In a volatile week caused by markets plunging around the globe, the major averages were spared a large drop by the largest cut in the federal funds rate in more than twenty years. The Dow finished the week up 108 points, reducing its year to date loss to 8%. Nasdaq, the only average to drop during the week, lost 14 points as it continued its slide, bringing its year to date loss to 12.3%. The S&P 500 rose a modest 5 points, keeping its year to date loss at 9.4%. The Russell 2000 rose 15 points for the week, mollifying its year to date loss to 10.1%.
While U.S. markets were closed on Monday in recognition of the civil rights leader Martin Luther King Jr., markets worldwide plunged on spreading fears that a U.S. recession and tighter credit will hurt the global economy. Investors braced for a similar decline on Wall Street. However, before the start of trading on Tuesday, the Federal Reserve cut its benchmark interest rate by 75 basis points to 3.5% to help support the troubled financial sector and stabilize the economy. On the corporate front, technology heavyweights Motorola and Apple both issued disappointing guidance, fueling more worries about the strength of consumer spending and an economic recession. Bank of America’s fourth quarter earnings report also added to the negative disposition during the session. On the earnings front, eBay reported fourth quarter results that beat analysts’ expectations, but warned about its profit outlook. Separately, strong wireless and broadband sales helped boost AT&T’s fourth quarter earnings, though guidance fell short of expectations. Nokia sailed past estimates for the latest period on improved margins and increased market share. The market was also helped by a strong earnings report and reassuring outlook from software giant Microsoft.
Last week we highlighted the fact that small-cap stocks, as measured by the Russell 2000, were already in a bear market. Today, we will try and put the decline into perspective. Since the IWN ETF mirrors the Russell 2000 value Index, we thought we would use that for illustrative purposes. From an intraday peak of 85.67 hit on June 1 last year, to an intraday low of 57.64 on January 22nd, Index has lost a staggering 32.78% in roughly 7 months! If we take a look at the Russell 2000 as a whole, since 1981, the worst total return 12 month holding period has been 27.29%, which was hit on October, 2000. If we look back 20 years from 2007, the worst 12 month holding period return for small value has been 21.8% in 1990. There have also been equally challenging periods for small-cap growth. In 2002, the Index lost 30.3%.
Looking at peak to trough figures for small caps (top to bottom), there have been some dramatic drops, which help to frame the recent decline. From March 9, 2000 until October 9, 2002, the Russell 2000 fell 46.06%; from August 25, 1987 to October 28, 1987, they dropped 39.19%; from April 21, 1998 to October 8, 1998 36.86% and from October 9, 1989 to October 30, 1990 34.27%. This puts the recent decline as the fifth largest we could find.
What should investors look for in the upcoming week? This week will again see significant earnings-related activity. On Monday before the bell Ashland (NYSE: ASH), Black & Decker (NYSE: BDK), Corning (NYSE: GLW), Enterprise Products (NYSE: EPD), Halliburton (NYSE: HAL), McDonald’s (NYSE: MCD), Sysco (NYSE: SYY), Tyson Foods (NYSE: TSN), and Verizon (NYSE: VZ) will all make announcements. This will be followed by announcements from American Express (NYSE: AXP), Cemex S.A, (NYSE: CA), Enbridge Energy (NYSE: EEP), and UNUMProvident (NYSE:UNM), after close. On Tuesday 3M (NYSE: MMM), American Electric (NYSE: AEP), Cardinal Health (NYSE: CAH), Dow Chemical (NYSE: DOW), EMC Corp., (NYSE: EMC), Occidental Petro (NYSE: OXY), PACCAR (NASDAQ: PCAR), Pepsi Bottling (NYSE: PBG), U.S Steel (NYSE: X), and Valero Energy (NYSE: VLO) will make announcements before the bell. After the close, Allstate (NYSE: ALL), Flextronics (NASDAQ: FLEX), and Chubb (NYSE: CB) will finish the day with their earnings announcements. Wednesday will be another busy day as Altria (NYSE: MO), Boeing (NYSE: BA), Kraft Foods (NYSE: KFT), Merck (NYSE: MRK), Hess (NYSE: HES), Eastman Kodak (NYSE: EK), AFLAC (NYSE: AFL), Amazon.com (NASDAQ: AMZN), Murphy Oil (NYSE: MUR), and Starbucks (NASDAQ: SBUX) will all make announcements. Thursday will be another important for investors as AstraZeneca (NYSE: AZN), Bristol-Myers (NYSE: BMY), CVS Corp., (NYSE: CVS), Honda Motor (NYSE: HMC), Marathon Oil (NYSE: MRO), Petro-Canada (NYSE: PCZ), Procter & Gamble (NYSE: PG), Raytheon (NYSE: RTN), Tesoro (NYSE: TSO), Wyeth (NYSE: WYE), Anheuser-Busch (NYSE: BUD), Google (NASDAQ: GOOG), and McKesson (NYSE: MCK) will make announcements. Chevron (NYSE: CVX), Exxon Mobil (NYSE: XOM), Manpower (NYSE: MAN), and Cummins (NYSE: CMI) will finish the week with announcements on Friday.
Next week will be fairly active on the economic front highlighted by the FOMC Announcement on interest rates on Wednesday afternoon. Futures appear to be pricing in another 50 basis point rate cut in interest rates. In other developments, investors can expect to see January Consumer Confidence announced mid-morning Tuesday. Look for a full morning on Wednesday with pre-market announcements of the Q4 GDP and Chain Deflator. December Personal Income and Spending as well as the Weekly Initial Unemployment Claims will be announced Thursday morning before the market opens, followed by crude inventories. Friday’s announcements include January Nonfarm Payrolls, the January Unemployment Rate, January Hourly Earnings, and the January Average Workweek before the bell. Mid-morning announcements for December Construction Spending and the January ISM Index will conclude the week.
The conference schedule for next week will again be on the tamer side. The week will begin with Credit Suisse-Capital Services NY Hedge Fund Manager Roundtable on Monday, followed by a three day Banc of America Securities Gaming Conference on Tuesday. Wednesday will be highlighted by the Citigroup Financial Services Conference and the two day Wachovia Healthcare Conference. Southwest Securities Small Cap Growth Conference and The McCloskey Group South African Coal Exports Conference will conclude the week.
It was a volatile week of trading of CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical research and development company, after the company announced that the U.S. Food and Drug Administration had placed on clinical hold the company’s Phase IIb clinical trial with arimoclomol for the treatment for amyotrophic lateral sclerosis, also known as ALS or Lou Gehrig’s disease. This decision was based on the need for additional analysis from previously completed animal toxicology studies with arimoclomol. To the company’s knowledge there has been no human adverse safety data from the 185 patients treated to date. Shares plunged in intra-day trading on Tuesday to as low as $1.00, which would have valued the entire company, including its RNAi business, at below $100. The analyst at Natixis penned a research note that “FDA Hold on Arimoclomol Creates Opportunity” in shares of CytRx. In the report, he noted that “Arimoclomol was also placed on hold by the FDA in 2005 pending analysis of data from a similar compound, bimoclomol. That delay was resolved in a fairly expedient manner, which gives us hope that the current hold can be lifted in the next three to six months. The FDA responded with its written request two weeks after notifying CytRx of that hold, and CytRx was able to initiate a Phase II trial within three months.” Shares fell 6 cents for the week, to finish at $2.03.
Multiband Corporation (NASDAQ: MBND), the nation’s largest DIRECTV Master System Operator for Multiple Dwelling Units, and DirecTECH Holding CO provided an update late Friday on the previously disclosed proposed merger between parties. The parties announced that they have entered into a supplementary revised definitive agreement to their original merger agreement whereby the company, through the issuance of approximately 1.49 million shares of Multiband’s restricted common stock and a long term promissory note for approximately $2.2 million, will purchase a 51% interest in Michigan Microtech, Inc., a wholly owned DirecTECH subsidiary, for $6.1 million. As a result of the acquisition, Multiband will consolidate Michigan’s financial results. Michigan had 2007 unaudited revenue for the first eleven months of its fiscal year of $23.5 million and was profitable. The transaction appears to be the first step in completing the acquisition of DirecTECH’s entire business. Acquiring the businesses in phases could make many of the compliance issues for MBND easier. We believe the acquisition could allow the company to regain compliance with the Nasdaq requirements for continued listing through the issuance of additional equity and should bolster investors’ confidence that the entire deal will be concluded later this year. The company also announced that a hearing has been scheduled with the NASDAQ stock market on February 7, 2008 to discuss Multiband’s compliance with the continuing listing requirements of the NASDAQ stock market. Shares fell 17 cents for the week, to finish at $2.43.
Enzo Biochem, Inc. (NYSE: ENZ), a leading biotechnology company specializing in gene identification and genetic and immune regulation technologies for diagnostic and therapeutic applications, said at its annual meeting that fiscal 2007,the year ended July 31, 2007, was a transformative year in which Enzo Life Sciences has been transformed into a global manufacturer and marketer of Life Science products, that is now poised for growth organically and via acquisitions. Enzo Clinical Labs has generated expanded revenue and it has embarked upon a program to develop broader capabilities in the rapidly growing field of molecular diagnostics. In addition, the company is realizing positive results from its two operating units, Enzo Clinical Labs and Enzo Life Sciences, along with growing royalty and licensing revenues from its Intellectual Property estate. The stock declined 50 cents for the week, to finish at $9.94.
Generex Biotechnology Corporation (Nasdaq: GNBT), the leader in drug delivery for metabolic diseases through the inner lining of the mouth, announced that the Ministry of Health of the Ukraine issued an approval letter for the conduct of a Phase III clinical trial protocol for Generex Oral-lyn at eight clinical sites located in the Ukraine. The significance of this approval is that it represents initiation of the first clinical sites for the pivotal study and permits commencement of screening for suitable patients. This approval is the first of seven countries within which the company will be conducting the Phase III trial of Generex Oral-lyn. Generex has already received non-objection letters from both Health Canada and the FDA to conduct this pivotal study. The company also announced the publication of two scientific abstracts arising from collaborations between the company’s Antigen Express immunotherapy subsidiary and Johns Hopkins University and Stallergenes S.A. The focus of Antigen Express is on proprietary immunotherapeutic technologies that modulate the body’s response to foreign and endogenous agents by modulating their interaction with CD4+ T helper cells. The stock fell 11 cents, to finish the week at $1.31.
Telkonet, Inc. (AMEX: TKO), the leading technology solutions provider for broadband networking, end-to-end service support and energy management, announced a major evolution in its proven SS5000 Energy Management Thermostat line with the new Version 4.5 model. The new thermostat incorporates a range of significant technology advancements over its Version 4.0 predecessor, including increased HVAC system interoperability, customization and flexibility, as well as improvements to make installation easier. Reinforcing the market imperative of delivering interoperability, Telkonet has become an Adopter Member of the ZigBee Alliance, an association of companies working together to enable cost-effective, low-power, wirelessly-networked monitoring and control products based on an open global standard. The company believes that the enhancements made to the Version 4.5 thermostat will make the product more desirable for its target markets, which are primarily the hospitality, commercial, education and government sectors, for which there is an increasingly critical need for efficient, cost-effective energy management solutions. The stock increased 16 cents for the week, to finish $1.04.
AMDL, Inc. (AMEX: ADL), through its wholly owned subsidiary Jade Pharmaceutical Inc., which is engaged in the development, manufacture and marketing of proprietary pharmaceutical, health care and diagnostic products, said last week that more than 100 individual owners of existing health spa centers in China have signed strategic cooperation agreements with JJB, a Jade subsidiary. These new strategic cooperation agreements will allow JJB to increase the sales of the expanding family of Goodnak anti-aging injections, capsules, creams and spray products into the China market during 2008. Each new clinic location is anticipated to annually contribute $400,000 to $700,000 in gross sales per location, which if realized would result in a minimum of $40 million in new revenue. The new regional Chinese strategic cooperation relationships are significant achievements and improve Jade’s ability to grow its sales in 2008 and beyond. The stock fell $0.49, to close the week at $3.00.
Halcyon Jets Holdings, Inc. (OTCBB: HJHO), a provider of private air travel services, said last week that NBA superstar Shaquille O’Neal will appear at the upcoming Supercar Weekend exhibition of spectacular automobiles and vintage race cars. The stock fell $0.13, to close the week at $0.37.
Infosmart Group, Inc. (OTCBB: IFSG), a leading recordable digital versatile disc manufacturer in Hong Kong and Brazil, provided its shareholders with an update on their Discobras subsidiary agreement with the Salvador Government and 2008 product diversification business model. This was an important agreement for the company with significant strategic ramifications due to the favorable tax advantages which were granted and are also applicable to other electronic media storage products in Brazil. Additionally, the agreement provides strong barriers to entry, and offers superior profit margins as compared to Infosmart’s legacy business in Hong Kong. Currently Discobras pays a reduced VAT of only 2.28%, is exempt from ICMS taxes on imported raw materials, and is not subjected to 70% to100% tariff on imported products. The company also expects sales of its Flash memory products to continue to increase throughout 2008, supported by Infosmart’s facility, which offers easy access to Salvador’s port, Brazil’s key distribution point. The stock rose $0.02, to finish the week at $0.34.
Collexis Holdings, Inc. (OTCBB: CLXS), a developer of high-definition search and discovery software, announced that the National Institutes of Health has selected the company to develop an Advanced Expert Profiling System that will allow more than 8,000 NIH researchers to connect and share their expertise via a web interface. The agreement represents an expansion of the company’s relationship with the NIH. Previously, the NIH signed an Enterprise License Agreement with Collexis, under which more than $20 billion in grant funding is analyzed using the company’s software platform. Given its scale of operations as the largest single source of funding globally for health sciences research, the selection of Collexis by the NIH will likely enhance the company’s profile among research institutions and academic universities and drive increased adoption of its software. In other news, Collexis Holdings, Inc. and VersusLaw, Inc. entered into a Licensing and Publishing Agreement, under which the company acquired a non-exclusive, transferable license to use VersusLaw’s legal-related collection of judicial opinions. The agreement gives Collexis the non-exclusive right to advertise and distribute copies of the data to end users, and to permit customers of Collexis to download, print, and electronically copy the data. Shares remained unchanged at $0.46 for the week.
ProLink Solutions, a wholly-owned subsidiary of ProLink Holdings Corp. (OTCBB: PLKH) and the world’s leading provider of Global Positioning Satellite golf course management systems and digital out-of-home on-course advertising, said last week that Coastal Pines Golf Club 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. With the addition of courses like Coastal Pines to ProLink’s roster, the company’s advertising partners gain a greater access to the discriminating, affluent and hard-to- reach golf demographic. Shares ended the week unchanged at $0.65.
Volume Alert: Shares of Calypte Biomedical Corporation (OTCBB: CBMC), a developer, manufacturer and marketer of HIV diagnostic tests, surged 50% last week on four times average volume after the company said last week that the Chinese State Food and Drug Administration had notified Calypte’s Chinese manufacturing subsidiary, Beijing Marr Bio-pharmaceutical Co., Ltd., that the technical review of its Aware HIV-1/2 OMT rapid oral test product application has been completed. The technical review is considered the most challenging and lengthy portion of the SFDA review process, and is the penultimate milestone in the approval process, letting the company move into the final administrative stage. Ultimately the notice indicates that the substantive content of the application and the technology itself have met with the acceptance of the SFDA and are acceptable for the Chinese market. The company also announced it had entered into a $8.0 million common stock purchase agreement with Fusion Capital Fund II, LLC, a Chicago-based institutional investor. The company may sell up to $8.0 million of its common stock to Fusion Capital from time to time over a 24-month period after the Securities and Exchange Commission has declared effective the registration statement related to the transaction. The proceeds will be used to further the commercialization of the company’s Aware HIV-1/2 Rapid diagnostic tests, develop new diagnostic tests and for general corporate purposes. Shares rose 4 cents for the week, to close at $0.12.
Seaway Valley Capital Corporation (OTCBB: SWVC), a company that invests in equity, equity-related, and debt in companies that require expansion capital and in companies pursuing acquisition strategies, announced that it is in preliminary discussions with three acquisition / investment candidates. These include one regional retailer, one regional retailer and wholesale distributor, and one national consumer products company. All discussions are considered serious but are still in the very early stages. Aggregate revenues of all three are projected to be in the $22-$24 million range for 2008. The company also recently announced that it executed a term sheet and is in final negotiations to acquire a regional hospitality and consumer products company with recent revenues and assets of approximately $5 million and $13 million, respectively. The stock stayed flat at $0.01 for the week.
Cord Blood America, Inc. (OTCBB: CBAI), the umbilical cord blood stem cell preservation company focused on bringing the life-saving potential of stem cells to families nationwide and internationally, announced that, based upon preliminary results, the company increased by 500% the number of customers who preserve cord blood at the company’s state-of-the-art storage facilities. The significant increase in customers is largely due to the accretive acquisitions Cord Blood America has made in 2007, including CorCell and CureSource, which increased the number of umbilical cord samples in storage significantly. The company believes that the acquisitions it made during 2007 and the marketing initiatives it is pursuing in 2008 position the company for another record year of growth. The stock closed the week unchanged at $0.013.
VoIP, Inc. (OTCBB: VOIC), a company that provides wholesale long-distance and local telephone services through its VoIP network, announced in cooperation with VariTalk, LLC, that VoIP’s patented “Click-to-Call” technology was used in several recent internet and mobile marketing campaigns. VoIP’s patented technology was featured in conjunction with the movies Transformers and Snakes on a Plane, and the TV show 30 Rock. The company also believes that other parties are infringing on its intellectual property, which VoIP spent millions of dollars developing. As a consequence, it has retained a leading intellectual property law firm, to pursue damages against those parties infringing. As the use of internet marketing grows, the company expects its patented Click-to-Call technology will be utilized in several different types of marketing campaigns, with substantial revenue potential. Shares fell $0.02, to close the week at $0.02.
On The Wires: RXi Pharmaceuticals Corporation, a subsidiary of CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical research and development company, announced that the company’s President and CEO Tod Woolf, will present a corporate overview at the Wachovia 2008 Healthcare Conference in Boston, MA on Thursday, January 31, 2008 at 8:00 AM EST. ProLink Solutions, a wholly-owned subsidiary of ProLink Holdings Corp. (OTCBB: PLKH) and the world’s leading provider of Global Positioning Satellite golf course management systems and on-course advertising, announced that M.G. Orender, past President of the PGA of America and a PGA Golf Professional Hall of Fame inductee, has joined its Board of Directors. The company also announced it will exhibit its innovative products, golf course services and advertising program at the 2008 Golf Industry Show, Booth #953, January 31-February 2 at the Orange County Convention Center in Orlando, Fla. Enzo Biochem, Inc. (NYSE: ENZ), a leading biotechnology company specializing in gene identification and genetic and immune regulation technologies for diagnostic and therapeutic applications, announced at its annual meeting that the shareholders elected Barry Weiner, Melvin F. Lazar and Dr. Bernard Kastin as Class II Directors for a term of three years, and ratified the appointment of Ernst & Young LLP as the company’s independent registered public accounting firm. Neutron Enterprises, the leading global provider of web-based stock market simulations catering to the academic, corporate and consumer markets, has changed its name to Stock-Trak Group, Inc. (OTCBB: STKG). The company’s stock ticker symbol has also changed from NTRN to STKG. Xcorporeal, Inc. (AMEX: XCR), a medical device company that is developing an extra-corporeal platform of products that might be used in devices to replace the function of various human organs, entered into a Services Agreement with Daniel Goldberger, a member of its Board of Directors and formerly President and Chief Operating Officer. Under the agreement Mr. Goldberger will provide consulting services to the company.
