Archive for the ‘Growth Story’ Category
Wednesday, September 26th, 2007
First before we get into the stock pitch, I wanted to apologize for the long layoff. I’ve been working on a web project that has yet to launch because of the numerous delays that stop me from seeing my baby take it’s first steps. I also wanted to say that I’m going to try to update a little more often because I love stocks and trading so I’ll probably never tear myself away from it. Also since summarizing Mad Money and Fast Money takes so long, I’m not going to do that and just go back to the basic point of this site which is to provide good analysis and some good stock picks…I mean PITCHES!
Quality Systems (QSII) is a company that I almost went into business against a few years back but fortunately, I was smart enough not to battle the numerous companies doing EMR or electronic medical records software. Our society is very very advanced but our medical system is a freaking dinosaur. Have you seen your doctors back offices? Yes file folders. What are we doing in our medical industry that we can’t get approvals from a computer system and automatically tell a system that we are allergic without the nurse asking fifty gazillion times. Ok sorry about that but seriously we all know that there has to be change. The advantage of medical software far outweigh the flaws.
Benefit number one is better and more accurate records which can turn to more accurate diagnosis. Two, cost savings in time spend on record management. Three, less change of human error in providing care and treatment. Four, ability to share medical information with other doctors so all issues are known so related information is taken into consideration while the doctor is making a decision. Five, we save some darn trees. The list can go on and on mainly because I did a business plan on this industry but the benefits are undeniable. So undeniable that Congress is in the progress of enacting legislation to force this software onto the medical system. Yes making good record keeping the law. How novel?
There are a few companies that will benefit. There is Cerner (CERN), General Electric (GE), Allscripts Healthcare Solutions Inc. (MDRX), and a tons more. While Cerner and General Electric are much too big to focus on this industry, the two companies that will benefit looks like will be Allscripts and Quality Systems who exclusively develop the software. Both companies were mentioned by Pete Najarian on CNBC’s Fast Money and both companies have a strong foothold although Allscripts is much bigger with a market cap of 1.4B, PE of 85, and revenue of 260M. Quality System is a much better value it seems from the fundmental stand point where it stands slightly below 1B market cap but with 29 PE and a forward PE of only about 20. The price per earnings growth (PEG) is a measly 0.96 with a clean balance sheet of NO DEBT and 70M in cash. The growth rate for both companies is about 16% but with Congress intervention, these stocks will move like crazy especially Quality System that has been beaten down with a 25% short position - any move up will be magnified.
The chart doesn’t look great but you can see that there is a turning point technically as you see there is move in the MACD to the upside on strong volume and the money is starting to flow back. Today it had a good move on strong volume but expect a huge move when there is more news of legislation. You hear it here - Quality Systems.
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Wednesday, August 15th, 2007
Mad Money’s Jim Cramer has been talking about Nastech Pharmaceutical Co (NSTK) for a long time now. He picks it as his speculative pick which means don’t bet your kid’s life savings on it! But here is the review on it:
Here is the description from Reuters:
“Nastech Pharmaceutical Company Inc. is a pharmaceutical company focusing on the development and commercialization of therapeutic products based on both its molecular biology-based drug delivery technology. The Company’s RNA interference (RNAi) therapeutic programs are targeted at both developing and delivering therapeutics using siRNA to down-regulate the expression of certain disease causing proteins that are over-expressed in inflammation, viral respiratory infections and other diseases. The Company’s products under clinical stage include Parathyroid Hormone PTH(1 -34) (Peptide), Calcitonin-salmon (Peptide), PeptideYY(3-36), Insulin, Exenatide and Carbetocin. The products under pre-clinical stage include RNAi directed against influenza virus, RNAi directed against TNF-alpha and undisclosed compounds.”
NASTECH DRUG PIPELINE
Well in english, Nastech has three drugs that it’s working on that all target huge markets. They are Nastech’s parathyroid hormone PTH(1-34) for osteoporosis, its insulin nasal spray (RNAi compounds) for diabetes and its PYY treatment for obesity. Let’s take a look at each.
Osteoporosis is a huge problem that will deabilitate a large baby boomer population of women and we all know women live longer because the wives torture their husbands (just kidding women). But this compound will target a huge population when approved in a great nasal spray. Next is diabetes which is one of the fastest growing problems in America and soon the world. With the insulin nasal spray, people won’t need to go to those dreaded shots. Next is the PYY treatment for obesity which is also a nasal spray. Do I sense a trend. Nastech…nasal. Yes they specialize in nasal delivery of tons of drugs. From trials the drug reduced caloric intake by 30%.
Up next seems to be a nasal delivery of an Autism drug and possibly more. The company claims that the nasal delivery of drugs make it more effective compared to shots so technically many drugs can be delivered better though their technology. Interesting wouldn’t we say. This sounds awfully like a sales pitch. But here is the bad:
In their last earnings report on Wednesday August 8th, Nastech’s second quarter loss widened because of LOWER revenue and increased expenses because of clinical trails and development cost because of their large pipeline. The company reported a net loss of $12.4 million, or 50 cents per share, compared with $560,000, or 3 cents per share, a year earlier. Revenue fell 57 percent to $4.9 million from $11.4 million. Analyst were expecting 42 cent loss and $6.1 million. So they missed pretty badly.
Overall it can be a growth stock if the market finds that nasal delivery is unquestionably better but the stock seems to be falling with the market after a strong rise but support seems at $14 where is now but next support is $13.50 50 day moving average then $12.25 200 day moving average. Under $13 looks like a good bet for a speculative stock.
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Monday, August 13th, 2007
In Japan and most of Asia, many products from electronics, newspapers, beverages, and anything that fits in a vending machine is sold through a vending machine. America so far only dispenses sodas, snacks and newspapers. Vending machines are by far extremely lucrative profit machines because it cuts out the most expensive part of the business which is the labor. However the problems comes when you would like to sell more expensive products without dealing with change or large sums of money. That is where USA Technologies (USAT) comes in. USA Technologies, Inc., incorporated in January 1992, offers a suite of networked devices and associated wireless non-cash payment, control/access management, remote monitoring and data reporting services, as well as energy management products. Basically they are the leader in vending technology from payments (e-Port), vending monitoring (USA Live), and vending machine energy management (Misers).
Although not profitable yet, the company is growing at a compounded revenue growth of 39% according to an article on Motley Fool which also highlighted this company as a microcap to watch but USAT has grown predominantly through relationships with Coca-Cola (KO), Pepsi Co (PEP), Mastercard (MA), and Sprint (S). While a very small company with a market cap a little above 100 million, there seems to be room to grow with the growing industrialization of the world and movement toward vending machines. Recently USAT announced a deal with Coca-Cola and Mastercard to use their eport system in their vending machines to a total of 7,500 machines in the US while suggesting global growth is just another signature away. The terminals allows Mastercard payments as well as MasterCard PayPass technology.
While that is a bigger deal, USAT supplies laundry mats and hotels payment services as well providing them a stable place to develop into other areas such as hotel vending. The idea is not that USAT provides ePort but the fact that it provides a comprehensive proven payment and monitoring system that is backed by 65 patents allows them to grow with more security from competitors. But the growth areas are numerous. It only has a deal with Mastercard at this time but having one with Visa or another credit issuer will increase it’s reach. Next there is the growth of vending beyond laundry mats and sodas. There are snack foods, gambling, hygenie items, electronics, newspapers, magazines, digital music, digital books, digital movies to pretty much anything. There is also the global growth. While many countries still lack the vending machines, it will eventually come.
SAC Capital Associates, led by billionaire trader Steven Cohen bought $10 million worth of USAT stock, for a 15% interest and Steve Cohen is a major guru to follow who has averaged a staggering 40% return since 1992. That’s why he was the second highestest paid hedge manager grossing over one billion last year. Another big stakeholder is Wellington Management, which owns an 8.1% stake. In a Businessweek article, Luis Martins, an analyst for Taglich Brothers figures sales will rise to $16.2 million in 2008, from $9.8 million in 2007. He sees the stock, now at 7.90, at 11 at yearend. Currently the price is about $9.50.
Another for the possibility of buy out. Why would a company like to buy out USAT? Well they have the technology that is accepted and proven. They have relationships with big vendors. They have the patents and security. They are growing at a fast pace especially now with the first major distribution of their ePort system with Coca-Cola. It’s expanding out into Kiosk as seens by Sony PictureStation Kiosk to print pictures. Kiosk will be a major format for product distribution. Who would be interest? Mastercard or Visa to have a monopoly on vending machines for their payment method. Banks or credit transaction processors. Imagine if every kiosk and vending machine was using USAT. This may take years to play out but USAT seems to on the right track but I would trust Steve Cohen.
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Saturday, August 11th, 2007
Not a new position for Seth Klarman of Baupost Group but a postion worth noting especially since Jim Cramer of Mad Money just interviewed the CEO and mentioned the stock a few times the last few weeks so we’re going to dive into the world of Seth Klarman and why he would put 5% of Syneron Medical in his fund that has returned 20% since inception.
After receiving his MBA from Harvard in 1982, Klarman start Baupost with $27 Million in investments but now he has over 5 billion in management. He got his BA from Cornell. According to a BusinessWeek profile of him in August of 2006, since then Klarman has returned 6,133% net of fees. His investing philosophy is centered on value and risk averse techniques which I think is not used enough except for the great Mr. Buffet. His emphasis is that investors are naive to look for returns which is the positive and never look at the risk. We all think yes Apple will go to $180 but we never think hey it could go to $80 instead.
“Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor” a book he publish in 1991 increased his notoriety along with his great returns among investors and academia. Since the book is no longer in print, it actually is a much desired item that goes for between $700 to $1200 on Amazon and Ebay. The book is such a collector’s items that many library either protect it or has gotten it stolen. I wish I could get my hands on it. I may track it down one day while the librarian watches me.
This value investor has in his great portfolio, Syneron Medical Ltd., an Israeli maker of aesthetic medical devices which provide cosmestic laser surgery and other cosmestic procedures. Last earnings were decent, Syneron earned $10.3 million, or 37 cents per share, up 16 percent from $8.9 million, or 32 cents per share, in the same period a year ago while revenue rose 36 percent to $37.5 million from $27.5 million. It matched analyst earnings of 37 cents while beating analyst estimates of sales of $33.2 by 13%. Not too shabby I say.
Also better news is that the company boost expectations of sales for this year to $146 million, up 25 percent from the prior year topping forecast of only 20% revenue growth. On earnings day, it rose to $25 but now as I write with the market downturn, it’s $23.56 trading at a PE of 16 and forward PE of 12. No debt. 93 million in cash. AValue? Yes. Growth?
Growth? Yes. It’s growth at 20 plus percent and with a Price to Earning’s Growth PEG at 0.94 is awesome. Recently they got approval for the Vela platform that removes that cellulite from the back of women…well men too..legs. It’s approved by the U.S. Food and Drug Administration and the European Union. Is America become more self conscious? Yes. Is America become more over weight? Yes. Baby boomers want to wear shorts? Of course, especially if they move to Las Vegas or Arizona. So Seth Klarman sees a decent trend and bought it for value. But it’s a growth play too.
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Thursday, August 9th, 2007
Ctrip.com (CTRP) is the Chinese version of Priceline who today rocketed up over 20% to finish at a 52 week high just above $72 from great earnings. Revenues moved up 16% higher at $355.9 million, fueled by a 93% surge in overseas gross bookings at Booking.com. Read the words - OVERSEAS bookings. This prompted on analyst to move price targets from $80 to $103. while median target rose to $86 from $72. So is there growth for Ctrip.com?
Well China seems synonymous to growth and with that Ctrip.com may be too. While the web is still growing in China, it’s still much less mature than in the US. I’ve been studying the web in China lately for a business project. Even on Motley Fool, Ctrip is a Hidden Gems stock pick suggesting that some people are keen to the growth prospects. Last earnings, net revenues rose 52% higher to $37.8 million. Earnings per diluted share soared from $0.11 a share to $0.17 a share (or $0.22 per share if you back out stock-based compensation expenses). So there is a lot of room to grow for this company. It can triple revenue easily. The market is still huge with more international travel coming to Shanghai and other parts of China for trade. Also the wealth is growing as well as the middle class means more trips to Macau for some Chinese Vegas time! But this is a long term stock.
They started with hotel bookings then expanded to airline and toured bookings. Last quarter it grew45% from last period. Also it has no debt and it’s profitable. Eventually the build out cost will die down only to leave more profit. It’s moving fast and the Beijing Olympics Games should only spur that one. But right now it’s trading a little high at forward PE of 45 but it’s growth far outweighs it. Look at Amazon!
Ok so the question is can Ctrip.com grow? Yes. Is it growing? Yes. Is there more room to grow? Yes. Is it the best of breed in China at least? Yes. Is it time to buy yet? Well, it’s at about $40 right now and I say near the next support which is $35. So between $38 to $35. But we’ll see. It’s not a sure thing yet.
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