Companies featured in the current edition of the newsletter: CETG, CHIP, CKGT, GNBT, GSPG, IASCA, ICLK, ITUI, IVOT, LNXGF, PLKH, SMGY, SRRY, SWVC, TKO, VYTR
The stock market was unable to build on the prior week’s gains, but it wasn’t for a lack of trying. It seems these days that the fortunes of the market are dictated by the financial sector, and last week the financials were a major drag on the broader market. A pickup in concerns about a global economic slowdown, which were fed by weak data out of Europe, the hangover of major earnings disappointments from American Express and Texas Instruments, cautious guidance from Apple, and a horrendous earnings report from Ford kept buying efforts in check. However, the S&P 500 lost only 3 points, bringing its year to date loss to 14.3%. The Nasdaq Composite Index gained 28 points, reducing its year to date loss to 12.9%. The Dow Jones Industrial Average dropped 126 points, increasing its year to date loss to 14.3%. The Russell 2000 finished the week on a positive note with a gain of 17 points, bringing its year to date loss to 7.3%.
Bank of America kicked off reporting for the financial sector last week and it did so a relatively good note, suggesting that it intends to maintain its current dividend. In contrast, Wachovia, Regions Financial, and Fifth Third all cut their dividend, yet none signaled that they would have to raise more capital through a stock offering. The enthusiasm toward financial stocks ended in a hurry on Thursday, though, when the sector dropped 6.8% and suffered its largest decline in more than eight years. Notwithstanding the earnings disappointments from select companies, the earnings news outside the financial sector has been better than expected. According to Bloomberg, second quarter earnings, ex-financial, are tracking to be up 8.6% as opposed to down 18.2% when financials are included. This understanding has provided a rational rallying point and an important source of support for the market, which had gotten overly pessimistic about earnings ahead of the reporting period. Of the 248 S&P 500 companies that have reported their results, 72.2% have registered positive surprises, 4.8% have been in line, and 23.0% have missed expectations.
The National Association of Realtors reported existing home sales in June slipped to a 10-year low, but lost in that report was the indication that the pace of sales declines is slowing. The same is true for new home sales, which were reported to be down 0.6% in June from an upwardly revised May number. Strikingly, June new home sales, announced at an annual rate of 530,000 units, were right in line with the 3-month average for the March to May period. Still, the market continues to be pre-occupied with fears about the consumer. Accordingly, it has been unable to put its full faith in earnings estimates for the back half of the year that call for growth in both the third and fourth quarters — including financials.
What should investors look for this week? There are still many companies scheduled to report earnings, including Kraft Foods (NYSE: KFT), Tyson Foods (NYSE: TSN), and Verizon (NYSE: VZ) on Monday prior to the opening, followed by Amgen (NASDAQ: AMGN), EDS (NYSE: EDS), and Hartford Financial (NYSE: HIG) after the close. Tuesday morning, Alcatel-Lucent (NYSE: ALU), General Motors (NYSE: GM), BP (NYSE: BP), Colgate-Palmolive (NYSE: CL), Northrop Grumman (NYSE: NOC), Sony (NYSE: SNE), U.S. Steel (NYSE: X), and Valero Energy (NYSE: VLO) will report results. Later on in the day after the market closes MetLife (NYSE: MET) and Viacom (NYSE: VIA) will report their earnings. Wednesday before the market opens Arcelor Mittal (NYSE: MT), Comcast (NASDAQ: CMCSA), Hess (NYSE: HES), Siemens AG (NYSE: SI), and Tyco Electronics (NYSE: TEL) will release their earnings. Gerdau S.A. (NYSE: GGB), Murphy Oil (NYSE: MUR), Prudential (NYSE: PRU), Starbucks (NASDAQ: SBUX), and Walt Disney (NYSE: DIS) will report after the market closes. Thursday will be a busy day with announcements from Aetna (NYSE: AET), AstraZeneca (NYSE: AZN), CVS Caremark (NYSE: CVS), Exxon Mobil (NYSE: XOM), Marathon Oil (NYSE: MRO), Motorola (NYSE: MOT), Royal Dutch Shell (NYSE: RDS), and America Movil SA (NYSE: AMX), Friday will feature announcements from Chevron (NYSE: CVX), Sun Microsystems (NASDAQ: JAVA), and Total S.A. (NYSE: TOT).
The economic calendar will be busy as well, beginning with July Consumer Confidence Tuesday at 10:00 a.m. Before the bell on Wednesday, July ADP Employment will be reported, followed by Weekly Crude Inventories at 10:35 a.m. Prior to the opening bell on Thursday Q2 Employment Cost Index, Weekly Jobless Claims, Q2 GDP and Chain Deflator will be released, followed by July Chicago PMI at 9:45 a.m. All eyes will be focused on July employment data being released on Friday before the bell, which consists of July Nonfarm Payrolls, Unemployment Rate, Hourly Earnings, and Average Workweek. July Auto & Truck Sales, June Construction Spending and July ISM Services will also be released on Friday.
Telkonet, Inc. (AMEX: TKO), the leading provider of innovative, centrally managed solutions for integrated energy management, networking, building automation and proactive support services, commented on its 2008 second quarter operations for the period ended June 30, 2008. The company expects to report a double-digit sequential increase in revenue growth in Telkonet’s operations for its second quarter from its revenues of $4 million in the 2008 first quarter. During the quarter, the company realized strong success in 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. It is also focusing considerable resources on smart grid technologies, where the company is bidding on several large opportunities. Telkonet’s high-speed Internet access sales continue to accelerate, with the company recently achieving a significant milestone of supporting more than 200,000 guest rooms with its differentiated HSIA guest support services. Shares fell by $0.06, to finish the week at $0.45.
Drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT) announced that the company was featured in an interview segment on FOXNews.com concerning Generex Oral-lyn, the company’s flagship proprietary oral insulin spray product. Generex Oral-lyn is currently in Phase III international trials to show non-inferiority to standard insulin. Dosing is underway at thirty-one clinical sites and the study will involve up to 750 patients with Type-1 Diabetes Mellitus. The product is currently on the market in India and Ecuador. Shares fell by $0.03, to finish the week at $0.83.
GoldSpring, Inc. (OTCBB: GSPG), a North American precious metals mining company, focused in Nevada, with extensive, contiguous property in the Comstock Lode District, reported a continuation in the trend of encouraging assay results from its latest four drill holes, numbered 45-48, suggesting expanded depth and surface area of the identified ore body in the Hartford Complex. The Hartford Complex represents less than five percent of the Company’s total leases of landholdings in the Comstock Lode. The assays from drill holes 45-48 continue the trend of favorable indications from the company’s 2008 drilling program, suggesting the potential for a broader range of mineralization. As a result of these, and other encouraging results obtained from drilling activity in the Hartford Complex, the company has taken steps to accelerate its drilling program. Specifically, the company plans to have three drills operating during the third quarter, which may expedite the completion of its drilling program at the Hartford Complex. The completion of the drill program is an essential step in GoldSpring’s return to mine production. One near-term catalyst for the stock could come from the release next month of its 43-101 reserve report, which would value its holdings in The Hartford Complex, which represents approximately 5% of its overall holdings. The stock rose by $0.002 for the week, to close at $0.04.
i2Telecom International, Inc. (OTCBB: ITUI), a developer of award-winning patented and innovative high-quality Voice-over-Internet Protocol products and services, announced that it has executed a Memorandum of Understanding for a strategic joint venture with Raed A.H. Rajab, a prominent businessman in Kuwait, to expand the company’s operations into a number of international markets by the end of this year. Through established sales channels, Rajab will provide $9 million in funding for operating and marketing expenses incurred by the joint venture during the next twelve months involving the launch of i2Telecom’s award-winning MyGlobalTalk and other telecom offerings into these markets. The joint venture will establish wholly-owned subsidiaries in each country and transfer exclusive rights to the company’s technology to that country in exchange for the funding. The stock rose by a penny to finish the week at $0.14.
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, announced that one of the world’s largest telecommunications companies has elected to advertise in the ProLink Network Research Program as part of a category exclusive three-month advertising campaign. The signing represents the first major advertiser to utilize the company Systems for advertising. Advertising represents a lucrative revenue source for the company, as it seeks to monetize the golfers who utilize the Network. Golfers are a highly attractive target for advertisers due to their financial resources. The company also announced that the Glen Club now features the ProLink Solutions ProStar GPS system used at many of the world’s most famous golf courses. In other news ProLink responded to a suit claiming patent infringement that was filed in the United States District Court for the Northern District of Illinois by GPS Industries, Inc. against its subsidiary ProLink Solutions, LLC, and other defendants. The company believes that the suit is baseless and without merit. ProLink intends to defend itself vigorously, and will continue to pursue previously announced litigation against GPSI aggressively. Furthermore, ProLink also believes that it does not infringe either of ‘518 or ‘768 patents with its product and service offerings, and it is surprised that GPSI’s management would file such an action. Shares rose by $0.12 for the week, to close at $0.55.
Vyteris, Inc. (OTCBB: VYTR), manufacturer of the first FDA-approved active patch transdermal drug delivery system, announced that it has received $2.5 million principal amount of financing from Ferring Pharmaceuticals, Inc., which represents an advance on a potential milestone payment for a Phase II clinical trial of a product for female fertility treatment. The $2.5 million was advanced in the form of a loan and bears interest at the rate of 10 percent per annum. If Ferring elects to proceed with the Phase II trial, the principal amount of the loan will be paid off through application of the Phase II payment which would otherwise be due under the License Agreement between Vyteris and Ferring. The stock finished the week unchanged at $0.41.
Sancon Resources Recovery, Inc. (OTCBB: SRRY), a rapidly growing environmental services and industrial waste recycling company, with operations in both China and Australia, announced record preliminary second quarter results for the period ended June 30, 2008. The company generated record 2008 second quarter revenue of approximately $2.93 million, a 73.3% increase compared to $1.69 million in the 2008 second quarter. Revenue increased due to strong growth in China. Gross profit increased 641% to $1.26 million compared to $0.17 million in the year earlier period. Despite the strong revenue growth in the 2008 second quarter, the company’s revenue would have been even higher except for the disruption caused by the earthquake that impacted Sancon’s ability to offer environmental services in certain areas that were impacted by the earthquake. Profitability was also impacted by the company’s decision to increase spending to develop ways to turn waste glass material into new usable products and materials, which it believes will allow it to generate additional sources of revenue and investments in additional infrastructure to support anticipated growth throughout the balance of 2008 and 2009. The stock fell by $0.07 for the week, to close at $0.51.
Capital City Energy Group, Inc. (OTCBB: CETG), a diversified oil and natural gas company, announced that it has acquired an interest in the prolific Fayetteville Shale located in Van Buren and Cleburne Counties in Arkansas. The company is participating in drilling activity on more than 30,000 acres in these counties. The Fayetteville Shale has quickly developed into a large unconventional gas resource and has attracted national attention due to the success in the area of such prominent energy firms as Chesapeake Energy and Southwestern Energy Company. With production increasing rapidly, the Capital City believes that the play could be a promising source of revenue. To date, Capital City has participated in drilling 29 producing wells on the properties. Drilling activity is increasing at the rate of 8 to 10 new producing wells per month. The producing wells average over 1 million cubic feet per day of natural gas production. Shares fell by $0.20 for the week, to close at $2.50.
VeriChip Corp. (NASDAQ: CHIP), a company that develops, markets, and sells radio frequency identification systems to identify, locate, and protect people and assets in the healthcare market, announced that it has completed the sale of its wholly owned Canadian subsidiary, Xmark Corp. to a subsidiary of Stanley Works for $47.9 million in cash, consisting of the $45 million purchase price plus a balance sheet adjustment of $2.9 million. The stock finished the week unchanged at $1.73.
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, announced that it has commenced an advertising campaign, with the support of one of its largest shareholders, to market two innovative products that the company recently launched. The products, Cactus Cattle Feed and Cactus Fish Feed, are expected to generate approximately $2.1 million in annual sales. China Kangtai Cactus expects to utilize both television and newspaper advertising to raise awareness of these new products, which provide cattle with the nutrition from cactus and have characteristics designed to prevent sepsis, inflammatory illnesses and to boost immunity. The company also announced that it entered into a Preferred Stock Purchase Agreement with T Squared Investments LLC to sell for an aggregate purchase price of $250,000, 416,667 shares of the company’s Series A Convertible Preferred Stock, par value $0.001 per share and warrants to purchase up to 500,000 shares of company’s common stock exercisable for a period of three years at an exercise price of $0.9375 per share or an aggregate exercise price of $625,000. The stock finished the week unchanged at $0.69.
iVoice Technology, Inc. (OTCBB: IVOT), a green technology company, focused on acquiring and identifying promising technologies that address environmental issues, announced that as of August 4th it will use the alternative name of iGreen Innovations, Inc.The company also plans to change its trading symbol. The stock traded below $0.01 for the week.
Linux Gold Corp. (OTCBB: LNXGF), a company that is involved in exploration of mineral properties, announced that the company has completed a private placement of common stock and warrants raising gross proceeds of $608,250. The company issued 4,055,000 Units, consisting of one share of restricted common stock of Linux Gold Corp. and one warrant. Each warrant will enable the investor to purchase one additional share at an exercise price of $0.20 per share for a period of one year from the date of closing. Funds raised are for exploration, accounts payable and working capital. Shares rose by $0.011, to finish the week at $0.106.
Seaway Valley Capital Corporation (OTCBB: SWVC), a company that makes equity, equity-related, and debt investments in companies that require expansion capital and in companies pursuing acquisition strategies, issued an update to its shareholders listing the company’s major milestones which include: 1) acquisition of one hundred percent of WiseBuys Stores and one hundred percent of Patrick Hackett Hardware Company 2) Acquisition of North Country Hospitality, Inc. Overall the company acquired assets totaling approximately $30 million and has current projected pro forma annualized revenues of $36 – $40 million including the current North Country assets and revenues. The stock traded below $0.01 for the week.
On the Wires: interCLICK, Inc. (OTCBB: ICLK) announced that it has hired two seasoned sales executives to support new offices the company has opened in Chicago and San Francisco. interCLICK named Ben Vincelette to the position of Director of Sales, Western Region and named Tim Stejskal Vice President of Sales for the Midwest Region. The company also announced that it has appointed a former Yahoo! and Tacoda Executive Jason Lynn as Vice President of Product Management. Smart Energy Solutions, Inc., (OTCBB: SMGY) announced the appointment of Edward Braniff as acting CEO following the resignation of Peter Mateja.