Companies featured in the current edition of the newsletter: AFMI, BOKO, CETG, CHIP, CKGT, CLXS, CTVWF, ETGF, GNBT, GSPG, HYTM, ICLK, ITUI, MBND, PLKH, TSX: SEE, SWVC, TAGS, TKO, VYTR
The dollar rallied, oil prices plummeted and stocks soared giving all the major indices robust gains for the week. The Dow Jones Industrial Average gained 408 points or 3.6%, reducing its year to date loss to 11.5%. The Nasdaq Composite Index rose by 103 points or 4.5%, giving it a year to date loss of 9%. The S&P 500 gained 36 points or 2.9%, bringing its year to date loss to 11.7%. The Russell 2000 posted a gain of 18 points or 2.5%, bringing its year to date loss to 4.1%.
In terms of the dollar, it enjoyed a sharp reversal of its sagging fortune as traders unwound what had been an easy money, long trade in the euro. Their inclination for doing so has taken root in recent weeks with inflation pressures picking up in the U.S. and economic growth slowing in Europe. Crude prices declined 7.9% for the week at Friday’s settlement, to $115.20 per barrel. They are now down 22% from the high they hit July 11. As to be expected, the continued declines factored favorably for the market in general and for transportation and retail stocks in particular.
There were some striking moves in a number of areas throughout the week. The most significant move, arguably, was the one made by the financial sector. Government sponsored enterprises Freddie Mac and Fannie Mae both reported huge quarterly losses, as did Dow component AIG. Although the stock of each of these companies was beaten back in material fashion following their reports, the financial sector surged. The financial sector’s relative strength in the face of bad news kept alive a buy-the-dip mentality. A reassuring earnings report and outlook from tech bellwether Cisco helped support the tech sector’s out-performance. Cisco’s stock increased 10% for the week while the tech sector increased 6.0%.
The economic data seen during the week was mixed. Personal income and spending for June was better than expected, but the price deflator provided a negative surprise. The inflation fears were tempered, though, in the wake of the FOMC decision and with commodity prices continuing their decline. The ISM Services and Pending Home Sales reports also brought better than expected results. Friday’s report on Q2 productivity provided more encouraging inflation news when it was reported unit labor costs rose just 1.3% from the first quarter. That was a slower rate of increase than seen in the prior two quarters. Weekly initial claims, however, were anything but good. They jumped to 455,000, which moved the 4-week moving average to 419,500 from 392,750. That is the highest 4-week average since July 12, 2003. Continuing claims increased 0.9% to 3.311 million.
What should investors look for? As earnings season concludes, earnings reports for the week include food conglomerate Sysco Corporation (NYSE: SYY) on Monday before the bell, followed by Fluor (NYSE: FLR) after the close. On Tuesday Thomson Reuters (NYSE: TRI) and TJX Companies (NYSE: TJX) will announce earning before the bell. Wednesdat will feature announcements from Deere (NYSE: DE) and Macy’s (NYSE: M) before the bell. Thursday will wrap up the current earning season with releases from JC Penney (NYSE: JCP), Wal-Mart (NYSE: WMT), Kohl’s (NYSE: KSS), and Nordstrom (NYSE: JWN).
The coming week brings a number of important releases beginning Tuesday with the U.S. Trade Balance for June and the July Treasury Budget. July Import/Export Prices and July Retail and Auto Sales will be released Wednesday before the market opens, followed by June Business Inventories and Weekly Crude Inventories at 10:00 a.m. and 10:30 a.m. respectively. Thursday before the bell July CPI, July Core CPI, and Weekly Initial claims will be reported. Concluding the week on Friday will be the August NY Empire State Manufacturing Index and Industrial and Capacity Utilization for July. In addition June Net Foreign Purchases and the preliminary August reading of University of Michigan Consumer Sentiment Index will also be released on Friday.
The conference schedule for the week begins Monday with the two-day Credit Suisse Group Tech Communications Conference in Boston and the four day EnerCom Oil & Gas Conference held in Denver. Tuesday will feature the Bruyette & Woods, Inc. Large Cap Bank Conference in Colorado Springs. The two day JPMorgan Harbour Auto Conference will take place on Wednesday in Michigan. interCLICK, Inc. (OTCBB: ICLK) will present at the two-day 28th Annual Canaccord Adams Global Growth Conference in Boston which begins Tuesday. The company will present that day at 1 p.m. eastern time.
Earnings Preview: Multiband Corporation, (NASDAQ: MBND), the nation’s largest DIRECTV Master System Operator for Multiple Dwelling Units, is scheduled to announce second quarter earnings this week for the period ended June 30, 2008. Previously, the company reported a net loss for the 2008 first quarter of $864,398 compared to $1,362,395 in the 2007 first quarter. Q2 results are expected to be improved as a result of the company’s acquisition of Michigan MicroTech from DirecTECH Holding Co. The company also divested itself of certain unprofitable subscribers last year, which should further bolster financial results. The company is also expected to discuss the potential acquisition of a 51% interest in DirecTech Southwest another subsidiary of DirecTECH. Under the terms of the transaction, Multiband would acquire a controlling interest in Southwest for $7.65 million, comprised of 1.9 million shares of Multiband valued at $2.50 per share, and the issuance of a $2.95 million five-year note. The transaction is scheduled to close in the 2008 third quarter. Multiband will consolidate the operating results of Southwest. Southwest had unaudited 2007 results of $67 million in revenue and was profitable. Shares rose by $0.15, to finish the week at $1.18.
Earnings Preview: Hythiam, Inc. (NASDAQ: HYTM), a healthcare services management company that provides behavioral health management services to health plans, employers, criminal justice, and government agencies, is scheduled to report results for its second quarter ended June 30, 2008 on Monday, August 11, 2008, after the market closes. For the 2008 first quarter, the company reported revenue of $11.3 million, which includes $2.0 million in revenue from Hythiam’s healthcare services business and $9.3 million in revenue from CompCare’s operations, compared to consolidated revenue of $8.9 million in the first quarter of 2007, which included $1.25 million in healthcare services revenue. Investors will likely focus on the amount of cash the company consumed in Q2 operations, what it says about the prospects for reimbursement from health plans and any indication as to the timing of Dr. Walter Ling completing a randomized, double-blind, placebo-controlled study of PROMETA’s effectiveness in treating methamphetamine addiction. Top-line results from the study are expected this quarter. Hythiam previously said it expects to spend cash of $7.7 million, $6.6 million and $5.6 million in each of the consecutive remaining quarters in fiscal year 2008. Shares rose 15.6% the day after release of Q1 results. The stock fell by 20 cents last week, to finish at $2.21.
Volume Alert: Shares of junior gold company GoldSpring, Inc. (OTCBB: GSPG), which is the largest mineral rights holder in Nevada’s Comstock Lode District, surged to a new 52-week high on more than 10 times average volume, as the stock jumped more than 25% last week, perhaps in anticipation of the company’s 43-101 reserve report, which is expected to be release later this month. The outsized move in the stock is even more significant as it come in a week where gold and precious metals stocks were weak. Readers may note that the stock has nearly quadrupled since we initiated coverage less than three months ago. While the stock now has a valuation of nearly $240 million on a fully-diluted basis, we note that the preliminary resource report suggested that the area surveyed in the report, which covers less than 5% of the company’s holdings in the Comstock, indicated a value of approximately $350 million, suggesting that there could be plenty of upside potential from these levels. Shares rose by $0.02, to finish the week at $0.06.
i2Telecom International, Inc. (OTCBB: ITUI), a developer of award-winning patented and innovative high-quality Voice-over-Internet Protocol products and services, said last week it had implemented a new softswitch to enable a suite of new Unified Communications services for the small-to-medium enterprise and consumer markets. The company has passed the certification and testing processes with Level 3 Communications and Qwest Communications. In its initial configuration, the new softswitch will support up to 200 million minutes of traffic per month and will enable i2Telecom to launch MyGlobalTalk services to several hundred thousand customers. By late 2008, i2Telecom expects to utilize the flexible and scalable new softswitch to add a variety of Unified Communications services to its product suite. The company is due to report its earnings next week and expects to report net income in excess of $4 million, or approximately $0.02 per share. The recent sale of the company’s VoiceStick patent will allow i2Telecom to be profitable for the second quarter of 2008, its first profitable quarter since the company’s inception. The stock rose by a penny, to close the week at $0.15.
Drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT) announced that it has received approval from the ethics committee at University Campus Bio-Medico of Rome to conduct a Generex Oral-lyn trial with subjects diagnosed with or susceptible to developing Impaired Glucose Tolerance. The endpoint of the study is to determine if glucose levels will drop when subjects use Generex Oral-lyn, the company’s proprietary oral insulin spray product, with the company’s proprietary RapidMist drug delivery device. The company also announced that enrollment of patients had begun for a new Phase I clinical trial employing a novel immunotherapeutic cancer vaccine being developed at Antigen Express, its wholly-owned subsidiary. The new trial will employ two immunotherapeutic vaccines designed to work in concert to activate the immune system to recognize and kill tumor cells in breast and ovarian cancer patients. In other news the company commented on recent trading activity in its common stock saying it knows of no reason for the recent decline in the price of its stock. The stock fell by $0.09 for the week, to close at $0.68.
Earnings Preview: Telkonet, Inc. (AMEX: TKO), the leading provider of innovative, centrally managed solutions for integrated energy management, networking, building automation and proactive support services, is scheduled to report second quarter results for the period ended June 30, 2008 on Monday after the market closes. The company previously said it expects to report a double-digit sequential increase in revenue growth in Telkonet’s operations for its second quarter from its revenue of $4 million in the 2008 first quarter. During the quarter, the company generated sales growth from the energy management area through enabling building owners to significantly reduce in-room heating and cooling usage, reducing their utility bills and engaging in green energy initiatives. Telkonet’s high-speed Internet access sales continue to accelerate, with the company recently supporting more than 200,000 guest rooms with its differentiated HSIA guest support services. Shares rose by a penny for the week, to close at $0.44.
Vyteris, Inc. (OTCBB: VYTR), the manufacturer of the first U.S. Food and Drug Administration-approved active patch transdermal drug delivery system, announced an initiative to identify and target candidate drugs in the pain management field that could potentially be delivered using Vyteris’ active patch transdermal system. Vyteris’ Pain Management Initiative will examine several candidate drugs to improve their safety and efficacy profiles using Vyteris’ proprietary controlled drug delivery technology and to potentially extend their patent protection. The initiative will include efforts to secure joint development agreements with pharmaceutical manufacturers for in vitro and in vivo testing of pain medication compounds. Shares remained unchanged for the week at $0.65.
Earnings Preview: ProLink Holdings (OTCBB: PLKH), a leading provider of Global Positioning Satellite golf management systems, is scheduled to announce second quarter results on Thursday after the market closes. In the 2008 first quarter, the company reported revenue of $5.7 million compared to $6.7 million in the first quarter of 2007. However, the company showed strong domestic sales growth, which was offset by the loss of a key European distributor. The company said during the second quarter that it had signed new distributors in Europe, which could support international growth during the second half of the year. The signing of new distributors in Europe and other international areas should allow the company to increase international revenues during the second half of 2008. Another area that investors will be watching closely is advertising sales. Recently, one of the world’s largest telecommunications companies, likely AT&T, entered into an agreement to advertise in the ProLink Network Research Program as part of a category exclusive three-month advertising campaign. Last week, PLKH said that Broadlands Golf Course now features the ProLink Solutions GPS system used at many of the world’s most famous golf courses and plans to participate in ProLink’s exclusive national advertising opportunity. The stock finished the week unchanged at $0.48.
Capital City Energy Group, Inc. (OTCBB: CETG), a diversified oil and natural gas company reported results from an independent reserve report conducted by James Engineering, Inc in Marietta, Ohio, a leading petroleum engineering firm, to value the company’s proven oil and gas reserves. The report concluded that the value of the company’s reserves increased by nearly 50% during the past quarter, despite James Engineering using a conservative pricing model for their oil and natural gas reserves. The evaluation was conducted on the company’s 178 producing properties located in 14 States. The stock gained $0.20 for the week to close at $2.95.
VeriChip Corporation (NASDAQ: CHIP), a provider of radio frequency identification systems for healthcare and patient-related needs, announced that the Board of Directors of the company declared a one-time Special Dividend payment of $1.35 per share to its stockholders. The Special Dividend is payable on August 28, 2008 to stockholders of record as of August 18, 2008. Because of the size of the Special Dividend, the company’s common stock will begin trading without the dividend, on an ex-dividend basis on August 29, 2008. The stock fell by $0.08 for the week, to close at $1.62.
CityView Corporation Limited (OTCBB: CTVWF), an exploration and development company, announced that it has entered into an agreement with ENDITRADE for the development of transportation and supply logistic services for support of the Angolan mining industry. ENDITRADE is a logistics company wholly owned by ENDIAMA which is the Angolan Government department responsible for the development of Angola’s diamond industry. Under this agreement CityView will enter into a joint venture with ENDITRADE to create an Angolan Special Purpose Vehicle which will be owned 51% by ENDITRADE and 49% by CityView. Under the business plan for the joint venture developed by ENDIAMA, it is anticipated that CityView will receive a significant return on its investment within the first year of its operations. CityView will also benefit from tax holiday provisions available from this type of investment under the Angolan private investment law. The stock finished the week unchanged at $0.10.
Element 21 Golf Company (OTCBB: ETGF), the manufacturer of advanced Scandium Alloy golf and fishing equipment, announced that Vijay Singh, one of the leading golfers on the PGA Tour, used Element 21’s Scandium shafts to win the Bridgestone Invitational. Singh switched to the Scandium shafts in the summer of 2007 and has been using scandium shafts on an unendorsed basis since then. Singh has a reputation of being the hardest working professional golfer, hitting thousands of golf balls on the practice range daily and playing in numerous events worldwide each year. The stock fell by $0.08 for the week, to close at $1.10.
Earnings Preview: China Kangtai Cactus Biotech Inc. (OTCBB: CKGT), a vertically integrated grower, developer, manufacturer and marketer of a variety of cactus-based consumer products in China, will report its second quarter financials next week. Previously the company reported record revenue in its first quarter, recording a profit of $1 million. The domestic demand for cactus products continues to be strong, and the company recently introduced new products, which could provide incremental revenue. The company continues to focus on expanding distribution and growing its production capabilities to meet the expected increase in demand. The stock remained unchanged for the week at $0.64.
Lawriter, LLC a subsidiary of Collexis Holdings Inc. (OTCBB: CLXS), a leading developer of semantic search and knowledge discovery software, announced the development of the first professional social network exclusively for law students. The site casemakerX was showcased in Beta format at the American Association of Law Librarians Conference in Portland in July. A full launch is expected in early fall 2008 to coincide with the incoming class of new law students. Along with the social networking site, CasemakerX will provide free access to the Casemaker Suite of Applications for the U.S. law student community. Shares rose by $0.11, to finish the week at $0.45.
SeaMiles Limited (TSX: SEE), North America’s premier cruise loyalty provider, announced financial results for its second quarter ended June 30, 2008. Revenue was $2.7 million, a 26% increase from last year. The increase in revenue was primarily a result of the implementation of management’s strategic and operational initiatives to grow its cruise loyalty program. The company reported net income for the 2008 second quarter of $409,217 or $0.04 per share in 2008 versus a net loss of $(2.4) million or $(0.21) in 2007. The positive results recorded for the second quarter were a direct result of the focus the company is placing on its cruise loyalty programs now that it has divested itself of all non-cruise related businesses. The stock remained unchanged for the week at $2.90.
Seaway Valley Capital Corporation (OTCBB: SWVC), a company that makes equity, equity-related, and debt investments in companies that require expansion capital, announced that Hackett’s opened its newest store in Sackets Harbor, NY. Shares traded below $0.01 for the week.
Earnings Preview: Tarrant Apparel Group (NASDAQ: TAGS), a design and sourcing company for private label and private brand casual apparel, is scheduled to announce second quarter results for the period ended June 30, 2008 on Thursday after the market closes. While the company is likely to face many of the challenges that have impacted retailers due to a difficult retail marketplace as a result of sluggish consumer spending, investors are likely to be more focused on what the company says about the previously announced management buyout. The company reported net sales of $50.5 million in the first quarter of 2008, a 10% decrease compared to $56.1 million in the same period in 2007. Loss from operations was $43,000 in the first quarter of 2008 compared to income from operations of $64,000 in the first quarter of 2007. The loss included a charge of $848,000 resulting from liquidated damages imposed by the U.S. Customs on two of the company’s overseas vendors in April 2008. The goods were imported in 2005 and these vendors who are typically responsible for these liquidated damages are no longer operating. Excluding the charge, the company would have generated net income which would have exceeded the 2007 first quarter’s results. Shares ended the week at $0.72, up 4 cents.
On the Wires: Collexis Holdings Inc. (OTCBB: CLXS) announced that Peter van Praag resigned as a director of Collexis. The company also announced that Henk Buurman resigned from his position as Vice President of Strategy and Business Development of Collexis B.V. Affinity Media International Corp. (OTCBB: AFMI) announced that stockholders of record as of August 8, 2008 will be invited to attend Affinity’s special meeting of stockholders tentatively scheduled to be held on September 5, 2008. i2Telecom International, Inc. (OTCBB: ITUI) announced the appointment of Chris Miltenberger as the company’s interim President and Chief Operating Officer.