Saturday, August 20, 2005

on longs and potential longs

Int'l Game Tech (IGT) -- already have a pretty big position here. Don't expect a move outside of the $25-$30 range for at least next 6 months. See great opportunity here for gaming expansion in 2006-10 plus potential from next round of slot upgrades (server based gaming). In the 24's, I'll likely pick up a bit more.

PeopleSupport (PSPT) -- big believer in this BPO story from the Phillipines. Client concentration risk is fading over time, pipeline is full, cash on the b/s and NOL's, inexpensive valuation. Likely sit tight here for 1+ years.

Aptimus (APTM) -- has been a short-term disaster after guiding well down for 2005. With some top 100 clients in beta testing, think that new hires can move a few to production in coming months. Like new SVP's (founder of ASKJ) talk of billions of impressions.

Orthovita (VITA) -- still have my eye on VITA. Another 50% yr/yr rev. growth quarter just reported. New Vitoss formulations catching on quickly. Vitagel uptake strong. Cortoss clinical paper showed strong results from use in VCF patients vs. PMMA. Cortoss could be huge to VITA in 2007-8 and beyond. Cortoss or not, still no profits until 07 at the earliest (move to more of a direct sales force should help)

Pepsico (PEP)--recently been taking a look at PEP. Pepsi carbonated soft drink (CSD) only part of the story. Frito-Lay snacks most imp. segment. High ROE, generates lots of cash. Use cash for dividends and buybacks. Even at PEP's size, still intl opps. Domestic to int'l ratio is 2/3 to 1/3. Strong relationship between salty snack consumption and per capita GDP growth. Here's a Deutsche Bank PEP presentation to look at.

CR Bard (BCR) and Constellation Brands (STZ) -- Bard got an upgrade from SSB recently that kind of stemmed it's decline towards $60. Still might get there. I've written briefly about BCR and STZ before. Kind of hard for me to understand the STZ move lower. Maybe worries on beer consumption trends? Will look very closely at STZ around $25.

Detsply (XRAY) is one that I've followed for a long time. Leader in dental consummables. Pretty reliable grower. Opportunities in industry for consolidation. Competitors are HSIC, PDCO, SYD. Stock has come down from $57 to $52 in past few months. Like it a lot in the high $40's

Chicago Bridge and Iron (CBI) is one that I recently started to examine. In my mind, really an energy play. CBI does construction/engineering work on refineries and more importantly on LNG terminals. Huge backlog. I'll take a closer look in 20-21 range.

Friday, August 19, 2005

Sears Holding (SHLD) comments from Bear Stearns

It's good to see SHLD start to get beaten down a bit over the past week or so. Why anyone would want to commit funds to a retailer like SHLD with interest rates on the rise and oil at $65/bbl is beyond me.

Some comments from BS:

--Mindy Meads, CEO of Lands Ends departs. BS sees as positive (mgmt shakeup). Might indicate Lands End is on the block.

BS visits Sears Essentials stores:

--100,000 sq. feet. Bright, well-lit, organized, wide aisles, centralized check-out

--Large, clear bilingual signage

--Store has more upscale feel than WalMart - more like Target or Kohl's.

--Categories that SHLD has that TGT and WMT don't have big presence in --high end plasma/LCD tv's, refrigerators, washer/dryers, dishwashers, mattresses.

--Aesthetically pleasing apparel depts. compared to WMT.

-- In the consummables category (basic grocery, cosmetics, cleaning prod, paper goods), SHLD is 20% higher than nearby WMT.

-- "The shelves were in-stock and very well-organized. In our view, perhaps the department was so immaculate because no one was making any purchases due to the high prices!"

{Note that I am short SHLD}

BB&T on OATS

Of all the analysts that cover OATS, two stick out to me in terms of adding value within their research. These analysts are from BB&T and also Adams Harkness and Hill. Even though both are at 'hold' whereas I'm more of a 'strong sell', both analysts do more than just serve as a mouthpiece for management. I just came across BB&T's most recent note on OATS. Here are some highights:

--in Q205, a partial reversal of a self-insurance policy added approx. $1.45 million pretax ($0.04 per share). Back that out and the reported 3 cents eps number falls to minus 1 cent.

--BBT looks for a nickel in EPS in 05 on 4.5% SSS growth. For '06, they look for 9% sq. footage growth, 3% SSS growth, 7.5% rev. gain. '06 EPS is pegged at 25 cents.

--"Because the chain has failed to open new stores agressively, we believe it fairly likely that its sales recovery will deccelerate beginning in Q206."

--OATS store size of 22,800 sq. ft makes it vulnerable to comp. WFMI plans to open 25 stores in OATS mkts in next 2 years. BBT estimates that 27/111 OATS stores will need to be closed or relocated.

--Safeway is rolling out organic/perishables merch. program to all domestic units. BBT estimates that 56 OATS stores compete with a Safeway, with avg. distance apart at 1.8 mi.

{Note that I am short OATS shares}

Monday, August 15, 2005

He said it once before but it bears repeatin'

Stephen Roach writes:

Over the years, I’ve learned to be wary of betting against the American consumer. But the history of energy shocks argues to the contrary. Moreover, today’s saving-short, asset-dependent, overly-indebted consumer is far more vulnerable than in the past. After years of such warnings, investors, of course, have all but given up on that possibility. That’s precisely the time to worry the most.

Attention OSTK shareholders

Saturday, August 13, 2005

notes from the Sontra CC

I just listened to the SONT 2nd quarter CC. With vaccine results (hepA, flu) and the Bayer $3 million milestone payment both due in Q3, I'll stick around through September to see what happens. This should be an interesting 6 weeks. Here are my cc notes:

--Excited about evaluations that are going on at pediatric hospitals

--Transdermal Glucose Monitor (TGM)-fabrication of prototype by end of 2005, clinical studies in 2006

--Vaccine studies completed (hepA, flu) and results presented in Q3.

--Sales cycle into ped. hospitals is taking longer than expected (you can say that again-32k)

--Will begin marketing to ped. physician offices in October

--Sonoprep 2.0 to market in 2006 (lower manuf. cost, better ergonomics)

--ISO and CE marks for Sonoprep in 4Q05.

--Net loss for the Q = 1.8 million, net loss for past 6m = 3 million

--Key ref. accts at CT Children's and St. Francis. Doctors from each of these accts will be presenting in Sept/Oct on sonoprep topical lidocaine advantages

--Developing a modified Sonoprep device for the dermatology market (nice, I like this idea)

--Working on a clinical study for blood banking with Mass Gen Hospital (I like this too. Haven't heard management discuss)

--No $1 million rev. in Q4. No more revenue predictions.

--TGM = sonoprep + glucose flux sensor. 3 markets being developed in parallel are hospital critical care, phyisician office and home use.

--Members from SONT and BAY have recently met with recently est. Clinical Advisory Board

--Progress has been made on new agreement to cover next stage of product development with BAY. $3 million pmt expected by end of Sept.

--HepA and flu vaccine results could lead to partnerships with vaccine cos.

--On BAY, continue to work with BAY, very confident, both want to take adv. of window of opportunity.

--$1.5 million cash burn/quarter. Doesn't include $3 million pmt.

--in the Q&A, sales traction question by shareholder was a good one. Question was basically "where was the sales traction that you described in the pr?" Davison kind of sidestepped this saying SONT is getting traction in terms of # of evaluations for sonoprep use. To me this is "evaluation traction" not sales traction.

Paul Kasriel's

Economic Outlook for August. I particularly like the section on real M2 growth and the yield spread.

Wednesday, August 10, 2005

the Sont slaughter

Understandably, SONT get hammered today losing 24% of its value. Here is the pr that they finally got around to putting out. Apparently (I still need to listen to the cc), CEO Davison withdrew guidance of a $1 million quarter by Q4. So his credibility is now in question by investors. Personally, I'm disappointed in the sonoprep topical lidocaine sales ($32k in quarter) and the withdrawn guidance but I'm not going to jump ship just yet. As far as I know, Bayer milestone payment for the glucose non-invasive monitor is still on for Q3. We should also get a handle on any expanded agreement between SONT and BAY in the 3rd quarter. Also, in Q3 we should get some results on the vaccine studies. I'm going to wait for the Bayer pr until the end of Q3 (Sept 30) and if I don't see one, I'm done. If a pr does surface, I'll evaluate and decide from there.

2 moves today--APTM & PSPT

I added to my Aptimus (APTM) position today in the $13.80's. If the big wigs that they just hired can bring on a big publisher or two by year end, I think we can get back to the high teens. Longer term, say by yr-end 2006, I don't think $30 is out of the question. I believe in the story here and I'll be patient.

I also picked up PeopleSupport (PSPT) as I mentioned I might for $8.84. I'm a long term believer in offshore BPO and I like PSPT's spot in the market. With pipeline full, client concentration will continue to dissipate over time. I think PSPT can grow top line at a 25% CAGR (and hopefully EPS at this level too) over next 3 years. For less than 15x '06 EPS, I think I got a deal at $8.84. I guess we'll see.

Tuesday, August 09, 2005

more Matt Simmons

Read this transcript of an interview he gave to Jim Puplava.

Crap

My speculative medical device/drug delivery co., Sontra Medical (SONT) just put out it's 2Q 10Q. The results were abysmal. Sales came in at $32k vs. $115k in the previous quarter. It's difficult to guage what investors were looking for from SONT this quarter (no analyst ests.), but $32k wasn't it. I'd imagine most hoped for $150-200k. Of course, I'm disappointed with the sonoprep sales in the quarter but I'm also disappointed in management for not putting out a pr to accompany the 10Q. The pr could have at least alluded to our status with Bayer and progress on the vaccine trials. Maybe we'll get a pr before the open tommorrow.

My best guess for tommorrow is a big sell-off in the first half hour of trading -- maybe 300,000 shares and off 25%. I won't be dumping at that time. If the cc is positive, we could definitely recover intraday. Here is what I'm hoping to learn from the cc:

1. What the hell happened to sonoprep sales in the Q? Did some substantial amt. of sales slip into Q3?

2. Are we on track with our Bayer partnership? Will this partnership be expanded? Will you reiterate expectation of $3 million Bayer pmt?

3. What happened with the vaccine trials (hepatitis/flu)?

4. In light of the dismal sales this q, how does Q3 look? Will you reiterate your guidance of a $1 million quarter by Q4.

If SONT can answer these 4 questions to investors' satisfaction, we'll be fine. If not, look out.

Saturday, August 06, 2005

a few long candidates

3 stocks look pretty interesting to me as long opportunities. Below, a few thoughts on each:

PeopleSupport (PSPT) is a co. that I profiled some time ago. They offer in-bound customer contact services out of the Phillipines. Co. reported a pretty solid Q as far as I can see. Rev growth was strong, client concentration risk is falling, pipeline looks full. PSPT might be selling off on costs to move into a new facility that will affect next 2 quarters and also attrition rates that spiked into the 20% range this past Q. Still, I like this BPO story and the fact that co's rev guidance for the year is pretty tight - 58-60 million. I don't think 60 cents/share in earnings for '06 is out of the question. Applying a 20 multiple to that (not unreasonable with a co. growing 25%/yr) gets you to 12. I'll likely add in the 8.90's.

Constellation Brands (STZ) is a co. that I have done well with in the past. They are a large wine and beer marketer/prodcuer/distributor. Trends are pretty favorable in the U.S and internationally for wine consumption and that is where STZ shines. Co. beefed up its wine line-up with big Australian acquisition of BRL Hardy a few years ago and most recently bought Mondavi. On the beer side, most important product that STZ distributes is Corona/Corona Light. Investors need to be aware of a few negatives or potential negatives to the STZ story -- co. likes to make acquisitions (integration risk), STZ carries a lot of debt (no dividend), worries spring up about beer consumption from time to time (mitigated somewhat by STZ being more concentrated on wine), and wine supply issues. I personally have confidence in STZ management and applaud them on integration of prev. acqs. I also think they have ample opps to improve Mondavi sales internationally. I'll likely add in the 25's. Here's a 2005 annual report to take a look at.

CR Bard (BCR) is a pretty large medical device co. ($6B market cap) that operates in 4 segments (vascular, surgical, urology and oncology). Bard does a good job at product innovation and plows a fair amt. back into R&D. I can see 10% rev/15% eps growth over the next 3 years. I like it a lot around $60. Here is Stifel's take on Bard's MRQ.

transcript of a Matthew Simmons Q&A

over at washingtonpost.com. Simmons is author of "Twilight in the Desert"

good article on incentives and auto stocks

From MSN, check it out

Monday, August 01, 2005

portfolio note -- EGOV

At 2:58 PM this afternoon, I closed out my position in Nic, Inc. (EGOV) at $5.40. I'll still keep the company on my watch list but I think the risk/reward is more balanced at these levels. I think we could just as easily see $5 as $6 from here.