March 2, 2005 Pacific Sunwear (PSUN)

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 before taking any action based on information on this website!

Lately, with my entries, I have been trying to explain my rationale for picking stocks...I hope that is helpful and that you feel free to comment or ask questions! My first place for looking for new stock ideas is the list of top % gainers on the NASDAQ. Today I noticed that Pacific Sunwear (PSUN) was on the list, and in fact, PSUN closed at $28.52, up $2.06 on the day or 7.79%. I do not own any shares nor do I have any options on this company.

It has been my impression over the years that stocks that are making a strong move upward on any particular day, may, if they have additional characteristics, be the stocks that move higher over the intermediate and longer-term.

According to the Yahoo "Profile" on PSUN, PacSun "...is a specialty retailer of everday casual apparel, accessories and footwear designed to meet the needs of active teens and young adults in the United States. The Company operates three primarily mall-based chains of retail stores under the names Pacific Sunwear (PacSun), Pacific Sunwear (PacSun) Outlet and d.e.m.o. PacSun and PacSun Outlet stores specialized in board-sport inspired casual apparel, footwear and related accessories...."

My next "screen" for a stock involves the latest quarterly result. I am looking for a strong report with both earnings and revenue increases. On March 1, 2005 (yesterday after the close of trading), PacSun announced 4th quarter 2004 results. It was this announcement that provided the impetus to move the stock higher today! Total sales for the quarter ended January 29, 2005, increased 16.2% to $379.7 million from $326.8 million last year. Company same store sales were up a solid 5.1% overall. Net income for the quarter increased 19% to $40.9 million, compared with $34.5 million the prior year. On a per share basis, this was a 26% increase to $.54/diluted share, from $.43/diluted share the prior year. Actually, for a retail investment, I am looking for three things: increase in sales, increase in "same-store" sales, and increase in earnings. PacSun passed this test with flying colors!

The next thing I look for is consistency of results. That is, was the latest quarter a "fluke" or has this company been performing like this over the last several years. A good friend of mine introduced me to the Morningstar.com website, and I haven't left since! Within this site, I like to look under "financials" and use the "5-Yr Restated" financials portion. For PSUN, this is located here.

On Morningstar.com, we can see the beautiful ramp-up of revenue from $.4 billion in 2000 to $1.2 billion in the trailing twelve months (TTM).

Earnings have been a bit more errratic, increasing from $.49/share in 2000 to $1.28/share in the TTM.

Next, I check the "Free Cash Flow". Think of this as the actual cash that is being generated by this business venture. For PSUN, this was a negative $(35) million in 2002, $36 million in 2003, $111 million in 2004, and $88 million in the TTM.

Finally, just below that portion is the Morningstar Balance Sheet assessment. Not being an accountant, I do know that assets are better than liabilities (!). And in addition, current assets are $'s that are available now or in the next 12 months, and need to be used to offset current liabilities. In this case, we can see that PSUN has $84.5 million in cash and $238.1 million in other current assets. This is plenty to cover both the $119.6 million in current liabilities and the smallish $37.0 million in long-term debt. Thus, this looks nice as well!

My next screen is to gather some basic information about "valuation". For this I turn to the "Key Statistics" on PacSun. Here we can see that this is a mid-cap stock with a market capitalization of $2.12 billion. The trailing p/e is great (imho) at 20.55 and the forward p/e is nice at 17.60 (fye 31-Jan-06).

Nicer yet is the PEG ratio, which compares the P/E to the growth rate. For PacSun, the 5-yr estimated PEG is 0.84...anything under 1.0 is a nice value! The price/sales also isn't too bad at 1.79.

Yahoo reports 74.24 million shares outstanding with 71.00 million of them that float. There are 3.35 million shares out short as of 2/8/05, representing 4.72% of the float or 2.255 trading days of volume. In my analysis, for what it is worth, I have been using 3.0 trading days of volume as significant. So this isn't (imho) a large factor for PSUN.

No dividend is paid and Yahoo reports a 3:2 stock split on 9/8/03.

How about "technicals"...that is what does the graph or chart look like? Is it "promising"? I have been using "Point & Figure" stock charts from Stockcharts.com. The PSUN "point & figure" chart from Stockcharts looks promising:

Here we can see a stock that was peaking in February, 2001, around $16.00, then dropped down to $6.00 in September, 2001, but since then has been climbing steadily and in a very strong fashion to its current level of $28.52. The chart looks wonderful to my amateur eyes!

So what do I think? Well this is a very pretty picture of a stock. The companty made a nice price move today on great earnings results and solid same-store sales numbers. The revenue has been growing especially steadily, and is often the occurrence, earnings have been a bit more erratic, yet the trend is still solidly higher. Free cash flow is positive, the balance sheet is solid, valuation is reasonable (imho), and the chart looks great! In fact, if I had some money (lol) or if my "system" indicated it was time to add a position, I might just be buying some PSUN right here. I think you could do far worse.

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

Bob

February 28, 2005 Alamo Group (ALG)

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 have had a couple of letters recently asking me again how I pick stocks...and bemoaning my recent sparsity of new stock picks. So today I dedicated myself at finding a new stock pick and hopefully using that selection to demonstrate the how and why of my selection methods. I hope that this is helpful for you.

After many years of buying stocks, I came across the observation that it may be possible to make money on a stock investment by purchasing stocks on a day that they are making a large move in an upward (!) direction. Sort of banking on a continued momentum in stock price after a single day of outperforming most other issues. But this is only my first screen!

There are a lot of places to look for large percentage gainers in the market. I have taken to using the Money.cnn.com site but I have also utilized the lists on USA Today as well. Frankly, any source that provides a list will suffice.

For this example, I found a candidate for inclusion today on the money.cnn.com list of top % gainers on the NYSE. I have lately tried to stay with stocks that are near $10 or higher, as the lower-priced stocks tend to be a bit more volatile and I end up selling them quickly on their pull-backs.

Alamo Group (ALG) made the list today, and as I am writing is trading at $24.80/share, up $.95 or 3.98% on the day. I do not own any shares nor do I hold any options on this equity. When I first saw the name, in fact, I thought it was the rental car company (see what I know!), and was surprised to find that it was an agricultural implements company. In fact, turning to the Yahoo "Profile" on Alamo Group, we can see that this company "...is a manufacturer of equipment for right-of-way maintenance and agriculture such as tractor mounted mowing and other vegetation maintenance equipment, street sweepers, agricultural implements and related after-market parts and services."

My next criterion to assess a stock investment is to check the latest quarter's results. Basically, I am just looking for a quarter in which both revenue and earnings are growing. My stock market selections are basically what I would call high "quality" stocks. We can go back and forth on what the definition of "quality" really is. In my opinion, quality is about consistency of corporate performance. I want to fill my portfolio with consistently growing companies...both growing their earnings as well as their revenues!

Usually I can find this information right on Yahoo under "headlines". However, Alamo Group is a little harder to find...I would rather read a report of earnings than struggle with a 10-Q. I usually go over to the homepage of the company and look for their news or earnings releases. That is where I found the latest quarterly report for ALG.

On November 4, 2004, Alamo Group (ALG) announced their 3rd quarter 2004 results. Net sales for the quarter ended September 30, 2004, increased 24% to $88.0 million from $70.7 million the same quarter the prior year. Net income was $4.2 million or $.43/diluted share, a 59% increase over the prior year's $2.6 million or $.27/diluted share. The report does note that results were affected by an acquisition of Rousseau Holdings, however, excluding the effect of that acquisition, revenue was still up 17% and earnings were still up 65% over the prior year.


Well the latest quarter was very nice! However, how about a longer-term view on this company? Have they shown the ability to continue this growth? For that I turn to Morningstar.com, and fortunately, the information that I use is still available without charge on their website.

The information I like to review is the "5-Yr Restated" financials on Morningstar.com on ALG. First, looking at the series of bar-graphs we can see that revenue has increased extremely steadily from $176.6 million in 1999 to $325.0 million in the trailing twelve months (TTM).

Next, the earnings, which have been a bit more erratic, have improved from $.63/share in 1999 to $1.30 in the TTM. In fact, they have steadily improved after dipping to $.65/share in 2002.

How about "Free Cash Flow"? This is found under the earnings chart, and shows that ALG had $1 million in free cash flow in 2001 and although erratic, stayed positive, and in the TTM had $14 million in free cash flow. Not being an accountant, in my simple understanding the free cash flow is the actual cash that is being created or consumed by the entity. In the old dot-com era, these little firms would be loaded with cash and talk about their "burn rate" which I assume was their amount of negative free cash flow. Probably more complex than that, but it works for me!

Finally on Morningstar.com, I like to check a basic balance sheet. What do I look for? Simply put, I would much rather see assets outweigh liabilities. And more importantly, current assets especially cash, outweighing current liabilities. For ALG, we can see that they have $7.1 million in cash and $153.7 million in other current assets, which is plenty to cover both the $51.8 million in current liabilities AND the $19.7 million in long-term liabilities more than two times over. This looks just fine to me!

My next stop is to look and see if I can get some "valuation" issues defined. My approach tends to be eclectic, that is, I do not want to limit myself to momentum, valuation, or technical approaches...rather why not try to utilize all of these perspectives to try to identify a "quality" investment?

For this, I refer back to Yahoo "Key Statistics" on ALG. Here we can discover that this is really a small company with a market capitalization of only $241.50 million. The trailing p/e is reasonable at 19.06. There aren't any forward p/e's, I assume the company is too small to have many analysts following, but the price/sales at 0.71 is also cheap being under 1.0.

According to Yahoo there are only 9.74 million shares outstanding with only 2.70 million of them that float. There are only 12,000 shares out short as of 2/8/05, representing 0.44% of the already small float or only 0.3 trading days of volume to cover. I arbitrarily use 3.0 trading days as a cut-off for a significant level of short interest. Above that is bullish in my humble opinion.

Yahoo also shows that the company pays a small dividend of $.24/share yielding 1.01%. No stock splits are reported. While I am not requiring stocks to have a dividend, the presence of a dividend just makes that investment that more attractive!

What about "technicals"? That is, how does the chart look? Lately, I have been using "point and figure" charts which show the "battle" between the forces driving a stock higher (columns of x's), and forces driving a stock lower (columns of o's). Again, a nice free service is Stockcharts and here is the "Point & Figure" chart on ALG:

Bottom line, this is a gorgeous graph which goes all the way back to April, 1999, when the stock price bottomed out at around $7.00 and shows a steady appreciation in stock price to the current levels around $24.80. The stock basically looks great if not a bit ahead of itself.

So what do I think? Putting all of this together I find a series of "passing marks" for Alamo Group (ALG) in my evaluation. What were they? In summary, a nice price move today, a solid earnings report, a very pretty five year picture of earnings and revenue growth (with earnings being a little less consistent), solid free cash flow, a solid balance sheet, a dividend, reasonable valuation, and a nice chart!

I am not buying any shares because I am simply not in the market to buy anything. That is, I wait for a buy signal from my own portfolio which if I were selling a portion today at a gain, I probably would be putting in an order for some shares of this stock. On the downside, the company is very small and may be subject to volatility. But thus far, the stock has been performing quite steadily in an upward direction!

Thanks again for stopping by! I hope that my explanation was not too detailed...and that you bore with me. If you have any questions, comments, or words of encouragement, please feel free to email me at bobsadviceforstocks@lycos.com.

Bob

A Reader Writes "Do you have any tips?"

Hello friends! Thanks again for stopping by and visiting my blog, Stock Picks Bob's Advice. I had another letter today (!) again asking about stock advice.

As I point out many times all over this website, I am an amateur investor and am not prepared to give individual stock market advice to individuals. However, there are many stock market ideas all through the blog that you can review with your investment advisors....and I am sure some will turn out to be great stocks over time.

However, more important than any picks, I want my readers to appreciate my techniques for picking stocks, and hopefully, they too will be able to pick stocks just as easily.

Xanthe wrote:

Hi Bob,

I have never purchased stock before but am very eager to do so in the near future. I admit that I am a little nervous in doing so because as you probably know stocks can be very unpredictable. Do you have any tips for me and can you reccomend any certain stocks to buy?


Thanks very much,
Xanthe

Well Xanthe, I hope that answers your question. My tips for you are to think well before buying any stocks, you can adopt my methodology....you can read my prior post...or take a look at the dozens of stocks listed here! Good luck and let me know what you decided to do!

Bob

A Reader Writes "I would appreciate any kind of guidance."
Hello Friends! That beautiful picture is a shot of Boston College from the BC Homepage. What a beautiful school and a wonderful city as well. Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor, so please consult with your professional investment advisors prior to making any decisions based on information on this website.

Checking my mail today, I saw that I received a nice letter from Chris who wrote:

Hi Bob,

My name is Chris and I stumbled upon your website today in search of
stock pick blog rings. I am a senior at Boston College and am taking
a financial services class. One of our projects is to split up in
groups and to pick stocks to create a portfolio. We are given a
million dollars and are asked to choose stock and justify the
choices. One thing my professor is keen on is the use of blogs
whether to take them for their face value or to understand their
misdirection.

Your page seems primarily focused on your past picks and monitoring
them, however, I was wondering if you might have an recent stock
picks that might seem good. I was also wondering how you initially
go about picking some stocks whether it be analyzing PE ratios or
betas or any other type of regression analysis. I am really open to
learning anything here and would appreciate any type of guidance.

Regards,

Chris

Chris, I hope that I may be of help to you! I hope that as a blogger I can provide you with more direction rather than misdirection.

I would like you to pick the stocks for your portfolio. You are welcome to any of mine :). But it is important that you understand why you might pick a stock...and see if your philosophy of investing is similar to mine (and your group's).

The first thing I like to do is to peruse the list of top percentage gainers. I have found over the years that within those lists are stocks that are worth considering for investment. You will have to see if that approach works for you!

Next step is to go to the latest quarterly results. You can find these over at Yahoo finance. Let me know if you have a problem, just scan through the headlines and see if you can find the latest quarter's results. Basically, what I am looking for in the latest quarter are two basic things: growth in revenue AND growth in earnings. In addition, if the company provides some positive guidance, like raising guidance for future results, well that is "gravy".

(You may start seeing that there isn't much 'magic' about my approach...just a bit of homework!)

Generally, at that point, I will go to Morningstar.com and check the "5-Yr Restated" financials. What am I looking for? Basically, growth in revenue...as steady as possible, same for the earnings. In addition, Morningstar gives information regarding free cash flow, and I insist on this being positive, and if there is a positive trend as well, then that is noted! Finally, on the lower part of the page is a balance sheet. Not being an accounting wiz, I simply look to make sure that the cash and current assets are greater than the current liabilities and that the long-term liabilities aren't too burdensome.

Next step, I like to touch on "valuation"....you can see this isn't my number one screen. For this, I generally click back on Yahoo Finance to "Key Statistics" for the stock I am researching. What do I look for there? I like to at least look at the market cap of the stock, the P/E, the PEG, and a number on the Price/Sales. I report on the number of shares, and see if there are a lot of sales out short....if there ARE a lot of short sellers, well, on an up move there might be a bit of a squeeze...as these shorts try to cover.

Finally, I go over to Stockcharts.com and look at a "point & figure" chart....I have found that these are helpful in getting a good feel for long-term trends as the columns of climbing 'x's' battle with the declining 'o's'.

PHEW...by the way, that's a photo of Faneuil Hall, one of my favorite tourist traps in the Boston area.

Anyhow, that's how I pick my stocks! But equally important is a little strategy on portfolio management. In the past, I didn't have any idea at all about moving into equities and moving back into cash depending on the overall market tone. In fact, I still don't have a great way of doing this. What I have settled on is an internal mechanism of using the activity of my own stocks to determine my trading direction....

What do I mean? Well, first of all, let's set a fixed maximum of stocks you are going to hold in this "phantom" portfolio. If you do it like I do it, you might consider 25 issues.

First, start at 50% invested. That is, start with 12 or 13 issues and 50% of your cash utilized. Pick stocks that fit the criteria I have suggested...you can pick recent stocks that I have written about, or find new ones tomorrow off the top % gainers list....just follow my screening techniques...they really are just common sense.

Next, sell any stock that drops 8%. Don't replace that stock with another issue unless you have a "buy signal" from the rest of your holdings. What I like to use is a sale at a gain. Now, when do you sell at a gain? Well, for me, I am trying to sell my losers quickly and sell my winners slowly.

What do I mean about that? What I mean, is that I sell 1/4 of my holdings when the stock hits a 30% gain, another 1/4 at 60%, 1/4 at 90%, 1/4 at 120%...and then sell 1/4 at 180%, 240%....until 360%...then I plan to continue selling 1/4 positions at 90% gains....

I hope you follow. I actually do this in practice.

Next on the downside, if I have sold a stock once (30% gain), then on the way back down, I sell at break-even instead of waiting for an 8% loss. On stocks that I have sold at higher levels of gains, I let the stock retrace 50% of the highest gain before unloading the shares. I will sell if clearly there is bad news....but generally, I like to try to avoid my own judgments, and let the price of the stock determine my action.

There are LOTS of stock blogs out there hyping all sorts of stuff. My methodology is very unsexy in my humble opinion, but I believe it is pretty common sensical....(is THAT a word?)....anyhow, I hope my discussion is helpful. Please write back and let me know what you decided and how things work out.

Bob

A Reader Writes "Will PMTI split?"

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 acting on any information on this website.

I always enjoy getting letters and comments from readers! Checking my mailbox, I found this:

hi bob

just wanted to email you to say i have some stock in pmti aswell, and just curious to know if you think the stock will split and if so what should i be looking for?

rick

Well Rick, first of all, I am glad that you own some PMTI, which is Palomar Medical Technolgies.

On February 10, 2005, PMTI reported 4th quarter 2004 results. Fourth quarter revenues jumped 63% to $16.4 million from $10.1 million the prior year. Net income came in at $5.4 million or $.29/diluted share, up from $1.0 million or $.06/diluted share the prior year. These were great results and the stock has been strong since then.

Looking at a recent "Point & Figure" chart from Stockcharts.com:

You can see how strong this stock has been performing! Looks like it broke down a little back in June 2004, when it dropped from $21 to $11.50. However, the stock has been strong since that time, staying above its support line.

When do I think it will split? I really don't know. It doesn't really affect my actions on a stock. I just wait until it hits percentage gain points and sell portions of my holdings.....so I don't really know WHEN it will split, or if it will.

What should you be looking for? That is certainly up to you. As for me, I sell portions at gains and then raise the downside stop each time...that is raise the level at which I would sell the remaining position on a retrenchment of the stock.

I frankly don't think I have answered your question, so if you have additional comments, please post them here or email me at bobsadviceforstocks@lycos.com.

Bob

"Looking Back One Year" A review of stock picks from the week of January 5, 2004






Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice! I have enclosed an image from the New York Burns Film Center on one of my old favorite cartoon figures: Mighty Mouse!

As always, please remember that I am an amateur investor so please consult with your professional investment advisors prior to making any decisions based on information on this website.

It is the weekend and I like to review past selections when I get a chance (!), and see how they would be doing if we had purchased all of them and held on to them...without selling either at a loss of 8% or at gains; a process that I like to do with my real trading portfolio. In any case, it still gives us an idea about the potential and the pitfalls of this and any trading strategy! This week I am up to the week of January 5, 2004. I made six selections that week.

On January 5, 2004, I posted Applied Films (AFCO) on Stock Picks at $37.46. AFCO closed at $22.30 on 2/25/05 for a loss of $(15.16) or (40.5)%.

On January 20, 2005, AFCO reported 2nd quarter 2005 earnings results. Net revenues were down (17.9)% to $46.9 million compared to $57.1 million the prior year. Pro forma income from continuing operations was down to $1.8 million or $.12/diluted share from $4.1 million or $.28/diluted share the prior year.

On January 6, 2004, I posted Dollar Tree (DLTR) on Stock Picks at a price of $31.85. DLTR closed at $26.85 on 2/25/05 for a loss of $(5.00) or (15.7)%.

On February 23, 2005, DLTR reported 4th quarter 2004 results. Sales for the quarter came in at $987.5 million, a 10.6% increase over the $893.1 million the prior year. Earnings came in at $.79/share up from $.69/share in the same quarter last year. For the year, same-store sales growth was an anemic 0.5%.





On January 7, 2004, I posted Kenneth Cole Productions (KCP) on Stock Picks at a price of $31.95. KCP closed at $29.09 on 2/25/05 for a loss of $(2.86) or (9.0)%.

On February 24, 2005, KCP reported 4th quarter 2004 results. Fourth quarter revenue, for the quarter ended December 31, 2004, increased 5.3% to $136.1 million. However, fourth quarter diluted EPS dropped to $.45/share from $.49/share the prior year.

On January 7, 2004, I posted Unifirst (UNF) on Stock Picks at a price of $27.11. UNF closed at $39.25 on 2/25/05 for a gain of $12.14 or 44.8%.

On January 5, 2005, UNF announced 1st quarter 2005 results. For the quarter ended November 27, 2004, revenues increased 4.2% to $188.4 million from $180.9 million the prior year. Net income came in at a record $13.4 million, or $.69/diluted share, a 40.2% increase from last year's first quarter net income of $9.5 million or $.49/diluted share.

On January 8, 2004, I posted Resources Connection (RECN) on Stock Picks at a price of $34.50. RECN closed at $49.89 on 2/25/05 for a gain of $15.39 or 44.6%.

On December 22, 2004, RECN reported 2nd quarter 2005 results. For the quarter ended November 30, 2004, revenue came in at $137.0 million, an 85% increase over the $74.0 million the prior year. (Sequentially revenue was up 19%!). Net income for the quarter was $15.6 million, or $.62/diluted share, up from $4.4 million or $.19/diluted share, an over 200% increase in earnings!

Finally, on January 9, 2004, I posted American Medical Systems (AMMD) on Stock Picks at a price of $25.96. AMMD closed at $39.70 on 2/25/05 for a gain of $13.74 or 52.9%.

On February 17, 2005, AMMD reported 4th quarter 2004 results. For the quarter ended January 1, 2005, sales were $60.0 million, a 27.3% increase over sales of $47.2 million the prior year. Net income was affected by write-offs, and came in at $6.7 million or $.19/share, down from $10.3 million or $.30/share the prior year. However, excluding the impact of an investment write-off and the effect of tax rate changes...net income for the quarter worked out to $10.8 million or $.30/share up from $8.4 million or $.24/share the prior year. You decide. However, the street appears to have like the results as the stock price held up nicely.

So how did we do that week a year ago??? I actually had three stocks that declined (AFCO, DLTR, and KCP); and three stocks that appreciated inprice (UNF, RECN, and AMMD). However, the stock appreciating were overall stronger than the losing stocks and I had an average increase of 12.9% for the six stocks!

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

Bob

"Revisiting a Stock Pick" Synaptics (SYNA)

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.

Yesterday my stock in Cal Dive (CDIS) hit my first targeted price for a sale, which as you may know is a 30% gain after an initial purchase. Thus, I sold 1/4 of my position, 50 shares, and had a new signal to deal with. Since I am under my 25 position portfolio goal (now at 21 issues), I was thus "entitled" to purchase a new position. Scanning through the list of top % gainers on the NASDAQ, I came across Synaptics (SYNA), a stock that I had listed first on 4/23/04 at a price of $17.69 on Stock Picks and was having a great day, closing yesterday at $24.33, up $3.32 or 15.80% on the day. I purchased 300 shares of SYNA at $24.02 prior to the close for my trading account. I have had some Synaptics shares in a managed account this past year...and am actually not sure whether I still have shares there, but believe I do. (I don't monitor one of my managed retirement accounts very closely at all!).

According to the Yahoo "Profile", SYNA "...is a worldwide developer and supplier of custom-designed user interface solutions for notebook computers."

What drove the stock higher yesterday, was the release of news that the new iPods from Apple Computer wil utilize Synaptics' touchpad technology. The stock had been under pressure recently over the possibility that Apple would no longer be requiring Synaptics' products in their new line.

On January 20, 2005, Synaptics reported 2nd quarter 2005 results. Net revenue for the second quarter ended December 31, 2004, came in at $56.5 million, an approximately 65% increase over the $34.3 million of net revenue the prior year same quarter. Net income was $9.7 million or $.33/diluted share for the quarter, an approximately 178% increase (!) over the $3.5 million or $.13/diluted share the prior year. Although believing the current quarter to be flat sequentially, the company expressed optimism for the 2005 fiscal year stating:

"Fiscal 2005 is shaping up to be an outstanding year based on our record first half performance and current outlook for the second half of the year"

How about longer-term? Taking a look at the "5-Yr Restated" financials from Morningstar.com, we can see the steady 'ramping-up' of revenue from $43.4 million in 2000 to $141.8 million in the trailing twelve months (TTM).

Earnings have increased from $.31/share in 2003 to $.55/share in the TTM. (Note the $.33/share in the latest quarter alone!). Free cash flow has been steady if not growing with $12 million reported in 2002 and $12 million reported in the TTM.

The balance sheet as reported on Morningstar.com looks very strong. SYNA has $97.3 million in cash, enough to cover both the $25.5 million in current liabilities and the $2.4 million in long-term liabilities almost four times over. In addition, they have $40.5 million in other current assets!

How about "valuation"? As has been pointed out by readers, I really do a very brief look at valuation issues...for what it is worth, I like to at least take a look at "Key Statistics" from Yahoo on SYNA. Here we can see that this is a mid-cap stock with a market cap of $639.30 million. The trailing p/e is moderate at 32.27, and the forward p/e (fye 30-Jun-06) is nicer at 22.32. With the fast growth rate anticipated (as noted in the latest quarter), we have a PEG (5-yr expected) of 0.62. The Price/Sales is a bit richer at 3.36.

Yahoo reports 26.28 million shares outstanding with 25.00 million of them that float. Currently there are 2.12 million shares out short as of 1/10/05, representing 8.46% of the float but only 2.059 trading days. Using my arbitrary 3 days of trading volume cut-off, this short interest does not appear to be very significan (imho).

No cash dividend and no stock dividends are reported on Yahoo.

How about "technicals"? In other words, what about a chart on the price performance of this stock? Taking a look at a "Point & Figure" chart from Stockcharts.com:

We can see that this stock has been gradually increasing in price from late 2003 when it was trading around $11/share to a recent high of $41/share in February, 2005. The stock declined recently on speculation about a loss in the Apple contract, back to support levels at around $21. It rebounded yesterday, and in my humble opinion, doesn't appear over-valued, nor does it appear to have broken down in price performance.

So what do I think? Well, I liked this stock before in April, 2004, when it was trading around $17.69. The stock had a great earnings report a few weeks ago, has shown steady growth over the past five years in both revenue and earnings, is generating a steady free cash flow, has an outstanding balance sheet, has a valuation that has a reasonable PEG, and the chart looks nice too! I guess that is why I decided to buy some shares yesterday!

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

Bob

"Trading Transparency" SYNA

Hello Friends! A few moments ago, I purchased 300 shares of Synaptics, Inc. (SYNA) at $24.02 for my trading account. This is a stock I have reviewed earlier which apparently was lower on thoughts it would lose an Apple contract, but which popped higher today on reaffirmation of that relationship!

Anyhow, looks nice to me!

I have posted on this one before, but shall try to give a little update later...if I get a chance :).

Bob

"Trading Transparency" CDIS
Hello Friends! I just wanted to keep you up to date on my trading portfolio. Thanks again for visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor, so please consult with your investment advisors prior to acting on any investment ideas on this website.

A few moments ago I made my first sale at a gain on Cal Dive Intl (CDIS). I sold 50 shares (of my original purchase of 200....a 25% position) at $50.03. I purchased these shares on 11/3/04 at a cost basis per share of $38.20. Thus, I had a gain of $11.83/share or 30.1%.

Thus, I am now able :) to purchase a new position, and I shall be visiting the top % gainers list in a few moments! I shall let you know if I find anything interesting! (My maximum # of positions, in my strategy, is 25 positions...and I thus have room for 5 additional positions....at that point, hopefully soon, I shall be sitting on my hands after a sale, and paying off, at long last, my margin! That would be a wonderful thing to happen!

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

Bob

"Looking Back One Year" A review of stock picks from the week of December 29, 2003





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 always consult with your professional investment advisors prior to making any investment decisions based on information on this website.

At the right is a beautiful picture of Yosemite.

My blog includes lots of ideas about stocks. I believe that among these, are potential outstanding performers. In my actual Trading Portfolio, I use pre-set sell-points to prevent the development of significant losses (by selling at an 8% loss), and to prevent failing to take gains (by selling portions at 30, 60, 90, 120, 180, 240% gains...). But for this weekend review, I just assume a "buy and hold" strategy, and see what would have happened if I had purchased equal dollar amounts of all of the stock picks that week and had simply 'held on'.

On December 29, 2003, I selected Matrixx (MTXX) for Stock Picks at a price of $18.28. MTXX closed at $12.39 on 2/18/05 for a loss of $(5.89) or (32.2)% since posting.

On February 9, 2005, MTXX announced 4th quarter 2004 results. For the quarter ended December 31, 2004, net sales came in at $27.0 million, a 48% increase above net sales of $18.2 million the prior year. Net income increased 62% to $1.7 million or $.17/share compared to net income of $1.0 million or $.11/share the prior year.

I selected American Vanguard (AVD) for Stock Picks on 12/29/03 at a price of $38.69. AVD split 3:2 on 4/19/04 for a resultant effective pick price of $25.79. AVD closed at $36.50 on 2/18/05 for a gain of $10.71 or 41.5%.

On November 3, 2004, AVD reported 3rd quarter results. For the quarter ended September 30, 2004, net sales rose 20% to $39.6 million, net income was up 42% to $4.0 million. On a diluted per share basis, this was a 40% increase to $.42/share. All of these numbers were strong!

On December 30, 2003, I posted Secure Computing (SCUR) on Stock Picks at a price of $16.78. SCUR closed at $9.25 on 2/18/05 for a loss of $(7.53) or (44.9)%.

On January 27, 2005, SCUR announced 4th quarter 2004 results. Sales were up 11% to $25.5 million from $22.9 million last year. Quarterly income grew to $4.5 million or $.12/share from $4.1 million or $.11/share last year. This was slightly above consensus.

On December 30, 2003, I posted SurModics (SRDX) on Stock Picks at a price of $24.38. SRDX closed at $31.51 on 2/18/05 for a gain of $7.13 or 29.2%.

On January 26, 2005, SRDX reported 1st quarter 2005 results. Revenues for the first quarter ended December 31, 2004, grew 16% to $14.1 million from $12.1 million in the prior year. Net income jumped 38% to $5.7 million from $4.1 million. On a diluted per share basis, this came out to $.32/share up from $.23/share in fiscal year 2004.

Finally, on January 1, 2004, I posted McKesson Corp (MCK) on Stock Picks at a price of $32.16. MCK closed at $36.77 on 2/18/05 for a gain of $4.61 or 14.3%.

On January 27, 2005, MCK reported 3rd quarter 2005 results. Revenue grew 14% to $20.8 billion. Net loss came in at $(665) million or $(2.26)/share including a charge of $810 million after-tax for securities litigation. Excluding that charge, earnings actually grew 20% to $.49 or $145 million. The street wasn't bothered much by that one time charge and the stock price has held up fine!

So how did we do? I had five picks that week a little over a year ago. Three gained and two lost ground for an average gain of 1.58%.

Thanks again for stopping by! I hope that my review of different stocks is helpful to you in understanding my thinking! If you have any questions, comments, or words of encouragement, please feel free to email me at bobsadviceforstocks@lycos.com or leave a message right here on my blog!

Bob