31 August 2005

Intriguing Stocks in Monday's IBD - EDO and CVTX

Here are two very different stocks that I found intriguing in Monday's IBD.

Edo Corporation - EDO

Here are excerpts from a piece in last Monday's IBD by Mike Angell:

Handsets’ Deadly Use: Detonators

More and more terrorists are using cell phones to remotely detonate bombs — and there’s not much authorities can do about it. At least, not that they can say. Cell phones have been connected to terrorist bombings in Madrid, Bali and Israel. Many roadside bombs in Iraq are believed to be triggered by cell phones....

The U.S. military in Iraq is equipped with an estimated 4,200 jammers to prevent all kinds of remotely detonated bombs. New York based Edo Corp. makes the product, but a spokesman said the company declined to comment.


IBD SmartSelect® Corporate Ratings
Edo Corporation (EDO) Ratings as of 8/30/2005

Earnings Per Share (EPS) Rating - 88 - Edo Corporation has outperformed 88% of all publicly-traded companies based on its short and long term earnings growth rates.
Relative Price Strength (RS) Rating - 23 - Edo Corporation has outperformed 23% of all publicly-traded companies in terms of its stock price performance over the last 12 months.
Industry Group Relative Strength (Grp RS) Rating - C+ - Edo Corporation belongs to an industry group that has performed in the bottom 60% of the 197 industry groups tracked by Investor's Business Daily, measured over the last six months.
Sales + Profit Margins + ROE (SMR) Rating - B - Edo Corporation rates in the top 40% of all publicly-traded companies based on four fundamental factors used by many analysts today: a company's sales growth rate over the last three quarters, before- and after-tax profit margins, and return on equity (ROE).
Accumulation/ Distribution (Acc/Dis) Rating - B- Edo Corporation stock has been experiencing moderate buying, based on its daily price and volume changes over the last 13 weeks.


CNBC's Stock Scouter rates EDO a 7:

EDO Corporation, a small-cap value company in the capital goods sector, is expected to outperform the market over the next six months with less than average risk.

Quick Summary
Pro
Earnings growth in the past year has accelerated moderately compared to earnings growth in the past three years. Positive
One or more analysts has modestly increased quarterly earnings estimates for EDO. Positive
Con
The most recent quarterly earnings report was slightly lower than analysts’ consensus forecast. Neutral/Negative
The StockScouter measure of relative price change and consistency is low. Negative


EDO is a commendably tight-lipped company making very useful tools that may frustrate terrorists and their intentions. Electronic jammers may not be glamorous devices made by Q for 007, but this is no longer the good old days of the Cold War. EDO manufactures an intriguing device, it's trading at $27.30, near its 52-week low of $25.89, and has pretty good numbers. Wish I knew more about the company and these products, but at the same time, I'm glad I don't. So let's put it into the WershovenistPig stock watch list.

CV Therapeutics - CVTX

Here are excerpts from a piece by Peter Benesh:

Drug Firm Is Ready For Liftoff

Looks like it’s three strikes and you’re in for the folks at CV Therapeutics. It’s taken 14 years, but CV now has three heart-related drugs close to launch, two within the next three quarters and the third by 2007....

The first drug from CV is Aceon for hypertension. The second is Ranexa for chronic angina. The third, Regadenoson, is called a cardiac stressor. It’s used for patients who can’t take the usual treadmill heart stress test....

THE COMPANY
CV Therapeutics went public in 1996. It focuses on molecular, or chemically based, treatments for cardiovascular problems. The firm’s science is based on receptors. Receptors are tiny structures on cells that let hormones, germs and chemicals trigger changes within the cell. Lange doesn’t personally know of any rivals that do the same thing. “But there maybe competition we don’t know about,” he said.

LOOKING AHEAD
CV is working on treatments for asthma and two other heart conditions, Lange says. The wild card is whether it remains an independent company. “Biotech is the home of innovation, (and) big pharma is so big it needs more and more drugs to meet expectations,” Monane said. That means CV could be a buyout target. Lange acknowledges as much.“We’ve been on a lot of lists.” Still, Lange says his goal is for CV to be as big as Amgen or Genentech.


IBD SmartSelect® Corporate Ratings
C V Therapeutics Inc (CVTX) Ratings as of 8/30/2005

Earnings Per Share (EPS) - 6 - C V Therapeutics Inc has outperformed 6% of all publicly-traded companies based on its short and long term earnings growth rates.
Rating Relative Price Strength (RS) Rating - 92 - C V Therapeutics Inc has outperformed 92% of all publicly-traded companies in terms of its stock price performance over the last 12 months.
Industry Group Relative Strength (Grp RS) Rating - A+ - C V Therapeutics Inc belongs to an industry group that has performed in the top 20% of the 197 industry groups tracked by Investor's Business Daily, measured over the last six months.
Sales + Profit Margins + ROE (SMR) - D - C V Therapeutics Inc rates in the bottom 40% of all publicly-traded companies based on four fundamental factors used by many analysts today: a company's sales growth rate over the last three quarters, before- and after-tax profit margins, and return on equity (ROE).
Rating Accumulation/ Distribution (Acc/Dis) Rating - B - C V Therapeutics Inc stock has been experiencing moderate buying, based on its daily price and volume changes over the last 13 weeks.


CNBC's Stock Scouter rates CVTX a 5:

CV Therapeutics, Inc., a small-cap growth company in the health care sector, is expected to outperform the market over the next six months with average risk.

Quick Summary
Pro
Shares are under heavy accumulation by financial institutions. Positive for a small company like CVTX
The StockScouter measure of relative price change and consistency is high. Positive
Con
The price-to-earnings multiple is a negative number. No effect
Previous day's closing price for CVTX was close to its 50-day moving average. Neutral


CVTX is near its 52-week high, but that's not surprising if executives are name-dropping companies like Genentech (DNA) that have been just soaring. I wish it were cheaper as this is a company that hasn't made any money yet, but has potential, potential not just now but months from now, when I'll be investing. And it has potential in not just one drug, but three. Three is less risky than one. This is another intriguing stock for the stock watch list.

30 August 2005

ATI Technologies plummets right onto the watch list...

Back on August 15, Cramer discussed a Canadian 3D graphics chip manufacturer on his radio show. Here's the recap:

Sam from Northwest asked about the halo effect from Xbox and flat-panel televisions on ATI ( ATYT). Cramer answered, "When I look at situations where I talk about tech and why I want to be in it, I'm thinking about companies like ATYT." The fact that it's at a 52-week low looks like an opportunity to Cramer, who said ATI should be bought. As a company with a mixed record, it's not a high quality company to Cramer by any means, but he said, "It shouldn't be this low. I would buy it for a trade."

Cramer's been advocating a tech rally in the second half of 2005, saying that there is an exciting new product cycle on the horizon. While I tend to think about high quality companies with products I use, like Apple (AAPL) and Google (GOOG) with their wonderfully addictive Earth application, I also want to find smaller, less obvious players. ATYT seemed like a good combination of tech plus low price.

ATYT has continued downhill since August 15, helped by a shareholder lawsuit. I was about to look more into this company when this news hit:

ATI Technologies cuts 4Q forecast
Chipmaker expects inventory write-down of $60 million

By Scott Banerjee, MarketWatch
Last Update: 6:31 PM ET Aug. 29, 2005

SAN FRANCISCO (MarketWatch) -- ATI Technologies Inc. said after the market close Monday that its fiscal fourth-quarter revenue would come in substantially lower than previously forecast as a result of slow sales for desktop computer chips and a sizable inventory write-down.

The graphics chipmaker cut its fourth-quarter revenue forecast to a range of $465 million to $480 million, compared with its previous forecast of $550 million to $680 million. Analysts surveyed by Thomson First Call were expecting revenue of $560.9 million.

The news sent shares of Markham, Ontario-based ATI down 12.6% to $9.90 in after-hours trading.

ATI (ATYT: news, chart, profile) said its desktop product line sales slowed, both in units and average selling prices.

The company expects an inventory write-down of $60 million to $70 million, and its gross margin percentage to fall into single digit range from a previous prediction of 29% to 30%.

ATI also said operating expenses, excluding stock-based compensation costs, are expected to be in the range of $143 million to $148 million. The company did not offer a revised earnings forecast. Analysts had previously expected a profits 7 cents a share.

ATI will be providing the graphics processor units for the Xbox 360 video game console from Microsoft Corp. (MSFT: news, chart, profile), due out on shelves this holiday season.


The after hours trading was as brutal as one would expect, taking the stock down a dollar from $11.34 to $10.34.

This is wonderful news. Notice, the news report says that ATI will still be putting chips into the new Xbox. Cramer though this stock was cheap at $12. Since I have both time to see where this stock goes and time before new Xbox sales affect this stock, ATYT has just plummeted right onto the watch list.

29 August 2005

What's the difference between a couple of tanking stocks?

Design Within Reach (DWRI) and Pier One Imports (PIR), two home furnishings retailers have recently visited their 52-week lows. DWRI sells high end design at ever-so-slightly less than high end prices via "studios" in cities and ritzy towns (think Greenwich, CT, and Princeton, NJ) throughout the US. PIR sells glorified dorm room rattan furniture by securing the services of Kirstie Alley pre-Fat Actress and Thom Filicia after Queer Eye exhausted its formula.

I guess you can see where I'm going with this one. If you just used CNBC's Stock Scouter, you'd see little difference. DWRI scores a lowly 3/10, while PIR achieves an even lower 2/10. Here are the Stock Scouter details for DWRI:

Fundamental
Grade: D
• The most recent quarterly earnings report was slightly lower than analysts' consensus forecast. Neutral/Negative
• Earnings growth information is unavailable or inconsistent.
• One or more analysts has modestly decreased quarterly earnings estimates for DWRI. Negative

Ownership
Grade: C
• Insider trading information is unavailable or inconsistent.
• Shares are under heavy accumulation by financial institutions. Positive for a small company like DWRI

Valuation
Grade: C
• The price-to-earnings multiple is higher than the average for all stocks in the StockScouter universe. Negative
• The price-to-sales multiple is slightly higher than the average for all stocks in the StockScouter universe. Negative for a small company like DWRI
• The ratio of DWRI's price-to-earnings multiple to its five-year growth rate is unavailable or inconsistent.

Technical
Grade: F
• The StockScouter measure of relative price change and consistency is very low. Very negative
• Previous day's closing price for DWRI was significantly below its 50-day moving average, a level from which prices frequently rebound over the long term. Positive


And here are the Stock Scouter details for PIR:

Fundamental
Grade: F
• The most recent quarterly earnings report was slightly lower than analysts' consensus forecast. Neutral/Negative
• Earnings growth in the past year has decelerated rapidly compared to earnings growth in the past three years. Negative
• One or more analysts has modestly decreased quarterly earnings estimates for PIR. Negative

Ownership
Grade: F
• Two or more executives, directors or major shareholders sold a large number of shares recently. Very negative
• Institutional holdings information is unavailable or inconsistent.

Valuation
Grade: C
• The price-to-earnings multiple is higher than the average for all stocks in the StockScouter universe. Negative
• Price-to-sales information is unavailable or inconsistent.
• The ratio of PIR's price-to-earnings multiple to its five-year growth rate is negative or below the average of all stocks in the StockScouter universe. Negative

Technical
Grade: F
• The StockScouter measure of relative price change and consistency is very low. Very negative
• Previous day's closing price for PIR was slightly below its 50-day moving average. Negative


Okay, these are not promising grades, more like the Delta House's performance recited by Dean Wormer.

Now let's look at the Investor's Business Daily's infomation for DWRI:

Earnings Per Share (EPS) Rating 97 - Design Within Reach Inc has outperformed 97% of all publicly-traded companies based on its short and long term earnings growth rates.

Relative Price Strength (RS) Rating 7 - Design Within Reach Inc has outperformed 7% of all publicly-traded companies in terms of its stock price performance over the last 12 months.

Industry Group Relative Strength (Grp RS) Rating D - Design Within Reach Inc belongs to an industry group that has performed in the bottom 40% of the 197 industry groups tracked by Investor's Business Daily, measured over the last six months.

Sales + Profit Margins + ROE (SMR) Rating A - Design Within Reach Inc rates in the top 20% of all publicly-traded companies based on four fundamental factors used by many analysts today: a company's sales growth rate over the last three quarters, before- and after-tax profit margins, and return on equity (ROE).
Accumulation/ Distribution (Acc/Dis) Rating D- - Design Within Reach Inc stock has been experiencing moderate selling, based on its daily price and volume changes over the last 13 weeks.


And the IBD infomation for PIR:

Pier 1 Imports Inc (PIR) Ratings as of 8/29/2005

Earnings Per Share (EPS) Rating - 25 - Pier 1 Imports Inc has outperformed 25% of all publicly-traded companies based on its short and long term earnings growth rates.

Relative Price Strength (RS) Rating - 5 - Pier 1 Imports Inc has outperformed 5% of all publicly-traded companies in terms of its stock price performance over the last 12 months.

Industry Group Relative Strength (Grp RS) Rating - D - Pier 1 Imports Inc belongs to an industry group that has performed in the bottom 40% of the 197 industry groups tracked by Investor's Business Daily, measured over the last six months.

Sales + Profit Margins + ROE (SMR) Rating - D - Pier 1 Imports Inc rates in the bottom 40% of all publicly-traded companies based on four fundamental factors used by many analysts today: a company's sales growth rate over the last three quarters, before- and after-tax profit margins, and return on equity (ROE).

Accumulation/ Distribution (Acc/Dis) Rating - D- - Pier 1 Imports Inc stock has been experiencing moderate selling, based on its daily price and volume changes over the last 13 weeks.


This sector has not done well in the market lately, which explains the D grades in Industry Group Relative Strength. Howevern the difference between these companies is really night and day. DWRI garners some low grades, such as the F in Technical and D- in Accumulation/Distribution because the price is down and there's been heavy selling. That's exactly where we want to find a cheap stock. DWRI recently lowered its guidance and has taken quite the hit from the market as detailed below:

By Mark Martinez
TheStreet.com Staff Reporter
8/5/2005 11:06 AM EDT
Design Within Reach (DWRI:Nasdaq - news - research) fell 22% after the company previewed second-quarter earnings that fell below expectations and lowered its 2005 earnings outlook. The design furnishings and accessories company reported preliminary earnings of $1.4 million, or 9 cents a share, on sales of $41.9 million. Analysts were expecting earnings of 10 cents a share on sales of $39 million. A year ago, the company earned $806,000, or 7 cents a share, on sales of $28.2 million. Looking ahead, Design Within Reach now expects 2005 earnings of 40 cents to 42 cents a share, which is well below its previous guidance of 51 cents a share. Guidance "reflects the company's decision to minimize the use of promotional activity to offset product and shipping margin pressures and additional Sarbanes-Oxley compliance expenses," the company said. As for the sales, the company remains comfortable with guidance of $160 million to $165 million. Analysts had been expecting earnings of 51 cents a share on sales of $167.5 million. Shares were trading down $3.78 to $13.41.


I think, in spite of all this bad news, that DWRI is an growth company with an intriguing product line and catalog. Although earnings missed Wall Street expectation, just look at its growing sales figures. And if you check out their locations on their website, there are still plenty of tony towns without Design within Reach locations. So I'm adding DWRI to the WershovenistPig stock watch list.

On the other hand, PIR is ubiquitous and a bit dowdy. It's not a growth play. So even though PIR's stock price in in the bargain bin with DWRI, it's too shoddy to be added to the stock watch list.

26 August 2005

Let's Examine Some Stocks: DSW and J. Crew

The retail sector does not seem to be the place to be right now.

I say good. Just the place for me to look as I’m not investing today, but a couple of months down the road.

On that note, let’s take a look at a recently issued stock and an upcoming IPO in the apparel/shoes business.

DSW just hit a new low today, just a couple of days after IBD featuring the company in its The New America section from Wednesday. Here are some promising excerpts:

As an off-price retailer, DSW can
buy well-known brands and designer
labels at low prices because of relationships
it’s developed with vendors
since its start in 1997. It has ties
with 300 leading brands, including
KennethCole.
In its early years DSW mainly
bought overstocked items and year old
goods. That changed as its vendor
relationships strengthened.
Now 80% of its goods are current
and in season, says Chief Financial
Officer Douglas Probst.
To make sure customers get fresh
goods, DSW delivers a new crop of
shoes to stores every week.

The company mainly competes
with department stores. A typical
DSW store carries 30,000 pairs of
shoes in 2,000 styles. That’s twice
the assortment you’ll find at most department
stores, Probst says.
This “thrill of the hunt” strategy is
key to DSW’s success, experts say.

DSW also encourages customer
loyalty. Its “reward your style” program
offers added savings to frequent
shoppers. The program has
5.5 million members. About 60% of
DSW’s annual sales come from program members,
Probst says.

Earnings for the quarter
are scheduled to be reported on
Sept. 7.
Analysts polled by First Call see
full-year earnings rising 18% to 99
cents a share. They expect profit to
move up 22% to $1.21 onf iscal 2006.
DSW’s stock performance has
been pretty sketchy. Shares opened
at 19 on June 29, bobbed up and
down over the next three weeks,
then peaked at 27.50 on July 25.The
stock has staggered since then and
trades near 25.
The company’s growth strategy involves
opening about 30 stores a
year, including this year.
“We could open 30 stores a year
for the next seven years and not be
at 400, which is at least the number
of stores the DSW concept could
have,” said Probst.
He sees strong expansion potential
in the Southwest and California.
“They still have a lot of landscape
out there to cover,” said Retail Forward’s
Putnam. “The chain isn’t
that big at this point, and there are
lots of location alternatives where
they can get good growth.”



On the anecdotal side of things, a friend and former co-worker, thedigitalbuffalo found a wonderful pair of designer shoes cheap at DSW. I recovered from a traumatic J. Crew shoe experience by shopping there, procuring a stylish pair of Tommy Hilfiger loafers at their new Union Square location.

I am putting DSW on my watch list, eagerly anticipating their 2Q conference call on September 7. If you want to join in on the listen, here’s how:

The conference call can be accessed two ways:
- Live over the internet: log on to the web at www.DSWshoe.com
- Call in: please dial 866-202-4683 and reference passcode
# 66869384 at least 5 minutes prior to the scheduled start
time.

Now onto a company I am far less interested in, J.Crew. They must be
thrilled with the retail sector's recent performance, what with their
upcoming IPO. Personally, I have not been particularly happy with the
quality and longevity of J.Crew's clothing and shoes. As a prep who
wears argyle socks everywhere but the gym and the beach, their
clothing should appeal to me, but also should survive more than half a
season. This stuff should be timeless, and last just as long. My two J.Crew
t-shirts I bought in 1991 in Center City, Philadelphia look better than the
J.Crew sweaters I purchased in the middle of last winter.

I mentioned a traumatic shoe experience above, so here's the riveting
story: bought two pairs of shoes that began to disintegrate after a
few weeks of wear. The rubber seal piece between the leather upper and
the sole had the appearance of being stitched on, but really was glued
on, and only barely. However, they took them back and credited my
account; I bet every purchaser of these shoes was having the same
problem I had. So the shoes sucked, but the customer service was
smooth and professional. Reminded me of the Saturn division of GM having great customer service, in the business of selling crap cars?

24 August 2005

I take the 1 train to Times Square, then the shuttle to Grand Central to get to the office. Once at my desk, the first thing I do on the 'net each day is go the New York Times. No surprise that this morning, I read "New Cameras to Watch Over Subway System" right off the bat. Apparently, the MTA awarded Lockheed Martin and a group of smaller companies the contract to increase surveillance of my preferred method of transportation. After feeling hopeful about improved security, I noticed the last two paragraphs of the piece detailing the smaller companies that will work with Lockheed.

The one company that stood out for me was the Cubic Corporation which created the MetroCard system that subplanted the token. I then googled the company and found its listing on the AMEX. Cubic, as of this morning, was near its 52-week low, trading at about $17. If I were currently investing with real money, I would have placed a limit order for 100-200 shares at upwards of $17.25 as a speculative trading opportunity.

I also would have considered Lockheed Martin, but since I'm not going to be able to invest real sums for about two more months, and I had my job to attend to, I didn't pursue researching that behemoth.

At around 4pm, I put on my headphones and plugged into Cramer's radio show, Real Money. His lead story, subway surveillance. His lead stock pick, Cubic Corporation. Cramer noted that Cubic was the most interesting company among the contract winners as it was at a 52-week low and had an interesting business model combining transportation and defense, a combo that seemed ridiculous to him prior to the despicable London Underground bombings. Cramer also pointed out that the subway contract's value of $200MM would barely affect a Lockheed Martin's balance sheet, while such a contract would be significant for a smaller player like Cubic.

I popped open the one day chart for Cubic and saw the result of Cramer's spotlight: Cubic jumped at the 2 o'clock hour, when his radio show airs live, from $17 to roughly $18.50, an 8% jump in the afternoon. Lockheed, on the other hand, was down 1.2% for the day.

Would've been a nice trade. I hope I spot these when there's money on the line.

23 August 2005

It begins, tra la la loop de doo!

I came up with the name of this blog while getting my third massage this week in Cabo San Lucas, Mexico.

One thinks of more important, or perhaps, more sensual things during their first or second coconut scrub rub while on vacation, but by the third one, the mind tends to wander to strange places. Mine was veering back to returning to New York, and to one of my distractions while I blast out some cardio action on the stationary bike at the Equinox on Lex at 44th, namely, Jim Cramer's Mad Money. I was thinking of his oft-recited line, "Bulls make money, bears make money, pigs get slaughtered." It's a catchy line that doesn't really say anything all that interesting, but excuse me while I run with it for a few paragraphs.

I unpack the line this way: smart investors can make money wagering on stocks moving up or down, but once you lose sight of the fundamentals of a company and try to make too much money off of a move, you're a pig. The dot-com/tech bubble made many people pigs. Law school in the late 90's and its attendant lack of income kept me from being piggy during that period. The 1.2 mil+ cost of an entry-level two bedroom condo in Manhattan is keeping me from hitting the trough with other porkers during this current housing market.

So it seems circumstance is keeping me from being piggish, nothing more. Hey, whenever I talk about visiting Montreal like my bud A-Rob did recently, I can't not bring up the restaurant Au Pied de Cochon and it's delectable choucroute entree. The pig's knuckle is to die for, and still beckons, as does the pigless poutine. Philly is now less about the cheesesteaks from Jim's on South Street and more about the roast pork Eye-talian from Tony Luke's. What I'm saying is I love the pig, I get the draw of the pig, I wanna make the buckets of ducats that a pig can make.

However, I understand the need to fight that tendency by searching out good investment ideas, explaining them in writing in this forum, and defending them in this space, open to the comments/criticism/mocking of everyone who reads this piffle. That's why I'm writing this. My plan is to post investment ideas that catch my fancy and attempt to justify them before dropping hard-earned cash on them. If I can't somehow convince my wife and my friends that I'm onto something financially rewarding in this space, then perhaps I should keep that cash earning 3%ish at INGdirect.

Okay, there's the raison d'etre, the mission statement of this blog.