February 15, 2006 Roper Industries (ROP)
Click HERE for my ***PODCAST*** on Roper Industries (ROP).

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.

To refresh your memory, let me once again remind you that when I am looking for a new stock to discuss on this blog, I start with the top % gainers lists. Today, looking through the top % gainers on the NYSE, I came across Roper Industries (ROP) which closed at $42.31, up $1.79 or 4.42% on the day. I do not own any shares nor do I have any options of this company.

Contributing to the bullish sentiment on this stock was last week's announcement that 2005 earnings should be at the "high-end of forecast" which had previously been forecast at the range of $1.64 to $1.70/share.

And what exactly does Roper do? According to the Yahoo "Profile" on Roper, the company

"...engages in the design, manufacture, and distribution of energy systems and controls, scientific and industrial imaging products and software, industrial technology products, and instrumentation products and services. It operates in five segments: Instrumentation, Industrial Technology, Energy Systems and Controls, Scientific and Industrial Imaging, and RF Technology."

And how about the latest quarterly result? On October 27, 2005, Roper Industries reported 3rd quarter 2005 results. For the quarter ended September 30, 2005, net sales came in at $365 million, 52% higher than the $240 million reported in the same quarter a year earlier. Net earnings increased to $39.2 million from $27.4 million the prior year, and on a diluted eps basis, came in at $.45/share, up 25% from $.36/share last year during the comparable quarter.

And what about longer-term results? Looking at the "5-Yr Restated" financials on ROP from Morningstar.com, we can see the steady growth in revenue from $.5 billion in 2000 to $1.0 billion in 2004 and $1.2 billion in the trailing twelve months (TTM). Earnings have increased a bit erratically, climbing from $.79/share in 2000 to $.89/share in 2001, then dipping to $.63/share in 2002. However, since 2002, earnings have had a steady growth to $1.24/share in 2004 and $1.42/share in the TTM.

Dividends have also been increasing steadily from $.14/share in 2000 to $.19/share in 2004 and $.20/share in the TTM.

The company has been increasing its number of shares outstanding, apparently for acquisition purposes, from 61 million in 2000 to 74 million in 2004 and 86 million in the TTM. This has not been an excessive growth in shares, with an approximately 50% increase in the float while revenue has nearly tripled and earnings doubled during the same period.

Free cash flow has been positive and growing from $79 million in 2002 to $153 million in 2004 and $183 million in the TTM.

The balance sheet, as reported by Morningstar.com looks strong with $68.4 million in cash and $458.8 million in other current assets. Balanced against current liabilities of $244.1 million, this gives us a 'current ratio' of approximately 2:1. In addition, the company does have a significant long-term debt load of $1.04 billion.

And how about some valuation numbers? Looking at the "Key Statistics" from Yahoo on Roper, we can see that this is a large cap stock with a market capitalization of $3.63 billion. The trailing p/e isn't too bad at 28.08, with a forward p/e (fye 31-Dec-06) even nicer at 21.37. The PEG ratio works out to a nice 1.46 (under 1.50 is reasonable imho.)

And the Price/Sales ratio? According to the Fidelity.com eResearch website, Roper is in the "Diversified Machinery" industrial group, and in fact is priced the richest in valuation relative to this parameter with a Price/Sales ratio of 2.6. Following ROP is Illinois Tool Works (ITW) with a ratio of 2.0, then Pall (PLL) with a Price/Sales ratio of 1.9. Next is Ingersoll-Rand (IR) at 1.3 and Eaton (ETN) at 1.0.

Going back to Yahoo.com for some additional numbers on this stock, Yahoo reports that there are 85.80 million shares outstanding and 83.19 million of them float. Of those that float, 1.80% are out short as of 1/10/05, representing 6.4 trading days of volume. This is significant imho, as it is greater than my own cut-off of 3 days of short interest. With the company raising guidance, she short-sellers may be starting to cover their short sales with purchases. Just a hunch.

As I noted above, the company pays a small dividend of $.24/share, yielding 0.60%. The last stock split, a 2:1 split, was on August 29, 2005.

And how about a chart? Looking at the "Point & Figure" chart on Roper Industries from Stockcharts.com, we can see that the stock was really moving sideways to lower between February, 2001, when it was trading at $19/share, to a low of $13.50 in February, 2003. The stock broke through resistance in June, 2003, at approximately $18.50, and has trading strongly higher since!

So what do I think? Well, I like this stock! That's why I wrote it up :). Seriously, the stock moved nicely higher today, they guided to the high end of estimates last week and shall be reporting the final quarter's results soon. The Morningstar numbers look nice with fairly steady revenue growth, and strong earnings growth the past few years. The company, in addition, has a small dividend, and has been steadily increasing the amount. The p/e and the PEG are nice, but the Price/Sales ratio suggests, at least within its group, a bit of a high-end valuation. Free cash flow is positive and growing and the balance sheet has a current ratio of over 2.0. There is a large amount of long-term debt however. In addition, the chart looks strong!

Anyhow, that's another stock for you to review! Thanks so much for stopping by and visiting. If you have any comments or questions, please feel free to email me at bobsadviceforstocks@lycos.com or leave your comments right in the blog.

Bob

A Reader Writes "I noticed that BOOM had dropped well below your purchase price...."
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.

Checking my mail/comments this morning, I saw that I had an interesting comment from Steve who had some concerns about my trading discipline. Before I answer his specific question, I would certainly like to point out that I endeavor to maintain as transparent a trading policy as possible. When I buy a stock, I post the purchase, and when I sell a stock I do the same. That being said, I do this manually, so it is always possible that I make a mistake with about 20 investments that I am following.

Steve writes:

Hi Bob,

I noticed that BOOM had dropped well below your purchase price a few days ago for a good portion of the day. Since you had already sold some shares at a profit, did you sell all of your remaining shares when it dropped below your purchase price? If not, why was this stock the exception to your rule?

Thanks,
Steve

Let me review my trading activity and my strategy in general on this stock and my other investments.

I am glad that you are keeping a close track on my trades and my blog and I am glad you took the time to write!

Currently I own 200 shares of Dynamic Materials Corp. (BOOM). These shares were acquired 12/05/05 at a cost basis per share (including commissions) of $28.32. I sold 40 shares of my original 240 share purchas (1/6th of my position) on 1/27/06 with proceeds of $1,489.00, giving me a price/share sale price of $37.23, or a gain of $8.91 or 31.4%. According to my avowed strategy :), I should be selling my remaining shares if they hit my cost or if they get down to $28.32 after a single purchase. Currently BOOM is trading at $29.78, so it is above my purchase price, but let's take a look at a chart for the past three months and see if the stock did dip below that $28.32 level. Here is a chart from CNNMoney.com:

Clearly, BOOM did drop down under that $28.32 level. So you are correct. If I had a programmed sale in my portfolio the stock would be gone! So I stand corrected and you have made an excellent observation. I didn't make any exceptions to my trading rules, I just missed the price drop as I went about my business that day!

Meanwhile, BOOM is once again above my cost, so I shall not be entering a sale but if it dips back down to the $28.32 level, the stock, as long as I am paying attention :), will be gone!

Thanks so much for commenting and catching my trading error. Thus far, that sale would not have added any gains or protected me from any additional losses.

Bob

Chico's FAS (CHS) "Revisiting a Stock Pick" February 14, 2006
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.

I was looking through the list of top % gainers on the NYSE today and came across Chico's FAS (CHS) which closed at $47.61, up $2.76 or 6.15% on the day. I do not own any shares nor do I have any options on this stock.

Chico's is an old favorite of mine on Stock Picks. I actually first posted Chico's on Stock Picks on July 31, 2003, when it was trading at $27.22. CHS had a 2:1 split on 2/23/05, giving me an effective "pick price" of $13.61, and thus, with CHS trading at $47.61, this represents a gain of $34.00 or 249.8% since first posting.

I like to wait at least a year before "revisiting" a stock pick. On January 6, 2005, I revisited Chico's on Stock Picks Bob's Advice when it was trading at $48.98. Adjusted for the stock split, this second "pick" was at $24.49. Thus, even this pick, based on today's close at $47.61, had a gain of $23.12 or 94.4% since posting!

And what exactly is Chico's? According to the Yahoo "Profile" on Chico's, the company

"...engages in the design and retail of private label, casual-to-dressy clothing, intimates, complementary accessories, and other nonclothing gift items in the United States, the U.S. Virgin Islands, and Puerto Rico. The company offers its products under the Chico’s, White House|Black Market (WH|BM), and Soma by Chico’s brand names."

Since we are looking at a retailer, I like to review the "same store sales" reports which come out monthly for most retail stores. For the most part, any same store sales figures over 5% are imho healthy. CHS did better than this, reporting January same-store sales up 14.6% with overall sales climbing 34.2% for the four weeks ended January 28, 2006.

And what about the latest quarterly result? On November 29, 2005, Chico's reported 3rd quarter results. Net sales for the quarter ended October 29, 2005, increased 33% to $359 million from $270 million for the same quarter ended October 30, 2004. Net income climbed 43.5% to $53 million or $.29/diluted share compared with $37 million or $.21/diluted share last year. This was s solid report!

How about longer-term results? Chico's has a beautiful evaluation on the "5-Yr Restated" financials from Morningstar.com. Here we can see that sales have grown steadily from $259 million in 2001 to $1.07 billion in 2005 and $1.3 billion in the trailing twelve months (TTM). Earnings have also steadily been increasing from $.17/share in 2001 to $.78/share in 2005 and $1.00/share in the TTM.

Free cash flow has also been positive and growing with $44 million in 2003, $131 million in 2005, and $166 million in the TTM.

The balance sheet as presented on Morningstar.com also looks nice with cash of $400.3 million and $140.2 million in other current assets; which, when balanced against the $151 million in current assets gives us a "current ratio" of $540/$210 or about 2.5:1. The current assets and cash easily cover the current liabilities and the long-term liabilities totalling $62.9 million.

And how about some valuation numbers? Looking at Yahoo "Key Statistics" on CHS, we find that this is now a large cap stock with a market capitalization of $8.62 billion. The trailing p/e is a bit rich at 47.42. However the forward p/e (fye 29-Jan-07) is a bit better at 36.07. Since such rapid growth has been reported and is expected, the PEG comes in at a reasonable 1.37.

According to the Fidelity.com eResearch website, Chico's is in the "Apparel Stores" industrial group. In fact, Chico's tops the list in terms of price compared to sales with a ratio of 6.2. This is followed by Abercrombie & Fitch (ANF) at 2.5, American Eagle (AEOS) at 1.9, Pacific Sunwear (PSUN) at 1.4, ant Limited Brnads (LTD) at 1.0.

Going back to Yahoo for some other stats, we can see that there are 180.98 million shares outstanding and 178.08 million of them actually float. As of 1/10/06, there were 11.23 million shares out short representing 6.30% of the float or enough shares to cover a volume of 5.5 trading days at the current level of volume. This is somewhat significant and may well be contributing to the intensity of the rally higher today. Just a thought :).

As I noted above, the company does not pay a dividend and the last stock split was a 2:1 split 2/23/05.

And what about a chart? Taking a look at the "Point & Figure" chart on CHS from Stockcharts.com:

We can see an absolutely GORGEOUS chart, with the stock climbing from $3.50 level in September, 2001, to the current level at around $47.61. I don't have any prettier charts that this one on Chico's.

So what do I think? Well, as I like to say, I sure wish I had purchased some shares on either of my previous posts :(. But I didn't. The company reported strong same store sales, had a solid quarterly report, the Morningstar.com report was perfect, but valuation was a bit rich although the PEG was nice, the Price/Sales was the highest in its industrial group.

Will the stock go higher? Time will tell. Meanwhile, thanks so much for stopping by and visiting. Please feel free to email me at bobsadviceforstocks@lycos.com if you have any comments or questions. (Or leave your comments right on the blog!)

Bob

A Reader Writes, "How do you narrow down the list for your (almost) daily selection?"
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 invesment decisions based on information on this website.

I was checking my mailbox this morning, and I saw that I had a nice letter from a regular reader of mine who raises some interesting questions. She wrote:

Hi Bob,

I'm still following your website and am amazed at how many good stocks you've selected over the years.

As I look at the top % gainers each day, I am surprised how many there are and the various reasons they are on the list that day. (stock splits, earnings, takeovers, news, rumors, announcements when earnings will be announced...)

How do you narrow down the list for your (almost) daily selection?

Thanks and as always -- keep the great blog going.

Lisa G

First of all I would like to thank you for your kind words! I often think that I have been blessed or just lucky to have fallen on to so many great stocks! I don't really think it is luck but rather a bit of homework that lands me some of these selections.

As you know, I am a big fan of the top % gainers list. I concentrate most on the NASDAQ but also look at the NYSE and the AMEX as well. Surprisingly with the long list of top % gainers there are often only one or two stocks that meet my own particular criteria. I also eliminate stocks that are much under $10, I am not a big fan of ADR's (foreign stocks trading in the US), and financial stocks.

I certainly do not write up all of the stocks I identify. Just don't have the time or energy :). In addition, I do also use a little seat of the pants approach to the stock. If I have a couple of different ones that I can "pick", then I will often gravitate to the medical stocks with the good numbers or the retail issues that show evidence of being able to expand and grow their business long-term. But I try to write up as many different kinds of stocks as possible.

For instance, I was taking a look at Tractor Supply (TSCO) the other day and didn't get around to writing it up. This company had a great quarterly report, solid Morningstar results, nice same-store sales (up 10% the prior month), and a nice chart. That is about all I need to write up a stock.

There are certain factors that are "must-haves" for me when selecting a stock, and those include the latest quarterly result, the presence of positive free cash flow, and a decent balance sheet. The chart is often the last thing I examine.

Does this answer you question? Probably not. But seriously, I will often go through virtually every single stock (over $10) on the top % gainers lists before finding a stock that meets even my basic criteria.

Is this the only way to buy stock or select stock ideas? Absolutely not. I don't even know if it is the best way, or even if it will be profitable long-term. Just something I have been doing and writing about :).

Much of my thoughts have been drawn from William O'Neill's CANSLIM theories but there are many differences as well. In any case, thanks so much for visiting. If you find a stock that you think belongs on my blog, and I haven't done anything about it, well please let me know!

Bob

"Looking Back One Year" A review of stock picks from the week of November 22, 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 remember to consult with your professional investment advisors prior to making any investment decisions based on information on this website.

One of my weekend tasks on this blog is to take a look at previous posts and see how things are working out. This review assumes a "buy and hold" approach to investing. In practice, I do not just buy and hold stocks. I sell my holdings quickly if they develop an 8% loss, and I sell my gaining stocks slowly and partially as they hit appreciation targets. In any case, this continuing review may be helpful in determining what works and what doesn't!

On November 22, 2004, I posted Manitowoc Co. (MTW) on Stock Picks Bob's Advice on November 22, 2004, when it was trading at $38.29/share. Manitowoc Co. closed at $69.11 on 2/10/06, for a gain of $30.82 or 80.5% since posting!

On February 1, 2006, MTW announced 4th quarter 2005 results. For the fourth quarter ended December 31, 2005, revenue climbed 16% to $589 million. Diluted eps came in at $.47/share (excluding special items), up 34% from the same quarter last year. This was a strong report for MTW!

On November 26, 2004, I posted RPC (RES) on Stock Picks Bob's Advice when it was trading at $27.07. RES closed at $28.21, so at first glance it appears that the stock hasn't moved much since posting. However, a closer examination reveals that the stock had a 3:2 split 3/11/05, and then another 3/2 split on 12/13/05, giving my pick price an adjusted price of $27.07 x 2/3 x 2/3 = $12.03 (!). Thus, the pick had a gain of $16.18 or 134.5% since posting. Unfortunately, I didn't buy any shares of either of these two companies :(.

On October 26, 2005, RES reported 3rd quarter 2005 results. For the quarter ended September 30, 2005, revenues increased 30.5% to $115.8 million, compared with $88.7 milion in the same quarter the prior year. Net income for the quarter was $23.1 million or $.53/diluted share compared with $10.2 million or $.24/diluted share the prior year. This was a terrific quarter and the stock continued to climb higher!

So how did we do? Do you have to ask? I was pretty lucky that week in November, 2004, with two stock picks; MTW gaining 80.5% and RES gaining 134.5%, for an average performance of 107.5% for these two stocks on the blog since their selection.

Please remember that past performance is NO guarantee of future price performance. And that I truly am an amateur investor. Anyhow, that's the review for the week. Next week I shall try to get to the week of November 29, 2004.

Thanks again for visiting. If you have any comments or questions, please feel free to email me at bobsadviceforstocks@lycos.com or just leave your comments right on the blog!

Bob

Angiodynamics (ANGO) Weekend Trading Portfolio Analysis











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.

I enjoy posting lots of stock market ideas on this blog. From these ideas I have built my own trading portfolio. About six months ago I started reviewing my positions which now number twenty-one. Two weeks ago I finished the list with Ventana Medical Systems (VMSI). Having gotten to the end of the list, this week I am starting back at the top of the alphabet with AngioDynamics (ANGO).

I first reviewed AngioDynamics on Stock Picks Bob's Advice just last month on January 6, 2006 shortly after purchasing 240 shares at $26.22. ANGO closed 2/10/06 at $25.60, for a loss of $(.62) or (2.4)% since purchase. If the stock drops to an 8% loss or down to $24.12 or lower, I shall be selling my shares. On the other hand, if the stock appreciates 30% to my first 'sale target', or to $34.09, then I shall be selling a portion of my holdings at a gain.

Let's take another look at AngioDynamics and see if all of the reasons why I made the purchase are still intact.

First of all, the Yahoo "Profile" explains the business. The company

"...engages in the design, development, manufacture, and marketing of medical devices for the minimally invasive diagnosis and treatment of peripheral vascular disease. Its products include angiographic catheters, hemodialysis catheters, plasma thromboplastin antecedent dilation catheters, thrombolytic products, image-guided vascular access products, endovascular laser venous system products, and drainage products."

One of my key criteria for selecting stocks on this blog remains the latest quarterly report. I like to see growing earnings and revenue, and if the company can exceed expectations and/or raise guidance, that is all the better! On Decmber 19, 2005, ANGO reported 2nd quarter 2006 results. Net sales grew 30% to $18.7 million. Net income climbed 60% to $1.7 million or $.13/share. These were solid results that I reviewed previously on the original blog post.

Before "picking" a stock or even before purchasing a stock for my own portfolio, I like to see some consistency of financial results over the past several years. Looking at the Morningstar.com "5-Yr Restated" financials on ANGO, we can see the steady revenue growth from $23.4 million in 2001 to $60.3 million in 2005 and $63.6 million in the trailing twelve months (TTM).

Earnings are first reported in 2005 as $.37/share increasing to $.41/share in the TTM.

Free cash flow has been steadily improving from $(3) million in 2003 to $3 million in 2005 and $4 million in the TTM.

The balance sheet is gorgeous with $28.8 million in cash, enough to cover both the $6.4 million in current liabilities and the $2.9 million in long-term liabilities almost 3x over! In addition, the company has $22.2 million in other current assets.

And what about some "valuation" numbers? Looking at the Yahoo "Key Statistics" on ANGO, we can see that this is a Small-Cap stock with a market capitalization of $316.24 million. The trailing p/e is rich at 57.27, the forward p/e (fye 28-May-07) is estimated at 35.56, and the anticipated earnings growth is coming anticipated to be fast enough that the PEG is only 1.23. Generally under 1.5 on the PEG may be considered a good value.

According to the Fidelity.com eResearch website, AngioDynamics is moderately priced relative to its Price/Sales ratio in the group "Medical Instuments/Supplies". Topping this group is Alcon (ACL) with a Price/Sales ratio of 8.3, Guidant (GDT) at 6.8, then AngioDynamics (ANGO) at 4.9, Stryker (SYK) at 4.1, Boston Scientific (BSX) at 2.8 and Baxter (BAX) at the bottom of the list at 2.4.

Going back to Yahoo for some more numbers, AngioDynamics has 12.35 million shares outstanding with 10.11 million that float. Of these 207,380 shares are out short representing just 1 day of trading. No cash dividend and no stock dividend are reported.

What about the chart? Looking at the "Point & Figure" chart on ANGO:

We can see that although I am personally down a little over 2% on my purchase, the chart on this stock appears intact with just a small retracement from its relatively steady upward move.

So what do I think? Well things still look strong to me. The latest quarterly report was solid, the Morningstar.com report looks very good, and valuation, although a bit rich, isn't bad with a PEG under 1.5. In addition the chart is solid. But rules are rules and if hits the 8% loss, out it goes!

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

Bob

February 9, 2006 Akamai Technologies (AKAM)
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.

I was looking through the list of top % gainers on the NASDAQ this evening and came across Akamai Technologies Inc. (AKAM) which closed at $26.01, up $4.01 or 18.23% on the day. I do not own any shares nor do I have any options on this stock.

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

"...provides services for the delivery of content and business processes over the Internet for businesses, government agencies, and other enterprises. It offers services and solutions for content and application delivery, application performance services, on demand managed services, and business performance management services based on its technological platform, EdgePlatform."

Once again we can see that it was the latest earnings report that drove the stock higher today. After the close of the market yesterday, the company announced 4th quarter 2005 results. Revenue for the quarter ended December 31, 2005, came in at $82.7 million, a 9% sequential increase in revenue, and a 44% increase over the fourth quarter 2004 revenue of $57.6 million. Net Income (GAAP) was $25.8 million or $.16/share. This was a large increase from the prior year's figure of $13.4 million or $.10/diluted share. In addition, as reported this morning, the company is optimistic about 2006. It was reported that

"The company's revenue in 2005 totaled $283 million, up 35 percent from 2004. Akamai expects at least $360 million in revenue this year."

Things appear to be looking up for Akamai!

How about longer-term? Reviewing the Morningstar.com "5-Yr Restated" financials on Akamai, we can see that revenue, except for a dip between 2001 and 2002, has otherwise been steadily increasing from $89.8 million in 2000 to $210 million in 2004 and $258 million in the trailing twelve months (TTM).

Earnings have only recently turned positive with losses of $(10.07)/share in 2000, dropping to a low of $(23.59)/share in 2001, then gradually decreasing, until turning positive in 2004 at $.25/share, and $2.09/share in the TTM.

Free cash flow which also was negative at $(73) million in 2002, improved to $(19) million in 2003, then turned positive at $39 million in 2004 and $45 million in the TTM.

AKAM, according to Morningstar.com, has $67 million in cash and $53.1 million in other current assets. Balanced agains the $57.9 million in current liabilities this gives us a "current ratio" of greater than 2:1. In addition, there are enough current assets, to start paying down the $211.5 million in long-term liabilities.

Reviewing Yahoo "Key Statistics" on Akamai, we find that this is actually a large-cap stock with a market capitalization of $3.95 billion. The trailing p/e is cheap at 13.04, but the forward p/e is 37.70. The company is anticipated to be growing its earnings fast enough that the PEG is a moderate 1.64.

According to the Fidelity.com eResearch website, AKAM is also the 'priciest' of the stocks in the "Internet Software & Services" Indsustrial Group. The company has a Price/Sales ratio of 13.7, only exceeded by Salesforce.com with a ratio of 16.7. These two are followed by eBay at 12.7, Symantec at 6.3 and Internet Security Systems at 3.2.

Going back to Yahoo, we can see that there are 151.98 million shares outstanding at 136.47 milllion of them float. Of these shares, 8.09 million are out short as of 1/10/06, representing 3.8 normal trading days of volume. This number is even less if we take the average of 3.9 million share daily the past 10 days. Thus the large spike in volume with the stock price surge may well be an indication of short-sellers scrambling to cover their shares. No cash dividend and no stock dividend are reported on Yahoo.

What about a chart? Looking at a "Point & Figure" chart on Stockcharts.com:

We can see that the stock has traded sharply higher from August, 2002, when the stock was traidng at $.65/share, to the current level of $26.01. The company did break down below support in May, 2005, but quickly bounced back, breaking through resistance in May, 2005, and moving solidly higher.

So what do I think? Let's summarize. Today the stock moved strongly higher (and is moving a few cents higher in after-hours trading as well.) The company reported a solid earnings report and raised guidance for 2006. Morningstar looks nice, although the company did only recently turn positive, losses are one thing I would like to avoid. Earnings, revenue, and free cash flow are showing nice improvements the past few years. However, valuation is a bit rich with a big Price/Sales ratio. The P/E isn't cheap but the PEG is better at 1.64.

Anyhow, these are the things I like to look at before "picking" a stock. The company fits in well on this blog and if I were in the market to be buying a positions, this is the kind of stock I might be able to buy.

Please feel free to drop me a line at bobsadviceforstocks@lycos.com if you have any questions or comments. Also, please feel free to comment right on the blog if that is your preference.

Bob

A Reader Writes "I woke up yesterday and saw everything in the red..."
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.

Earlier today, I had a comment from a frustrated reader who left a comment on my Xanga "shadow" blog where I also post comments. She was trying hard to learn how to invest and was coming up empty. She wrote:

I sat here for a good while, trying to think of how to say this. I lost my confidence today. That's what it is. When I woke up and saw how everything was back up, including the two stocks I should have held onto, I realized I had no business betting like this. Because that's all it is. An hour after I sold Bristol Meyers they came out with this new drug that Cramer was raving about. Only he was promoting a small biotech, as I recall. At his Harvard thing he told some kid to get rid of Bristol Meyers. The next day I looked at the five-year chart and it was right where it had been five years ago. The reason I sold Nokia was because I went through hell with that stock. My broker bought it for both my accounts. Because I didn't establish a new starting price, I didn't notice when it had gone down 8%. It's back up today and the news was that it had some great new contract in the UK.

I'm working as hard and as fast as I can to learn this stuff but these were all about bad timing. Mine. I went to look at my portfolio, to see what I had started out with. I'm embarrassed to say I have managed to lose 10,000 in five years, just in my IRA. And what really pisses me off is that my broker is mainly responsible for that. I could forgive myself but he should know better.

When I thought about how frugally I am trying to live now and how I just picked up the phone today and bought 6,000 worth of Packeteer, I think I must be crazy. I really thought I had a feel for what was going on in the market. When I woke up yesterday and saw everything in the red, I thought this was it. All those people pulling their money out fooled me. I thought I knew what was going on but I don't. And it's paralyzing.

Let me first say that I am glad that you wrote all of this today. I am unhappy that you are experiencing much of the angst of investing. The pain and depression when stocks decline and the euphoria when they climb higher. I also experience many of those things as well as the self-doubt that comes with wrong decisons.

Investing is not about confidence. Investing is about the ability to analyze and divorce oneself from one's emotions and make decisions.

It is almost impossible not to look back at stocks that you have sold and then kick yourself when they climb higher without you. It is better not to look back too often :).

It is difficult to learn new methods of investing. To change from a portfolio of good old fashioned blue chips to little companies one has never heard of.

But it doesn't have to be about gambling.

Gambling is about putting money down and having random events occur, hoping that one random event will lead to a big payout or "jackpot". Investing is about buying a piece of a company. But it is only gambling when one is arbitrarily picking stocks without any foundation to expect performance.

And when a stock climbs, I do not particularly require it to go up forever. I sell portions of stock rather quickly to hedge that investment, to reduce my risk exposure. And when a stock declines below my purchase price, I sell it quickly to avoid a small loss becoming a large loss. And within my own portfolio, I listen to the market, and as stocks are sold on bad news, I move funds into cash. And when stocks appreciate on good news, I move cash into equities. This isn't gambling. This is thinking, observing and acting.

As for your purchase of Packeteer. I also own the stock. I suspect you purchased shares to follow my investment decision. That's ok with me. But you need to think about your plans for each of your investments before you even make the purchase. You need to be prepared for terrible bear markets which will ravage your investment values, and for the more common bull markets where values will skyrocket. I have learned long ago that there is nothing shameful about taking small profits, or admitting small mistakes with sales. I am not interested in gambling. You know I don't go for the homeruns. I go for the base hits. Sometimes I am surprised how well some of my selections have done. But I am far from perfect myself.

Paralyzing? That's the worse thing in the world when dealing with investments. It is far better to realize that with a trading strategy, one is never paralyzed. The actions of the market dictate ones trades.

Please find a broker you are comfortable with. If you don't like your current broker, shop around. Do not gamble with your investments. If my ideas are too radical, well slow down and just buy one or two of what I do, and get used to it.

My strategy is unproven. It might even be unprofitable over the long-term. You know I don't think so but I don't really know! I am not a financial advisor, so take everything I write with a grain of salt. Meanwhile, hang in there. Don't panic. Don't be paralyzed. But think about your breathing. Think about the universe. Slow down and develop a plan for each of your investments. And when the time comes to act on them, do not hesitate. With every decision you make, comes added confidence in your ability to decide!

Bob

February 8, 2006 Stamps.com Inc. (STMP)
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.

Sometimes even a "dot.com" stock makes it to the list here on Stock Picks! I was looking through the list of top % gainers on the NASDAQ today and came across Stamps.Com Inc. (STMP) which had a nice day today, closing at $30.99, up $5.82 or 23.12% on the day. I do not own any shares nor do I have any options on this company.

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

"...provides Internet-based postage solutions. It operates in three segments: Internet Postage Service, PhotoStamps, and Online Store. The Internet Postage Service segment offers service, which enables users to print information-based indicia, or electronic stamps, directly onto envelopes or labels using ordinary laser or inkjet printers. The PhotoStamps segment allows consumers to turn digital photos, designs, or images into valid US postage. The Online Store segment sells NetStamps consumables, including labels, shipping labels, Internet postage labels, dedicated postage printers, label inkjet and laser toner cartridges, scales, and other mailing and shipping-focused office supplies.

What drove the stock higher today was the announcement of 4th quarter 2005 results. For the fourth quarter ended December 31, 2005, revenue was $20.6 million, a 76% increase over the prior year same quarter result. GAAP net income was $4.1 million or $.17/diluted share, up 176% vs. last year's result of $1.46 million or $.06/diluted share. This result beat expectations and Stamps.com raised guidance, as reported:

"Looking ahead, Stamps.com sees 2006 earnings of 53 cents to 63 cents a share, or 65 cents to 75 cents a share excluding stock-based compensation costs. Analysts project earnings of 63 cents a share."

And how about longer-term results? Looking at the Morningstar.com "5-Yr Restated" financials on STMP, we find that revenue grew slowly between 2000 and 2002 when it increased from $15.2 million to $16.3 million. Since 2002, revenue growth has accelerated to $38.1 million in 2004 and $53 million in the trailing twelve months (TTM).

The company has been gradually reducing its losses, decreasing from $(9.08)/share in 2000 the $(.21)/share in 2004. The company turned profitable in the TTM reporting $.34/share in earnings.

Free cash flow, while dropping from $1 million in 2002 to a negative $(6) million in 2003, turned positive at $1 million in 2004 and increased to $9 million in the TTM.

The balance sheet as reported by Morningstar.com is solid with $38.6 million in cash and $4 million in other current assets giving STMP a current ratio of 6 considering the $6.8 million in current liabilities. Morningstar does not report any long-term liabilities for this company.

And how about some valuation numbers for this company? Looking at Yahoo "Key Statistics" on STMP, we can see that Stamps.com is a mid-cap stock with a market capitalization of $721.94 million. The trailing p/e is a very rich 93.06, but with the rapid growth, and the forward p/e of 52.53 (fye 31-Dec-06), the PEG works out to a more reasonable 1.58.

According to the Fidelity.com eResearch website on STMP, the company is in the "Catalog/Mail Order Houses" industrial group. Within this group, at least according to the Price/Sales figure, the company is also richly valued, leading the entire group with a price/sales figure of 11.3. The next stock in the group is much lower, Coldwater Creek (CWTR) at 2.7, followed by J Jill (JILL) at 1.1, ValueVision (VVTV) at 0.7, Insight Enterprises (NSIT) at 0.3, and PC Connection (PCCC) at 0.1.

Going back to Yahoo "Key Statistics" for some additional numbers on this company, we find that there are only 23.30 million shares outstanding with 12.46 million of them that 'float'. The short interest, as of 1/10/06, stood at 2.28 million shares or 7.7 trading days of volume. This looks significant to me and may well be the cause of the sharp price rise today on good earnings news.

The company does not pay a cash dividend and the last stock split was a reverse 1:2 paid on 5/12/04.

And what does the graph look like? Looking at a "Point & Figure" chart on STMP from StockCharts.com:

We can see the stock has an interesting chart, with an increasing 'saw-tooth' like pattern of gradual increases in price from the $8.50 level in August, 2004, to the current level of $30.99. The stock chart looks strong and not over-extended to me!

In summary, this is a very small company with what appears to be a niche product. The latest quarterly report was strong with outstanding growth in revenue and earnings and the company beat expectations. In addition, the company raised guidance on the upcoming year's earnings. A nice report overall.

The Morningstar.com report shows that revenue has recently been growing and the company has just turned positive. The balance sheet is strong as well. Valuation, however, is a bit rich, with a sky-high Price/Sales number, and a P/E in the 90's. The PEG, however, is just a shade over 1.5.

I am not in the market to be buying any stocks, but if I were, this is the kind of stock I might very well be purchasing. Thanks for visiting and please drop me a line if you have any comments or questions.

Bob

February 7, 2006 Gardner Denver Machinery (GDI)

Click ***HERE*** for my PODCAST on GARDNER DENVER

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.

I was looking through the list of top % gainers on the NYSE today and came across Gardner Denver Machinery (GDI) which as I write is trading at $58.68, up $2.98 today or 5.35%. I do not own any shares of this company nor do I have any options.

According to the Yahoo "Profile" on Gardner Denver, the company

"...engages in the design, manufacture, and marketing of compressor and vacuum products, as well as fluid transfer products. Its Compressor and Vacuum Products segment offers rotary screw, reciprocating, sliding vane, and centrifugal air compressors; positive displacement, centrifugal, and side channel blowers; and liquid ring pumps and engineered systems for industrial and commercial applications."

What drove the stock higher was the announcement of 4th quarter earnings. As reported:

"Revenues for the three months ended December 31, 2005 were $369.3 million, a 53% increase compared to the fourth quarter of the previous year, primarily as a result of acquisitions completed in 2005 and strong organic growth. Net income for the three months ended December 31, 2005 was $25.3 million, an 86% increase compared to the same period last year, as a result of the benefit of acquisitions and flow-through profitability on organic revenue growth. Diluted earnings per share for the three months of 2005 was $0.96, 43% higher than the previous year. Cash generated by operations increased 55% to $119 million in 2005, compared to $77 million in the previous year.

This report was very strong as the company exceeded estimates of $.77/share and also raised guidance for 2006. This is indeed what I like to call a "trifecta" in an earnings report!

And what about longer-term results? Looking at the Morningstar.com "5-Yr Restated" financials on GDI, we can see that revenue has grown steadily from $379 million in 2000 to $420 million in 2001, then dipping slightly to $418 million in 2002. However, since 2002, the revenue growth has accelerated to $740 million in 2004 and $1.09 billion in the trailing twelve months (TTM).

Earnings have also been erratic with $1.21 reported in 2000, and $1.27 reported in 2003. However, since 2003, earnings have grown strongly with $1.92 reported in 2004 and $2.44 reported in the TTM.

Free cash flow has been positive and growing with $39 million in 2002, $57 million in 2004 and $77 million in the TTM.

The balance sheet shows cash at $114.6 million and other current assets at $4.8 million. With current liabilities of $316.5 million, this gives us a current ratio of close to 2.0 which is solid. The long-term liabilities stand at $779.3 million.

What about some key numbers on this stock?

Looking at Yahoo "Key Statistics" on Gardner Denver Machinery, we find that this is a mid-cap stock with a market capitalization of $1.52 billion. The trailing p/e is moderate at 24.36, and the forward p/e (fye 31-Dec-06) is even nicer at 19.31. With the strong growth in earnings, the PEG (5 yr expected) comes in at a bargain-level 0.60.

Reviewing the Fidelity.com eResearch website, we can see that even by the Price/Sales ratio, GDI is reasonably priced. According to Fidelity.com, the company belongs in the "Diversified Machinery" industrial group. Within this group, the most expensive stock (by Price/Sales ratio) is Roper Industries (ROP) with a Price/Sales ratio of 2.5. Next is Pall (PLL) and Illinois Tool Works (ITW) at 1.9, followed by Ingersoll-Rand (IR) at 1.3. Gardner Denver (GDI) is next at 1.1 and Eaton (ETN) is the most reasonably priced in the group with a Price/Sales ratio of only 0.9.

Looking back at Yahoo for some more numbers on this stock, we find that there are 25.97 million shares outstanding, and 25.52 million of them float. Of these shares, 1.15 million shares are out short representing 4.50% of the float or 8.1 trading days of volume (the short ratio). From my perspective, this is significant being over 3 days of volume, and with the strong earnings report, there is likely a bit of a squeeze of the shorts going on as they scramble to buy shares driving the stock higher yet.

No cash dividend is reported and the last stock split was a 3:2 split paid in December, 1997.

What about a chart? Looking at a "Point & Figure" chart on GDI from StockCharts.com:

We can see that the stock trading weakly between April, 2002, when the stock hit a price of $27, down to a low of $14.50 in November, 2002. Since then, the stock has traded strongly higher for the past three straight years, reaching the $58.70 level today. The stock looks strong to me!

So what do I think? In summary, the stock is moving higher today in the face of a weak market on the back of a solid earnings report. Both earnings and revenue climbed strongly and the company beat expectations. In addition, the company has raised guidance for 2006. A solid report.

Morningstar.com, at least for the past three years looks solid. Prior to this, the numbers were flat. However, things appear to have turned around in 2003 and 2004, and thus the chart looks good during this period as well. Free cash flow is positive and growing and the balance sheet looks nice with a current ratio of almost 2:1.

Valuation-wise, we have a stock with a p/e in the 20's and a PEG at about 0.64. The Price/Sales ratio is also one of the cheapest in its industrial group coming in at 1.1. This also looks nice.

Finally, the chart looks strong.

In fact, there isn't much I don't like about this stock. The stock price may be a bit ahead of itself, I like it when the price hugs that support line, but that is in itself a weak criticism, especially with the reasonable valuation.

Since I just sold a stock at a loss, I am in no position to be buying anything at all anyway. But if I were.....:). 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