Companies featured in this edition of the newsletter: AEN, CBAI, FMTI, HYTM, IWEB, PLKH, PSTI, SVUL
Markets managed to continue their upward swing last week despite trepidation surrounding the upcoming earnings season, which left many investors anxiously awaiting results to see just how profoundly the events of the past quarter had affected companies’ bottom lines. All of the major indices managed to eek out gains once again following the week’s activity, with the Dow gaining 65 points to close over 8000 at 8083, up 0.8% on the week, paring its YTD loss to 7.9%. The Nasdaq fared slightly better, gaining 1.9% on the week to close at 1652, bringing its yearly gains to 4.8%. The S&P 500 and Russell 2000 managed to post gains of 1.7% and 2.6% respectively to bring their YTD losses to 5.2% and 6.3%.
Mixed news on the earnings front characterized volatile trading during last week’s holiday shortened session, as aluminum manufacturer Alcoa reported a loss of $0.59 per share, worse than consensus estimates calling for a loss of $0.57 per share. The company attributed the dismal performance to lagging demand from the company’s end markets, as the automotive, transportation, construction and aerospace industries have all been hard hit by the economic downturn. Despite missing estimates, the report was not as bad as many had feared, which resulted in Alcoa stock trading 4% higher by the end of the week.
There were some positive surprises also amid the uncertainty, as Wells Fargo defied EPS estimates of $0.23 per share gain by pre-announcing quarterly earnings of $0.55 per share on first quarter revenue of $3 billion, which was all that was needed to spark a rally on Friday that helped lead the financial sector to a 15.9% gain on the week. The unexpectedly positive report served to inspire confidence in the rest of the sector, which is set to report earnings this week. Since its intra-day low on March 6th, the Financial Index is up 80%!
Economic data for the week had a negligible effect on traders as investors’ attention seemed to be focused squarely on earnings data, but there were some encouraging reports in the form of weekly initial jobless claims, which fell from 674,000 the prior week to 654,000, besting consensus estimates of 660,000. The trade deficit from February also dropped sharply, to $ $26 billion from $36.2 billion in January. The lower deficit is expected to reflect favorably in Q1 GDP figures.
What should investors look for this week? Earnings season continues to gain momentum; expect reports from Goldman Sachs (NYSE: GS) Tuesday before the bell, followed by Intel (NASDAQ:INTC) after the close the same day. On Wednesday, look for reports from Abbott Labs (NYSE: ABT), and Charles Schwab (NASDAQ: SCHW) before the open, followed on Thursday morning by Baxter (NYSE: BAX), JP Morgan Chase (NYSE: JPM), Nokia (NYSE: NOK) and Southwest Airlines (NYSE: LUV); Google (NASDAQ: GOOG) reports after the bell on Thursday. On Friday, Citigroup (NYSE: C) and General Electric (NYSE: GE) are scheduled to post results.
Economic reports for the week begin with Core PPI, PPI, and Retail Sales, all for March, released together at 8:30am Tuesday morning, followed by February Business Inventories at 10:00am. On Wednesday, look for Core CPI and CPI for March, along with Empire Manufacturing Index figures for April due out at 8:30am followed by Net Long-term TIC Flows for February at 9:00am followed by capacity Utilization and Industrial Production figures for March at 9:15am. Weekly crude inventories follow at 10:30am and the day wraps up with the Fed’s Beige Book at 2:00pm. On Thursday, expect Housing Starts and Building Permits for March due out with weekly initial jobless claims at 8:30am, followed by Philadelphia Fed Minutes for April and Preliminary Michigan Sentiment Index figures for April at 10:00am.
There are no major conferences of note scheduled for this week, but UBS will hold their annual general meeting in New York on Wednesday. Keep an eye on Fed Chairman Bernanke’s statements at the Fed Conference on Friday as well, as his comments have significant market moving potential.
Volume Alert: Shares of nutraceutical developer Forbes Medi-Tech Inc. (NASDAQ: FMTI), surged 125% on over 50 times average volume last week, following the announcement of results for the fiscal year ended December 31, 2008. While the results were unimpressive, the move may have been catalyzed by investors’ enthusiasm with the company’s plans to divest its research and development operations in favor of focusing resources on its revenue generating nutraceutical business. A sale would strengthen the company’s balance sheet and improve operating results. Shares gained twenty cents on the week to close at $0.36.
Healthcare services company, Hythiam, Inc. (NASDAQ: HYTM) announced last week that it presented at an educational session of the Disease Management Association of America sponsored 2009 Integrated Care Summit held on March 29-31, in Austin, Texas. Dr. Lawrence Weinstein, Senior Vice President of Medical Affairs for Catasys, presented jointly with Dr. Jack Mahoney, strategic health consultant for Pitney Bowes, Inc. and Medical Director for the Florida Health Care Coalition, regarding the overall costs of substance abuse in the workplace. The presentation highlighted that, while limiting behavioral health services such as those that treat employees with substance abuse problems may lead to reductions in behavioral health costs, those reductions were off-set by increases in non-behavioral health costs and increased sick days. The presenters concluded that effective behavioral health programs may well provide reduced costs to employers in the long run due to decreasing the problems associated with substance dependant employees in the workplace which lead to higher costs than treating the problems in the first place. Shares lost seven cents on the week to close at $0.29.
Pluristem Therapeutics (NASDAQ: PSTI), a company engaged in developing regenerative therapies from stem cells derived from the placenta, announced last week that it will be sponsoring the World Conference on Regenerative Medicine to be held October 29-31, 2009 in Leipzig, Germany. The conference, which will be organized by the Fraunhofer Institute for Cell Therapy and Immunology, will provide a platform for the exchange of information on stem cells, tissue engineering, technology development, immunology signaling, and regulatory topics. Shares lost four cents on the week to close at $1.23.
Volume Alert: Shares of Adeona Pharmaceuticals (AMEX: AEN), a specialty pharmaceutical company developing innovative late-stage drug candidates for the treatment of autoimmune and central nervous system diseases, surged 547% on 50 times average volume before retreating last week, following an announcement that the company had authorized the repurchase of up to $1 million of its stock, up to a maximum of four million shares at a maximum price of $5.00- the repurchase program will last through December 31, 2009. Shares gained forty cents on the week to close at $0.57.
IceWeb (OTCBB: IWEB), a storage technology company specializing in Geographic Information Systems (GIS) that provides services to bureaucratic and corporate organizations, dramatically improved its balance sheet last week through the sale of its IceWEB Solutions Group, Inc. subsidiary in order to focus on higher-margin sales of its own manufactured products, which includes online cloud computing, software services and data storage products. iceWEB Solutions had primarily been a reseller of IT services, a low-margin business. The company expects to reduce current liabilities and indebtedness from approximately $9 million at its fiscal year ended September 30, 2008, to $3.4 million as of its fiscal second quarter ended March 31, 2009 as a result of the transaction. In other news last week, the company announced that it has incorporated InfiniBand technology into all of its FileStorm Storage Network Attached Storage products. IceWEB believes that by embracing this latest technological breakthrough in data storage, it will expand the marketability of its storage technology and attract new customers seeking cost-effective storage solutions. Shares gained a penny on the week to close at $0.09.
Steel Vault (OTCBB: SVUL) an emerging provider of identity security products and services, announced that its subsidiary, NationalCreditReport.com grew its subscriber base from 1,689 active subscribers at the end of February 2009, to 4,415 active subscribers at the end of March 2009, a month-over-month increase of 161 percent. The announcement marks the second month in a row of triple digit growth for NationalCreditReport.com, following a 120% increase in subscribers during the month of February. The company attributes its rapid growth to a combination of factors, including recently increased marketing efforts designed to cost effectively acquire customers, and organic growth resulting from increased awareness on the part of consumers regarding the importance of protecting their identities. Shares remained unchanged at $0.39 on the week.
Prolink Holdings Corp. (OTCBB: PLKH), a provider of Global Positioning Satellite golf course management systems and digital out-of-home on-course advertising, announced last week that Old Oak Country Club in Homer Glen, Illinois is the latest course to feature the Prolink GPS system. Old Oak Country Club is a short 20 minute drive from Chicago, and was built in 1926 on a tract of land dominated by large oak and hickory trees. The recently renovated 18-hole golf course has been skillfully carved out of the natural environment, measuring 6,069 yards at its longest. The Prolink system will give Old Oak members access to Prolink’s expansive nationwide on-course advertising system in addition to being able to track their progress from hole to hole. Shares gained three cents on the week to close at $0.08.
SPECIAL SITUATIONS:
Cord Blood America Inc. (OTCBB: CBAI)
With the recent attention being focused on stem cells following the Obama administration’s reversal of the ban on research regarding the cutting edge regenerative therapies, investors have begun to flock back to companies that had been all but forgotten over the previous decade. One such overlooked company operating in a space complimentary to stem cell research is Cord Blood America. CBAI operates as a stem cell bank focusing on the storage of stem cells obtained from the umbilical cord immediately following child birth. Cord Blood’s technology allows parents to cryogenically preserve umbilical cord blood specific to their child, thus providing a bountiful source of cord blood rich in patient specific stem cells that can be drawn upon in the event of future health problems and medical advancements.
Cord Blood’s technology serves as an insurance policy against future health problems by providing a pure sample of the patient’s own stem cells which can then be used to combat specific medical conditions. Cryogenically preserved umbilical stem cells have already been used to treat 75 major diseases including leukemia, severe anemia, metabolic blood disorders and immune deficiencies. As stem cell research continues to advance, countless applications for the technology continue to arise, providing further opportunities for Cord Blood’s stored cells to positively impact the lives of those with the foresight to provide cord blood for storage. Besides current uses, medical research is ongoing on how to use these cells to combat heart disease, Parkinson’s disease, spinal cord injuries, sickle cell anemia, cancer and other difficult to treat conditions. Researchers postulate that the cells they remove from the umbilical cord blood may someday be turned into every single tissue in the body, making for instance, the repair of a damaged heart possible or facilitating recovery from a stroke by turning stem cells into brain cells. Cord blood has proven to contain the kind of stem cells that can be turned into red blood cells and disease-fighting white blood cells as well. They also avoid the controversies surrounding embryonic stem cells due to the fact that no embryo is harmed in the harvesting of cord stem cells.
Cord Blood’s corporate strategy is to market its services through educating expecting parents as to the potentially life-saving benefits of preserving cord blood samples; after all, what parent wouldn’t want to provide their child with a second chance. The company spreads its message through nurturing relationships with healthcare insurance providers to bring the message to parents when the insurance company is notified of a pregnancy. The collection process takes no more than five minutes, and is painless, easy and non-invasive.
The industry itself is growing at a robust rate as more and more parents are made aware of the opportunity to help provide for a healthier future for their children. Only a few years ago, five percent of the four million women in the US giving birth knew about preserving their umbilical cord blood and only two percent of those 200,000 took advantage of the life-saving procedure. Since then, the number of cord blood samples stored has been growing by 50 percent per year, and more than four percent of all those giving birth in the US now preserve the umbilical cord.
The company has recently begun restructuring operations which has resulted in a 12% reduction in long term debt, with further plans to improve its balance sheet in the works. Additionally, the government has recently announced its support of cord blood storage through the Family Cord Blood Banking Act introduced in the U.S. House of Representatives. The proposal amends the Internal Revenue Code to add cord blood banking services as a qualified medical expense, providing significant financial incentives to families choosing to invest in this life-saving technology. With supporting initiatives aimed at increasing the instances of families investing in the future health of their children, and corporate plans to invest in the health of the company, Cord Blood presents investors with an opportunity to invest in a company with a bright future in an overlooked, extremely promising market.
