Companies featured in the current edition of the newsletter: ACCY, CACN, CBMC, CTVWF, CVM, ENZ, FMTI, GNBT, GSPG, HYTM, IASCA, ITUI, IVOT, PLKH, SEE, SWVC, TKO
The stock market tumbled 3.1% in a volatile week of trade, falling to its lowest level in nearly three months. Although weakness was broad-based, the financial sector was at the center of the market’s decline, with concerns over further write-downs weighing on sentiment. The S&P 500 was down 42 points or 3.1% for the week, increasing its year to date loss to 10.2%. The Nasdaq Composite Index dropped 48 points, bringing its year to date loss to 9.3%. The Dow Jones Industrial Index was down 465 points or 3.8% for the week, increasing to its year to date loss to 10.7%. The Russell 2000 dropped 8 points, bringing its year to date loss to 5.3%.
As expected, quarterly earnings from Lehman Brothers, Goldman Sachs and Morgan Stanley were poor compared to last year. But the results were better when compared to Wall Street’s expectations; Goldman’s earnings blew away forecasts, and Morgan Stanley beat estimates. Lehman’s loss of $2.8 billion matched its preannouncement. The stock market, and financials in particular, plunged on Tuesday despite Goldman’s large beat. Ironically, the market sank when Goldman warned that U.S. banks may need to raise $65 billion in fresh capital in response to the subprime fallout. Citigroup compounded the financial sector’s decline on Thursday, after announcing that it will face another barrage of write-downs in its second quarter, although the total amount should be less than its $19 billion first quarter write-down due decreased subprime exposure.
Economic data was largely overlooked as market participants focused on corporate news, although there were several notable releases. May PPI rose by a higher-than-expected amount due to the spike in energy prices, however, core PPI, which excludes food and energy, was in-line with estimates. Housing starts fell 3.3% from the prior month and building permits dipped 1.3%. Homebuilding stocks ended the week with a 1.3% gain. Industrial production in May unexpectedly dipped, but the slowdown is still not near the levels seen during the 2001 recession. Specifically, production declined 0.2% from the prior month, which was worse than the forecast of a 0.1% increase. Capacity utilization slipped 0.2% to 79.4%. The number of new unemployment claims held mostly steady from the prior week, remaining elevated, but below the levels typically seen during recessionary environments. In commodity trading, crude oil settled the week nearly unchanged at $134.62 per barrel after several wild swings, trading as high as $139.89, a new all-time high, and as low as $131.19.
What should investors look for this week? While the earnings calendar will most likely be light, many small-cap stocks will be impacted by the rebalancing of the Russell indices, which will occur after the market closes on Friday afternoon. If you own a stock that is either added to or being removed from the Russell 2000, chances are it is likely to experience increased volatility this week, culminating in a large trade after the market closes on Friday when many index funds will either buy or sell their positions. Approximately 14% of the Russell 2000 will be comprised of different companies when it rebalances.
On the earnings front, Walgreen (NYSE: WAG) will announce numbers Monday before the bell. Kroger (NYSE: KR) will make an announcement Tuesday before the bell, followed later in the day with announcements from Darden Restaurants (NYSE: DRI) and Jabil Circuit (NYSE: JBL). Wednesday will be a busy day with earnings releases from General Mills (NYSE: GIS), Monsanto (NYSE: MON), Bed Bath & Beyond (NASDAQ: BBBY), Nike (NYSE: NKE), Oracle (NASDAQ: ORCL), and Research In Motion (NASDAQ: RIMM). Thursday morning ConAgra (NYSE: CAG) will report numbers with Rite Aid (NYSE: RAD) and Accenture (NYSE: ACN) announcing earnings later that evening.
The economic calendar will certainly provide important data that investors will closely watch. Prior to the release of the FOMC policy statement that will be released on Wednesday at 2:15 p.m., June Consumer Confidence will be reported Tuesday at 10:00 a.m. Before the bell on Wednesday, May Durable Orders will be announced followed by May New Home Sales at 10:00 a.m. and Weekly Crude Inventories at 10:30 a.m. Thursday morning before the opening bell, Q1 GDP will be released along with Q1 Chain Deflator and Weekly Jobless Claims. Existing May Home Sales will be released at 10:00 a.m. later that day. Prior to the opening bell on Friday, May Personal Income and Spending data will be reported along with May Core PCE Inflation. With respect to the FOMC meeting, expectations for a 25 basis point increase were tempered last week but disappointing data and a sluggish market performance. Investors now think there is an 8% probability the Fed raises rates, versus a 22% probability just one week ago.
The conference schedule on Tuesday will feature the Deutsche Bank Securities Inc. 2008 Alternative Energy Conference in San Francisco and the two-day UBS Global Financial Markets & Technology Conference in London. Other notable conferences include the Credit Suisse Satellite Conference in Washington D.C., and the two-day UBS Global Insurance Conference in London, both beginning Thursday.
Volume Alert: Shares of Enzo Biochem (NYSE: ENZ) jumped 3.5% on Friday on nearly twice average volume, perhaps due to speculation that the company could benefit from consolidation in the life sciences sector. Just one ago, Invitrogen Corp.’s planned $6.4 billion buyout of Applera’s Applied Biosystems Group shone a spotlight on the wider life sciences product industry suggesting that further consolidation could follow. That was the first time that a major consumables player combined with a systems player suggesting that other participants could also focus on bringing much larger integrated solutions to the market. Enzo ended the week at $11.70, up 20 cents.
Volume Alert: Shares of Substance-abuse program provider Hythiam Inc. (NASDAQ: HYTM) jumped 3.8% Friday on more than twice average volume, culminating an active week of trading in which the first double-blind, placebo-controlled study utilizing Hythiam’s PROMETA Treatment Program were presented at the College on Problems of Drug Dependence conference in San Juan, Puerto Rico, by addiction expert Harold C. Urschel, III, M.D., M.M.A. The 30-day study focused on evaluating the impact of PROMETA on cravings during the treatment of methamphetamine dependence, and was designed as a follow-up to Dr. Urschel’s 90-day open-label study on the effects of PROMETA in treatment-seeking, methamphetamine-dependent individuals. The newly released results of the 30-day study were analyzed using an intent-to-treat analysis, which includes all randomized participants, and demonstrated that PROMETA achieved a statistically significant reduction in the combined craving score for methamphetamine when compared to placebo over the study duration. The PROMETA subjects also had an immediate and sustained reduction in cravings beginning with the first post-treatment assessment. Also last week, Rodman & Renshaw initiated coverage of the company’s stock with an Outperform rating and a price target of $6. Shares rose by $0.29, to finish the week at $2.73.
CEL-SCI Corporation (AMEX: CVM), a company that engages in the research and development of drugs and vaccines used in the treatment of cancer, announced the discovery of a novel peptide for the treatment of rheumatoid arthritis. This peptide, called CEL-2000, was tested in a well established animal model of rheumatoid arthritis and was compared to Enbrel, a leading treatment for people with rheumatoid arthritis. The tests showed that CEL-2000 is equivalent or possibly superior to Enbrel in slowing disease progression and lessening symptoms in mice. In addition, the vaccine has the potential to require fewer and smaller doses, be less toxic, more disease specific and much less invasive. The company also believes that the drug could be attractive to patients who are not able to take or be responsive to Enbrel, Remicade or Humira. Rheumatoid arthritis treatments comprise a $13 billion market. The stock rose by a penny, to finish the week at $0.67.
Forbes Medi-Tech Inc. (NASDAQ: FMTI), a life sciences company dedicated to the research, development and commercialization of innovative products for the prevention and treatment of life-threatening disease, announced that the company has demonstrated compliance with Nasdaq’s Minimum Bid Price Requirement, as evidenced by a closing bid price of $1.00 or more for a minimum of ten consecutive trading days. Accordingly, the Nasdaq Hearings Panel has determined that the company’s shares will continue to be listed on The Nasdaq Stock Market. Shares fell by$0.23 for the week, to close at $1.02.
Generex Biotechnology Corporation (NASDAQ: GNBT), the leader in drug delivery for metabolic diseases through the inner lining of the mouth, made a podium presentation of data from a company-sponsored study at The Endocrine Society’s 90th Annual Meeting. The presentation described a one-year study that compared the efficacy and safety of analog versus human insulin. The study concluded that human insulin, when delivered through the buccal mucosa, is not inferior to analogues in the long-term treatment of Type-1 diabetes and could be used as a less costly alternative. The company will also hold a conference call on Tuesday at 11 a.m. where it is expected to update investors on the progress of its pivotal Phase III trial for Generex Oral-lyn. The stock finished the week unchanged at $0.96.
Telkonet, Inc. (AMEX: TKO), the leading provider of innovative, centrally managed solutions for integrated energy management, networking, building automation and proactive support services, is dynamically evolving energy management efficiency, with the launch of the advanced Networked Telkonet Smart Energy platform. Building on the proven capabilities of the Telkonet SmartEnergy system, incorporating Telkonet’s unique patented Recovery Time technology, NTSE advances intelligent HVAC building control with a flexible, resilient and low-cost energy management platform. NTSE gives property owners the tools to identify and implement energy savings, providing total visibility and detailed data about a property’s HVAC system and its energy consumption, together with real-time, instant remote management capabilities. With HVAC costs typically accounting for more than 50% of a building’s electricity overhead, controlling in-room energy consumption is a prime requirement. The company also announced that it has won a significant competitive bid with Red Lion Hotels Corporation to supply a comprehensive managed high speed Internet access solution. The project will involve installing high-speed Internet access in more than 5,400 rooms in 30 properties across the United States and in providing customer support. The HSIA roll-out has commenced and will be completed early in Q3. The stock rose by $0.02 for the week, to close at $0.58.
Volume Alert: Shares of junior gold company Goldspring (OTCBB: GSPG) rose nearly 7% on Friday on more than twice average volume. Recently, the company received a Preliminary Interim Resource Report from an independent geology firm which provided an estimate as to the contained resource gold ounces currently drill indicated at GoldSpring’s Hartford Complex in the Comstock Lode District, which represents less than 5% of the acreage of the company’s overall land holdings. Based on the 38 drill holes completed to date, the report indicated a resource of 4,926,000 tons grading 0.080 ounces per ton gold containing 392,000 ounces at a cutoff grade of 0.030 ounces per ton. At current gold prices, the resource identified in the Report would be worth approximately $350 million, or nearly three times the current value of the company. Shares ended the week at $0.0297, up nearly 19%.
Volume Alert: Shares of i2Telecom International, Inc. (OTCBB: ITUI), a developer of patented and Voice-over-Internet Protocol products and services, surged more than 12% on Friday on the highest volume in the company’s history, as the stock traded more than 15 times average volume. Earlier this month, the company said that it had sold a selected patent, along with certain patent applications, to Sinon Data LLC for $6.5 million in cash. The patent, along with the certain patent applications sold, relate to i2Telecom’s Voice Service Access Module, which is marketed under the VoiceStick label. i2Telecom retains a non-exclusive license without geographic limitation. Shares closed at their highest level since mid-October, ending the week at $0.135, up 50%.
Calypte Biomedical Corporation (OTCBB: CBMC), a developer, manufacturer and marketer of HIV diagnostic tests, announced last week the appointment of Donald N. Taylor as President and Chief Executive Officer of the company. Taylor has considerable expertise in sales and marketing and has a solid track record of growing revenue quickly in major markets around the world and building momentum towards profitability and beyond. In conjunction with the announcement, the company also said it had entered into agreements with current investors to exercise warrants at market prices, raising $1 million through the process. Shares ended the week at $0.05, unchanged.
Alternative Construction Technologies, Inc. (OTCBB: ACCY), a company that engages in the research, development, and marketing of proprietary products for the construction industry, announced that it has registered its state-of-the-art ACTech Panel System and several ancillary services in twenty-five states. Individual states have registration requirements and procurement policies that dictate how the private sector can sell to them. Many states even set specifications for certain products, materials and services. Currently, twenty-four of these states have green building mandates which request or require green building materials when constructing government funded buildings. Alternative Construction Technologies has now applied for registration in all twenty-four green building mandate states, which will allow the company to sell the ACTech Panel System to state and municipal governments. The stock dropped $0.25 for the week, to close at $1.05.
CityView Corporation Limited (OTCBB: CTVWF), an exploration and development company, announced results from an independent review conducted by PricewaterhouseCoopers on CityView’s assets. The report noted that, based on a sum of the parts methodology the company’s assets may be worth between $182 million and $296 million. This implies a value of between $0.42 and US$0.68 per share. The stock finished the week unchanged at $0.15.
IAS Energy, Inc. (OTCBB: IASCA), which has acquired a 40% interest in a promising Chinese Internet company, announced that Video1314.com has entered into a partnership and cross-marketing agreement with Queen Productions Limited, a leading Chinese Artist management, music and film production company. Queen Products represents many popular Chinese entertainers, and its relationships should expand the audience for Video1314.com at a time when it has made significant enhancements to improve its functionality and content. The stock fell by a penny for the week, to close at $0.21.
iVoice Technology, Inc. (OTCBB: IVOT), a green technology company, focused on acquiring and identifying promising technologies that address environmental issues, announced that its wholly owned subsidiary B Green Innovations, Inc., released their new information rich website displaying their current and future products offerings. The new Web site also features comprehensive content on B Green Innovations. The stock traded below $0.01 for the week.
ProLink Holdings Corp. (OTCBB: PLKH), the world’s leading provider of Global Positioning Satellite golf course management systems and digital out-of-home on-course advertising, announced that Green Valley Ranch Golf Club and Rush Creek Golf Club now feature the ProLink Solutions ProStar GPS system used at many of the world’s most famous golf courses. Both Golf Clubs previously featured ProLink’s GameStar GPS system. Last year, the company posted a renewal rate of approximately 90 percent on expiring leases. Shares rose by $0.05 for the week, to close at $0.55.
SeaMiles Limited (TSXV: SEE), North America’s premier cruise loyalty provider, announced that it has completed the sale of its remaining non-core real estate assets for $3.7 million. The company had previously entered into a definitive agreement to sell the assets in March. The transaction eliminates the company’s remaining real estate and convertible debt aggregating $3.6 million and will result in savings to the company in excess of $400,000 per year. SeaMiles expects to begin to recognize a portion of the savings in the second quarter results for the period ended June 30, 2008. The properties sold were the Greene Slate Inn, the Ports development project and three residential houses. The stock fell by $0.10, to finish the week at $1.90.
Seaway Valley Capital Corporation (OTCBB: SWVC), a company that makes equity, equity-related, and debt investments in companies that require expansion capital, reported that its War of 1812 Amber Ale, which is produced by its wholly owned subsidiary Sackets Harbor Brewing Company, has been recognized by Syracuse’s famous Dinosaur Bar-B-Q as one of its strongest selling beers on draught. The stock traded below $0.01 for the week.
On the Wires: Customer Acquisition Network Holdings, Inc. (OTCBB: CACN) announced that it has appointed David M. Garrity, CFA to its Board of Directors.
