Stock Picks Bob's Advice
Wednesday, 27 August 2003
August 27, 2003 Netflix, Inc. (NFLX)
This is a stock that I DO have some shares in another account. That gives me a little more familiarity with the issue and it may give me a bias towards it but it showed up in the numbers today and deserves consideration.
According to money.cnn.com, Netflix "...provides an online entertainment subscription service providing subscribers access to a library of filmed entertainment titles formatted on DVD." What this amounts to is a DVD subscription service, where, as I understand it (I do not use the service), for a monthly fee you can rent unlimited #'s of DVD's (sequentially not all at once lol).
Anyhow, NFLX is indeed having a nice day trading at $32.66 up $2.87 or 9.63% as I write.
On July 17, 2003, NFLX reported their second quarter results which, as I see it, were nothing short of stellar: Revenue was $63.2 million, up 74% from the same quarter last year which was $36.4 million, and up 14% from the $55.7 million for the PRIOR 3 months. They reported 1.15 million subscribers, adding 327,000 new subscribers during the quarter, a 39% increase in subscribers added, but on a negative note a decrease in 22% from the 417,000 new subscribers added in the first quarter of 2003.
Morningstar shows the exponential growth in revenues reported by this company at $1 million in 1998, $5 million in 1999, $36 million in 2000, $76 million in 2001, $153 million in 2002 and extrapolating the current quarter would get us north of $240 million in 2003.
Free Cash Flow, which in my humble opinion, is a good measure of viability of a rapidly expanding business (remember all of those dot-com's which 'burned' up all of their cash?)...has improved nicely from a $(29) million in 2000 to a positive $2 million in 2001, $37 million in 2002 and $57 million in the trailing twelve months.
This company is LOADED with cash (relatively speaking!) with $116.3 million in CASH reported on Morningstar.com with $51.5 million in current liabilities and only $500,000 reported in long-term liabilities. In addition, NFLX report $3.3 million of other current assets on Morningstar.
If you go to Yahoo.com and check under finance and detailed stock quotes you can pull up the 'profile' on Netflix where I have obtained the following information: Market cap is a moderate $715.1 million with 24.0 million shares outstanding and 10.8 million shares that float. No dividend is reported. Since NFLX just turned profitable, no p/e is recordable, the price/sales ratio is a moderately pricey 3.55, and as of 7/8/03, there were 8.99 million shares out short representing 83.3% of the float (!!!). This gives us a short ratio of 6.96 days based on average trading volume of 1.29 million shares.
Overall, I like this stock a lot. The growth is there although there is a SLIGHT decelleration of quarter to quarter subscriber growth, the numbers are still strong. The company has lots of cash and is throwing off more $millions in free cash flow. The p/e, p/sales is a bit expensive but with all of the other things in line, this shouldn't be a problem. Recently, there was a court decision upholding Netflix's methods (? patents) on delivery of DVD's...so there is what we call a nice 'moat' forming. I have borrowed that from Morningstar.com which puts out a nice newsletter and likes to talk of moats around companies....sounds medieval absolutely.
Good luck investing! Please let me know what you think and share this website URL with your friends. If you have any questions, comments or words of encouragement, please feel free to contact me at firstname.lastname@example.org.
Tuesday, 26 August 2003
August 26, 2003 Engineered Support System (EASI)
How do we separate the big movers in the market like EASI today that closed at $54.77 up $7.95 or 16.98% from the 'flash in the pan' kind of stock move or a stock that may be making part of a long-term appreciation? That is what this weblog is all about. Trying to separate the wheat from the chaff...trying to figure out if a stock that pops is for real and maybe just maybe will even be higher priced six months from now. I think we are onto something but I will let you be the judge.
Engineered Suport System (EASI), according to money.cnn.com, "...is a designer & manufacturer of military support equipment and electronics for the U.S. armed forces. EASI also engineers and manufactures air handling & heat transfer equipment, material handling equipment and custom molded plastic products for commercial and industrial products."
This stock made a big move, as do many on our list, due to an earnings announcement today. Per NYTimes on the web, for the third quarter ending July 31, 2003, EASI reported revenue growth of 46% or $155.7 million vs $106.6 million last year. In addition, net earnings for the quarter increased 67% to $12.4 million or $.72/diluted share vs. $6.9 million or $.43/diluted share in 2002.
Looking at Morningstar.com, we find that revenue growth is not a NEW thing for this company. In 1998, EASI had $97.0 million in revenue, $165.3 million in 1999, $335.3 million in 2000, $365.2 million in 2001 and $407.9 million in 2002. Extrapolating the current quarter would give us about $600 million in 2003.
Free cash flow has improved recently per Morningstar with $17 million in 2000, $16 million in 2001, $51 million in 2002 and $69 million in free cash flow in the trailing twelve months.
Assets and Liabilities are fairly well balanced, although we have seen prettier picture on other entries, with $14.9 million in cash and $83.1 million in other current assets. This is balanced by $84.5 million in current liabilities and $35.1 million in long-term debt. With the nice positive free cash flow, these levels should not be a problem on my superficial examination. But I let you, as always, the reader make your own determination.
Yahoo.com shows that the market cap for EASI is a moderate $754.9 million with 16.1 million shares outstanding and 14.1 million of them that float. The stock has a 1.5 for 1.0 split on November, 2002, but no cash dividend is paid. The price/easrnings is a reasonable (to me) 24.32 and the price/sales is at 1.66 suggesting a reasonable valuation. There are 949,000 shares out short representing 5.52 days of trading activity.
I like EASI but do not at this time own any shares. The p/e is reasonable, the growth is steady and strong, the free cash flow picture is beautiful but the liabilities are a little bit high relative to assets...but that in itself appears to be a minor imperfection. This might well be a stock to purchase!
Thanks for stopping by and please come and visit again. As always, would love for you to leave some comments here or send me any questions/comments to email@example.com
Monday, 25 August 2003
August 25, 2003 Electronic Clearing House (ECHO)
Now we are starting to come across some TINY companies with a great track record. I do not own any shares of this stock...but sure am tempted! Electronic Clearing House, Inc. (ECHO) "...is a financial services provider with specialties in Internet transaction delivery, credit card processing, electronic check processing and the design and implementation of integrated systems."
ECHO is performing well in the market in a relatively soft market environment: currently trading at $6.36, up $.74 or 13.17% on the day.
On August 4, 2003, ECHO announced the results for the three months ending June 30, 2003: revenue for the third quarter was a record $10.5 million an increase of 25.7% when compared to $8.4 million in the same quarter in 2002. Operating income rose to $564,000 compared to a loss of $143,000 in the 2002 quarter. On a per share basis, net income was $.05/share compared to $(.03)/share in the same quarter last year.
Looking at Morningstar.com, we find an increase in revenue from $21.1 million in 1998, $23.8 million in 1999, $28.3 million in 2000, $29.9 million in 2001, $33.3 million in 2002 and $34.7 million in the trailing twelve months.
Free cash flow has been less than fabulous with $0 reported in 2000, $1 million in 2001, ($2) million in 2002 and ($1) million in trailing twelve months.
Assets and liabilities shows $2.8 million in cash and $3.3 million in other current assets balanced by $3.0 million in current liabilities and $2.0 million in long-term liabilities. Although not flush with cash, they are also not burdened by excessive debt.
Another tiny company, relatively speaking, this company carries a market cap of $32.6 million per Yahoo.com with 5.80 million shares outstanding and 5.60 million of them that float. No dividend is paid. The p/e is reported at 56.20 which while sounding steep also represents the recent return to profitability which if continued should drop this p/e quickly. Price/sales is an inexpensive 0.88.
There are 3,000 shares out short as of 7/8/03...representing 0.2 days of trading volume.
This is an interesting stock and if you would like a fast-growing small company, this might be it. Again, like all small issues, it may suffer from liquidity issues...but within a portfolio, this may be a great pick!
Thanks again for stopping by. I hope all this commentary is helpful to you. I sure would appreciate some comments here on the website...or some more emails to let me know your comments, questions, or encouraging words!
email me at Bobsadviceforstocks@lycos.com
August 25, 2003 Invivo Corporation (SAFE)
It is Monday morning again. I came to work to see a patient and then to clear off my desk where old mail/and things to do are piling up....but I had to check out those stocks with the greatest gains...even IF the market is slipping a bit this morning. They say if you do something for six weeks it becomes a habit....well this website is passing three months now...and we ARE starting to get some regular repeat visitors....and it IS becoming a habit for me. I find that I am learning a lot about looking at stocks and I hope you are too!
Enough editorializing...Invivo (SAFE)"...designs, manufactures, and markets monitoring systems that measure and display vital signs of patients in medical settings." I could relate to that! I do not own any shares of this company nor do any members of my family.
SAFE is having a nice day on the heels of announcing a three for two split today. As I write, SAFE is trading at $20.39, up $.96 on the day or 4.93%.
As reported in NYTimes on the Web, Invivo reported their fourth quarter results on August 5, 2003, and they were very nice: revenues for the quarter were $16.9 million compared to $11.3 million in 2002 same quarter (an increase of 49%), and net income was $1.01 million or $.24/share compared to $734,000 or $.16/share in the same quarter in fiscal 2002.
Looking at Morningstar.com, we find a nice pattern of increasing revenue growth from $28.0 million in 1998, $34.7 millio in 1999, $36.6 million in 2000, $38.1 million in 2001, $42.1 million in 2002, and $45.6 million in the trailing twelve months. (Extrapolating the current quarter of $16 million plus would get us over $60 million on an annualized basis).
Free cash flow is less than impressive with $0 in 2000, $1 million in 2001, $4 million in 2002, and $0 million in the trailing twelve months.
Assets and liabilities on Morningstar are quite good with $27.1 million of cash, more than enough to cover both the $9.4 million of current liabilities and $2.0 million of long-term liabilities with lots left over! In addition, they are reported to have $22.9 million of other current assets.
This is another pretty tiny company with a market cap of $75.2 million with only 3.87 million shares outstanding and 3.60 million of them that float. No dividend is paid. The p/e is a reasonable (imho) 24.98, and the price/sales ratio is reasonable at 1.64. There were only 6,000 shares out short as of 7/8/03, representing 0.75 average trading day volumes.
I do like this stock a lot. I wish it had a bit more free cash flow...but it is positive or zero the past few years so they are not apparently burning through their ample supply of cash. They have a very nice consistent record of increasing their revenue each year and are trading at a relatively low p/e. With the SMALL market cap, this makes the stock relatively volatile...which may be good on the upside but also may cause difficulty getting into our out of this stock with a large number of shares making it less attractive to institutional investors like mutual funds.
Thanks for stopping by! Please visit again soon and if you also have a website, please put a link to this weblog on your website...it would help us get noticed by search engines like Google!
Saturday, 23 August 2003
"How are we doing?" A look back on Week of July 7th, 2003
I haven't done this update for awhile so as we slip back....this gives us a little longer view...almost two months out now. The week of July 7th was not a busy week on the weblog for me. We actually only made two picks! Findwhat.com (FWHT)on 7/7/03, and Websense (WBSN) on 7/8/03.
We picked Findwhat.com on 7/7/03 at $22.16/share. FWHT closed yesterday 8/22/03, at $20.89 which is a loss of $1.27 or 5.7%. Websense was selected on 7/8/03 at $20.26. As of yesterday, WBSN closed at $23.63 a gain of $2.74 or a gain of 13%.
So, for the week, with just two picks we had one down 5.7% and the other up 13%. This gives us a net gain of 7.3% or an average gain of 3.65%. Nothing spectacular but at least moving in the right direction.
Thanks for stopping by! Please come back and visit soon. Be sure to stop by the main webpage: http://bobsadviceforstocks.tripod.com where there are links to my current trading portfolio as well as a summary of all of our picks on this site.
Have a great weekend!
Friday, 22 August 2003
August 22, 2003 Electronics Boutique Holdings Corp. (ELBO)
It is 1 pm Central time with the market set to close in two hours. The Dow continues to fade, now down 26.38 points to 9397.30 with the NASDAQ clinging to a 2.50 point gain at 1780.05. Today does not look too promising a trading session if you are long the market like I always am.
One other stock caught my eye today as I was skimming through those greatest percentage gainers today: Electronics Boutique (ELBO). I have seen many of these small shops in malls and have sometimes spent time looking for a good video game for my Mac or my PC. Yep, I am prone to spend an occasional evening staring at the computer screen...playing Command and Conquer or some other silly game!
Anyhow, ELBO is beating the tide handily, trading as I write at $32.30 up $3.49 or 12.11%. I do not own any shares of this company.
ELBO reported earnings yesterday....and I believe this is the source of the pop in the stock price. For the second quarter ending August 2, 2003, revenues rose 15% to $302.1 million from $262.6 million last year. Net income was $1.7 million, a 181% increase from net income of $0.6 million last year or on a per share basis, $.07 vs $.02 in 2002.
Morningstar.com shows a pattern of steady growth in revenue starting with $0.5 billion in 1998, $0.6 billion in 1999, $0.7 billion in 2000, $0.8 billion in 2001, $1.06 billion in 2002, and $1.3 billion in 2003.
Free cash flow, while erratic, has recently turned to the positive, with $(44) million in 2001, $8 million in 2002, $(9) million in 2003, and $35 million positive cash flow reported in the trailing twelve months.
Assets and liabilities look satisfactory per Morningstar which reports $118.3 million in cash and $226.5 million in other current assets as opposed to $193.8 million in current liabilities and only $12.1 million in long-term liabilities on the balance sheet.
Yahoo shows that the market cap is a moderate $716.2 million with 24.9 million shares outstanding and only 13.2 million of those that float. No dividend is paid. The p/e is a reasonable 18.71 and the price/sales ratio is inexpensive at 0.52. There are 2.42 million shares out short which represents a bit of an opportunity to those of us that invest long. The short ratio, representing the trading days to cover is 5.75 as of 7/8/03, which suggests a bit of buying pressure supplied by the shorts...which may be in effect today.
I do like this stock a lot, and would consider buying some shares in here if I had some free cash (lol)...anybody want to email me some? Just kidding. Listen, have a great weekend, stop by and visit again and frequently, and if you have a website of your own I would greatly appreciate if you could post a link here for those that might be interested!
Regards to all of my friends.
Trading transparency QSII
I actually wanted to pull some cash off my portfolio for some work around the house, so I sold 50 shares of QSII this morning for about $42. We still have 150 shares and I will try to hold off additional sales unless the stock appreciates/depreciates significantly. Bob
August 22, 2003 DJ Orthopedics, Inc. (DJO)
The market started off enthusiastically with a quick gain with the news that Intel was optimistic about the coming quarter. The Schering-Plough piece did not help and the market paused in its recent bullish move with a bit of a correction. Currently the Dow is trading at 9413.79 down 9.89 on the day but the NASDAQ at 1783.83 is up 6.28.
Looking through the biggest percentage gainers I came across DJ Orthopedics, Inc. (DJO). This company, according to CNN.Money, "...is an orthopedic sports medicine company that designs, manufactures and markets products & services that repair, regenerate and rehabilitate soft tissue and bone, help protect against injury and treat osteoarthritis of the knee."
Currently, DJO is trading at $10.89 up $.52 or 5.01% on the day. The latest earnings report, for the second quarter of 2003, was released on 8/5/03. According to NYTimes on the Web, net revenues for the quarter ending June 28, 2003, were $47.4 million, an increase of 4% over last year's net revenue of $45.7 million. Net income in the quarter was $2.7 million or $.15/share compared with a net loss of $4.9 million or $(.27)/share in 2002.
Morningstar.com shows a nice steady increase in revenue starting at $85.3 million in 1996, $94.9 million in 1997, $104 million in 1998, $116 million in 1999, $144 million in 2000, $169 million in 2001, and $183 million in 2002. Free cash flow has improved recently from a $(5) million in 20002, $(10) million in 2001, to a positive $11 million in 2002 and $14 million in the trailing twleve months.
Assets and liabilities are fairly well balanced with $13.2 million of cash and $64.0 million of other current assets vs. $24.7 million of current liabilities and $89.3 million in long-term liabilities.
DJO is a fairly small company with a market cap of $186.1 million with 17.9 million shares outstanding and only 9.3 million of them that float. No dividend is paid. Due to prior losses, no p/e is reportable and the price/sales is a reasonable 1.00 per Yahoo. There are only 119,000 shares out short...representing 1.23 days of average trading volume.
Overall, this is a nice small orthopedics firm. I own some EXAC in my trading portfolio but do not own any share of this company. Good luck investing!
Thanks for stopping by! Please come back and visit again soon.
Thursday, 21 August 2003
August 21, 2003 Lifeway Foods, Inc. (LWAY)
O.K. I hate doing this but I found this one this morning and jumped in with both feet first BEFORE I posted this note. So I AM an owner of 200 shares in my trading account and will update that account shortly.
Lifeway (LWAY)"...produces kefir, a drinkable product similar to yogurt sold under the name Lifeway's Kefir, a plain farmer's cheese sold under the name Lifeway's Farmer's Cheese, and a fruit sugar-flavored product similar to cream cheese sold under the name Sweet Kiss." (according to CNN.Money) (This is what I would call a 'wholesome' stock pick!)
Lifeway, as I write, is trading at $14.51 up $2.10 on the day or 16.91%. On August 14, 2003, as reported on NYTimes on the Web, Lifeway reported their second quarter 2003 earnings result. Revenues for the quarter ending June 30, 2003, were $3.78 million, up 25% from $3 million last year. Net income was $691,082 or $.16/share an increase of 96% compared to $351,656 or $.08/share last year.
Looking at Morningstar.com we find sequential growth in revenue of $6.0 million in 1997, $6.8 million in 1998, $7.9 million in 1999, $9.2 million in 2000, $10.7 million in 2001 and $12 million in 2002. Extrapolating the current quarter would get us something like $14 million in 2003.
Free cash flow, while small, is positive with $0 million in 2000, $1 million in 2001 and $3 million in 2002. Per Morningstar, $2 million in the trailing twelve months.
Looking at Assets/Liabilities we find Lifeway with $8.4 million in cash and $3.0 million in other current assets, easily covering the $1.1 million in current liabilities and $1.1 million in long term debt.
Looking at Yahoo, we find that LWAY is a TINY company with a market cap of $52.4 million. This is one of the smallest companies we have reviewed here with 4.22 million shares outstanding and only 1.10 million shares that float. No dividend is paid. Company is currently selling at a trailing p/e of 21.89 with a bit of a steep price/sales ratio of 3.95. As of 7/8/03, there are only 3,000 shares out short representing 0.3% of the float so forget about a short 'squeeze'.
I like this stock...except for its tiny size and the fact that Fidelity required 100% equity...that is, it is non-marginable. Good luck if you buy! Thanks for stopping by.
August 21, 2003 Trading Transparency
Haven't seen too much to post but did like LWAY today. Picked up 200 shares at around $13.80 or so....and in the last week, sold my RATE....stock price has been drifting down and we still had about a $260 profit so out went THAT interest-rate sensitive issue. QSII has been strong since our purchase so after a fast 26% gain, I dropped 100 of the 300 shares. That's about the size of things. Will try to post the full report on LWAY later today.
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