07 September 2005

Watching the Watch List

Periodically, when I have nothing else to post, I'm going to re-evaluate the WershovenistPig Stock Watch List, to update figures, check for news stories, and trim the fat, if necessary. This blog is still young, so this type of posting will evolve as the list grows, I begin actually investing money, and perhaps learn some html (a nifty graphical chart would be better than straight text).

Name Date Added - Original IBD Scores - Original CNBC Stock Scouter Score - Closing Price in IBD on Date Added - Current IBD Scores - Current CNBC Stock Scouter Score - Current Closing Price - Price Percentage Change Since Addition Date

CUB - 8/24 - 21/10/C+/D- - 2 - $17.12 - 21/15/C/C/D- - 4 - $18.06 - +5.5%
DSW - 8/26 - 83/25/A-/B - na - $22.94 - 83/23/B/B/C - na - $22.00 - -4.1%
DWRI - 8/29 - 97/7/D/A-/D - 3 - $11.48 - 97/9/E/A/E - 3 - $11.88 - +3.5%
ATYT - 8/30 - 64/5/A/B/D - 3 - $11.34 - 63/10/A/B/B- - 4 - $12.88 - +13.6%
CVTX - 8/31 - 6/92/A+/D/B - 7 - $26.56 - 6/94/A+/D/B+ - 6 - $29.13 - +9.7%
EDO - 8/31 - 88/22/C+/B/B- - 7 - $27.30 - 88/23/C/B/B - 4 - $27.84 - +2.0%
CBH - 9/1 - 90/73/D+/A/B+ - 10 - $33.72 - 90/75/C-/A/A- - 9 - $34.29 - +1.7%
ARXT - 9/5 - na - na - $33.92 - 36/90/A-/na/na - na - $31.91 - -5.9%
CTRN - 9/6 - 98/94/E/A/B- - na - $26.03 - 98/95/E/A/B- - $26.04 - +0.0%
BDE - 9/6 - 95/86/A+/A/B - na - $16.24 - 95/86/A+/A/B - na - $16.70 - +2.8%
UNT - 9/6 - 93/86/A/A/A+ - 10 - $51.09 - 93/87/A+/A/A+ - 10 - $51.17 - +0.0%
APC - 9/6 - 95/84/A+/A/B- - 8 - $91.75 - 95/85/A+/A/B- - 8 - $92.88 - +1.2%

ATYT is the big winner on the watch list, even considering the bad news from the day I added ATYT.
ATI Tech: Warning? What Warning?
By Troy Wolverton
TheStreet.com Staff Reporter
8/30/2005 1:43 PM EDT
URL: http://www.thestreet.com/stocks/troywolverton/10240331.html

ATI Technologies (ATYT:Nasdaq) issued a big warning Monday, but the graphics chipmaker still seems to have some big believers on the Street.

The company forecast that fourth-quarter revenue will come in almost $100 million less than previously predicted, marking the third time the company has sought to lower expectations for its coming report and the second straight quarter that it has issued a formal warning.

Despite that, analysts rushed to the company's defense Tuesday, with at least one of them upgrading the stock and several others reiterating their buy or outperform ratings.

Most argued that the sales shortfall was expected and that the stock is trading at a historically low level. Most expect the company's stock and results to turn around in coming months as the company introduces new products.

"Stubborn though it may seem, we are sticking with our buy rating and $16 price target on ATYT. We believe there are multiple potential catalysts for [the] November quarter," said Deutsche Bank analyst Ben Lynch in a report issued Monday night. (Deutsche Bank has not done recent investment banking business for ATI Technologies.)

But it wasn't just analysts who defended the stock. In the after-hours markets following ATI's announcement late Monday, the company's shares traded off as much as 14%. But on Tuesday, they recovered much of that lost ground. In recent trading, they were actually up 6 cents to $11.40.

Blaming disappointing sales of and prices on its chips for desktop computers, ATI said Monday that it will post fourth-quarter revenue of between $465 million and $480 million. That was down from a previous range of $550 million to $580 million and an initial estimate of about $600 million.

Although ATI did not give a bottom-line estimate, its updated forecast implied a loss of $100 million or more, thanks in large part to an expected $60 million to $70 million inventory write-off. Analysts were expecting the company to post a 7 cents a share profit for the quarter and revenue of about $560 million.

Still, analysts said they were more surprised by the size of the shortfall rather than the warning itself. Likewise, several said that they had seen the inventory write-down coming.

"Our checks had indicated that ATI aggressively lowered prices of high-end and mid-range desktop products in order to try to clear its inventory" -- an indication of inventory problems, noted Gurinder Kalra, an analyst with Bear Stearns, which has not done recent investment banking business for ATI.

The keys for the company going forward are a series of planned new products, including new desktop graphics chips, analysts said. ATI also should see a boon from the launch of Microsoft's (MSFT:Nasdaq) Xbox 360, which incorporates the company's technology, as well as from other consumer electronics products that use its chips, such as digital televisions and wireless phones, they said.

"We believe that ATYT is a turnaround story after its recent problems and is poised for growth heading over the next 12 to 18 months," said P.J. McNealy, an analyst with American Technology Research, which doesn't do investment banking.

Still, many analysts and investors made similar arguments as recently as June, when the company warned about third-quarter results. But some of those analysts said they were simply too early in calling for a turnaround in ATI's stock.

"In hindsight we were two months early on our upgrade," said Arnab Chandra, an analyst with Lehman Brothers, which has not done recent investment banking business for ATI. But he added, "We reiterate our original thesis that ATI has hit a bottom and risk/reward is favorable at these levels."

Still, not everyone was ready to hop on the ATI train. In his own note, Needham analyst N. Quinn Bolton reiterated his hold rating on ATI shares. The company is losing market share to rival Nvidia (NVDA:Nasdaq) in the high-end and enthusiast markets. Meanwhile, how quickly the company can ramp up production of its next generation chips and how well they will be accepted by the market are unclear, Bolton said.

Further, the company's gross profit margins, even excluding the inventory write-off, are coming in significantly below the company's targets.

"We remain cautious on ATYT shares. Based on previous trough multiples, we believe downside exists to the approximate $8.50 to $9 range," said Bolton, whose firm has not done recent investment banking business for ATI.

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