold (unbeknownst to him or her :)). A short-seller who SELLS a stock FIRST and plans to BUY the shares LATER is gambling that the stock price is actually going to DECLINE. Since the short-seller could therefore buy the stocks back CHEAPER, he or she could thus pocket the difference and PROFIT from a stock's DECLINE.

Grandad's Bluff Post Card from the 1940's

One of the big downsides to short-selling is that the potential losses of a short-seller are INFINITE! That is if you sell a $5 stock short (you are "short" the sale because you sold it and didn't have any of you own to do so!), you could lose an infinite amount of money as the stock can climb as high as the moon! However, if you BUY a stock at $5, the maximum amount you can lose is just the purchase price (everything lol). But a short seller can lose a MULTIPLE of his investment. That is, if he short-sells a stock at $5 and it goes to $15, and he buys it back at that price, he has lost $10/share....more than the $5 original sale price.

I hope you follow :).

In my own evaluations, I often point out the "short ratio". This is a figure that I glean from Yahoo on the "Key Statistics" pages of each stock. This short-interest, which is usually several weeks old, tells me the number of days of average trading volume it would take for all of the shares that have been sold "short" to be covered. That is, if the short-sellers had to all buy back shares to return them to the original owners, the days worth of volume required. This is calculated by knowing the average trading volume of a stock and the number of total shares that have been sold short.

Personally, I use a three day cut-off for significance. This is an arbitrary cut-off that I set up in my reviews; I just needed some figure to distinguish what seemed to be a lot from a little in the number of days, the short ratio. I infer a bullish indicator from a lot of shares sold short. It is possible that the short sellers know something bad about the stock, which will result in the decline of the stock price. But in the face of good news, like a solid earnings report, or a new contract, etc., knowing that there are a lot of shares "pre-sold" so to speak, is imho, a bullish indicator that they might need to rush to cover to prevent their losses from mounting as the stock price moves higher.

When there are a lot of short-sellers out there, and the stock price moves higher, a "panic" might develop as all of the short-sellers rush to the exits. Which for them, means searching for shares to BUY to cover their pre-sold shares. This is called a SQUEEZE....and that is why I think it is bullish.

Anyhow, that was a pretty long-winded answer. I hope that was helpful. Please remember that I am truly an amateur, so my answer is from that perspective. If you or anyone else has questions or comments, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Bob

New ***PODCAST*** for Reliv International (RELV)
Hello Friends! Here is the ***LINK*** to the ***PODCAST*** on Reliv International (RELV). Thanks for visiting!

Bob