Companies featured in the current edition of the newsletter: CGXP, CLXS, CTVWF, DVLY, GNBT, HYTM, LNXGF, NSMG, PBIO, PLKH, SEE.V, SMGY, SWVC, TAGS
The week included only four trading days, but certainly did not lack for volatility. When the dust settled, all of the major indices closed solidly in the black, generating most of the gains on Thursday. For the week the Dow Jones Industrial Average gained 2.2%, reducing its loss for the year to 6.8%. The technology heavy Nasdaq advanced 2.1%, cutting its losses for the year to 14.9%. The S&P 500, for a second consecutive week, had positive gains, finishing the week with an increase of 3.2% and paring its loss for the year to 9.5%. The Russell 2000 advanced 2.8% but is off 11% for the year.
The financial sector was the driving force behind last week’s gains, just as it had led the market lower previously. It got off to a strong start after Fannie Mae and Freddie Mac were upgraded to Outperform from Market Perform at Keefe, Bruyette & Woods. Financials, and the market, got a further boost after the New York Fed announced modifications to its new Term Securities Lending Facility. The March Philadelphia Fed, a regional manufacturing survey, also gave stocks a boost. The survey came in at -17.4, which is higher than the previous reading of -24.0. Economists expected a reading of -18.0. Other economic data was bearish, although the market shrugged off the news. Jobless claims for the week ended March 15 rose to 378,000 from the prior reading of 356,000. Economists expected 360,000 claims. In a separate report, February leading indicators fell 0.3%, which was in-line with expectations. The prior reading, however, was revised lower to -0.4% from -0.1%.
What should investors look for in the upcoming week? It will be another tame week for earnings announcements, beginning Monday with announcements from Tiffany & Co (NYSE: TIF) and Walgreen (NYSE: WAG), coming before the opening bell. Commercial Metals (NYSE: CMC), Jabil Circuit (NYSE: JBL), and SAIC (NYSE: SAI) will follow with announcements on Tuesday. Wednesday will be highlighted by an announcement from Oracle (NASDAQ: ORCL) coming after close. Thursday will be the busiest day of the week with announcements from ConAgra (NYSE: CAG), Lennar (NYSE: LEN), WellCare Group (NYSE: WCG), Williams-Sonoma (NYSE: WSM), and Accenture (NYSE: ACN).
The economic calendar will be active, starting with February Existing Homes Sales being reported at 10:00 on Monday. Tuesday morning shortly after the opening, March Consumer Confidence will be announced. Before the opening on Wednesday, February Durable Goods Orders and New Homes Sales will be released, with Weekly Crude Inventories being reported at 10:30. Thursday morning, the Final Q4 Chain Deflator and the Final Q4 GDP numbers will be reported at 8:30 along with Weekly Jobless Claims. Friday ends the week with February Personal Spending and Income data being announced prior to the bell, followed by the Revised March Michigan Sentiment numbers at 10:00.
The conference schedule is light, beginning with a three day Credit Suisse- 2008 Global Leveraged Finance Conference in Phoenix and two day Sidoti 12th Annual Emerging Growth Institutional Investor Conference in New York, on Tuesday. The two day JP Morgan Gaming, Lodging & Restaurants Conference in Las Vegas, two day Banc of America Securities Mid Cap Conference in Atlanta, two day Lehman Brothers Investment Grade Energy and Pipeline Conference in New York, will highlight Wednesday’s conference schedule. The JP Morgan 2008 Insurance Conference will conclude the week on Thursday.
Shares of healthcare services company Hythiam, Inc. (NASDAQ: HYTM) hit an all-time low last week after the company reported fourth quarter results. HYTM reported revenue of $11.8 million, which include $2.0 million in revenues from Hythiam’s healthcare services business and $9.8 million in revenues from CompCare’s operations, compared to Hythiam’s revenues of $1.0 million in the fourth quarter of 2006. Net loss for the 2007 fourth quarter was $8.6 million, or $0.17 per share, versus a net loss of $10.8 million, or $0.27 per share, in the fourth quarter of 2006. The fourth quarter primarily reflected revenue generated from the company’s private-pay business, but it is expected that the revenue base will change over time, reflecting acceptance of the company’s disease management offering by managed care providers and other third party payers. Based upon expectations that the company will sign a managed care deal and the upcoming data from a study being conducted at Cedars Sinai of PROMETA, the company’s proprietary protocols to treat drug and alcohol addiction, analysts at RBC, UBS and Brean Murray all reiterated their Buy/Outperform ratings on the stock. The stock fell by $1.23 for the week, to close at $1.44.
Drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT) said last week that Dr. Gerald Bernstein, the company’s Vice-President for Medical Affairs would continue in that position, despite not running for re-election to the Board in order to allow the company to have sufficient independent directors. The stock dropped by $0.11, to finish the week at $0.89.
Pressure BioSciences, Inc. (NASDAQ: PBIO), a company focused on the development of a novel, enabling technology called Pressure Cycling Technology, announced that researchers from the company and the Harvard School of Public Health have unveiled a novel approach for the simultaneous extraction, isolation, and fractionation of nucleic acids, proteins, and lipids from animal and plant samples routinely used in laboratory research. The method is based on the synergistic combination of the company’s patented pressure cycling technology, single-use processing containers, and proprietary PCT- enhanced reagents. This is a unique method that can concurrently extract, isolate, and fractionate four major classes of bio-molecules from various cells and tissues. The approach is rapid, reproducible, safe, and provides efficient and high quality bio-molecule recovery. This technique offers the potential to enhance studies in systems biology currently being conducted in a number of laboratories working in many important areas of human, animal, plant, and microbial research. Shares dropped by $0.16, to finish the week at $4.00.
Tarrant Apparel Group (NASDAQ: TAGS), a company that engages in the design, contract, manufacture, and sale of casual apparel for women, men, and children, announced that it has entered into a final settlement agreement and payment plan with the Internal Revenue Service relating to certain audits that were previously conducted and disclosed for fiscal years 1996 through 2002. Under the settlement, which totals $14 million, including interest and penalties, the company will pay the IRS $4 million immediately, and an additional $250,000 per month until repayment is completed. The stock fell by 2 cents, finishing the week at $0.60,
Ceragenix Pharmaceuticals, Inc. (OTCBB: CGXP), a biopharmaceutical and medical device company focused on infectious disease and dermatology, announced that preclinical testing of the company’s CeraShield coated endotracheal tubes and C.R. Bard’s recently FDA cleared Agento tube has shown that Cerashield coated endotracheal tubes were able to provide a 7 fold increase in the duration of antimicrobial protection compared to the recently cleared silver coated Agento tube from C.R. Bard. Bacterial growth on endotracheal tubes is a key component in the pathogenesis of Ventilator Associated Pneumonia which afflicts an estimated 250,000 patients each year and is associated with high morbidity and added hospital costs of $4 billion in the U.S. alone. The stock rose 2 cents for the week, to close at $0.90.
Collexis Holdings, Inc. (OTCBB: CLXS), a leading developer of high definition search and knowledge discovery software, was recently named a finalist for the Software & Information Industry Association 23rd Annual Codie Awards. Established in 1986, the Codie Awards celebrate outstanding achievement and vision in the software, digital information and education technology industries. This year’s awards recognize 68 categories of outstanding products and services. Collexis was one of five finalists in the Content Category, Best Medical and Health Information Product for their Knowledge Disease Dashboards. Shares fell by 4 cents to finish the week at $0.28.
CityView Corporation Limited (OTCBB: CTVWF), an exploration and development company, said that its recent evaluation of the Luachisse diamond concession data has revealed that the project is much further advanced than originally envisioned. It now appears that alluvial production could commence by the end of 2008 provided that advantage is taken of the imminent dry season in Angola and steps are taken to install a 120 – 250 tons per hour production plant. Shares dropped by $0.03, to close the week at $0.12.
Deer Valley Corp (OTCBB: DVLY), a company that through its subsidiary, Deer Valley Homebuilders, Inc., engages in the production, sale, and marketing of factory-built homes, filed its 2007 annual report last week. The report showed gross revenue of $63.3 million for the fiscal year 2007, as compared to $65.5 million in fiscal year 2006. Revenue for 2007 was less than that of 2006 primarily due to a reduced production schedule during the first quarter of 2007 reflecting the industry wide softness in demand for HUD Code housing units. The company also had $4.8 million in cash and cash equivalents as of December 31, 2007. The company earned $0.11 per diluted share, compared to a loss of $1.59 in the year earlier period. The 2006 loss included a non-cash charge for a preferred dividend. The stock finished the week unchanged at $0.95.
ProLink Holdings Corp. (OTCBB: PLKH), a leading provider of Global Positioning Satellite golf course management systems and digital out-of-home on-course advertising, announced that Ravenwood Golf Club now features the ProLink Solutions ProStar 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 increased by $0.02 for the week, to close at $0.49.
Smart Energy Solutions, Inc. (OTCBB: SMGY), a company that engages in the research and development, production, and distribution of Battery Brain, and OnGuard Dealer Services, LLC, entered into a Distributorship Agreement. Pursuant to the Agreement, OnGuard was appointed as the exclusive distributor of the Battery Brain Products to certain market segments in the 40 continental states. During the term of the Agreement, OnGuard shall purchase from the company Battery Brain products at agreed upon prices. Shares rose by $0.03, to finish the week at $0.25.
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 Payless ShoeSource, Inc., which operates Payless stores within the company’s wholly owned subsidiary, WiseBuys Stores, Inc., will continue to operate its Payless store-within-a-store concept after the WiseBuys stores are converted into Hackett’s. Seaway Valley acquired both WiseBuys Stores, Inc. and Patrick Hackett Hardware Company in 2007 and is merging the operations of the two retailers under the Hackett’s brand. After the store conversions, Hacketts will operate nine locations. The company also announced the final closing of and funding from the previously announced Wells Fargo inventory-based line of credit at its wholly owned subsidiary, Patrick Hackett Hardware Company. Hackett’s expects to immediately draw down approximately $2 million of the $5 million facility leaving excess capacity of around $3 million, which should be sufficient to fund Hackett’s working capital needs through 2008. The stock remained below $0.01 for the week.
On The Wires: Linux Gold Corp. (OTCBB: LNXGF), a company involved in exploration of mineral properties, announced that a new 43-101 technical report, for the Granite Mountain Property in western Alaska, and the consent of the author of the report, was filed February 7, 2008 on SEDAR (sedar.com). Deer Valley Corporation (OTC BB:DVLY) announced that it has hired Brad Bolding, a well known and highly respected sales executive in the factory built housing market.
SPECIAL SITUATIONS:
SeaMiles Limited (TSX VENTURE: SEE) $1.15
With the overwhelming success on Thursday of Visa’s IPO, we thought we would take a look at a much smaller participant in the space. Credit card companies have long struggled with coming up with new way to retain existing customers and to recruit new ones. Credit card companies took a cue from the airline industry that had preceded the financial industry in deregulation, and had met the new increase in competition with Airline Miles programs to encourage brand loyalty and repeat customers. However, adopting the airlines miles approach did not prove attractive to the whole consumer market. More options were needed as many consumers would not use their free miles and were interested in other forms of travel.
This left room for companies like SeaMiles to enter the industry by offering other travel alternatives. SeaMiles is North America’s new gold standard in cruise rewards programs. It is committed to recognizing and rewarding cruisers with SeaMiles that can be redeemed on any cruise line, at any time, with no fees, and no restrictions. In December of 2004, SeaMiles launched the Carnival Sea Miles MasterCard program, which has been a resounding success. It has already awarded over 2 billion SeaMiles to its current members.
For the nine months ended September, 2007, Seamiles had revenue of approximately $8.5 million (in Canadian dollars), up nearly 70% from the same period in fiscal 2006 and reduced its loss, before extraordinary items, to approximately $150,000, a substantial improvement compared to the same period in 2006 when the company lost $1.5 million. One catalyst for the improved results was the launch of a second Carnival SeaMiles credit card, this time the SeaMiles Visa Rewards Card. This generic card holds the same promise and has already generated a great deal of interest from cruise enthusiasts with membership growing on a daily basis.
The stock has been volatile, hitting a high of $2.50 in mid-July. Currently, it trades near its 52-week low, likely reflecting the current environment for microcap companies rather than specific corporate developments. The company continues to focus on growth and development and is considered one of the most successful cruise loyalty programs in existence today. With an experienced management team at the helm and an established name, the company should continue to dominate its niche market and its strong growth.
National Storm Management, Inc. (OTC: NSMG) $0.04
While the NCAA college basketball tournament has captured the attention of many this week, basketball fans and others may be aware that there was a college basketball conference tournament in Atlanta last week that was delayed and ultimately moved to another venue as a result of a tornado ripping a hole in the roof of the Georgia Dome. Statewide, storm damage was estimated at $250 million. This brings us to National Storm Management Inc., a national construction company founded in 2001 and headquartered in Glen Ellyn, Illinois providing storm restoration services in seven states. The company and its affiliates are recognized by all major insurance companies such as State Farm, Allstate, Farmers and others for storm related claims.
How significant could the Atlanta storm be for the company? In April, 2006 a severe hail storm hit Indianapolis. NSMG opened an office in the area and generated approximately $4 million in revenue from work in the area during a two-year period. The storm that hit Atlanta created a far greater level of damage, suggesting that the opportunity could be larger. The company is considering opening an office in the area to position itself for work in the area.
National Storm had revenue for the 2007 third quarter of approximately $2.2 million, and nine-month revenue of $6.1 million. The company’s operating affiliates include: ABC Exteriors (Illinois, Indiana and Kentucky); Pinnacle Roofing (Florida and Louisiana); WRS, Inc. (Minnesota); and First Class Roofing and Siding (Ohio), giving it a regional focus to disaster-recovery work. Except for its operations in Florida, the company relies heavily on subcontractors to perform essentially all physical restoration and off-season work. 2007 included few major storms, generating limited hurricane related activity for companies that focus on disaster work.
The stock reached a high of $1.58 in 2005, reflecting the very active hurricane season, but has declined since then, giving the company a market capitalization of less than $5 million, or well below one times 2007 revenue. Historically, shares of storm-related companies have traded higher as the hurricane season approaches, and weather forecasters begin to anticipate activity. National Storm has been no exception. Last year, shares surged as high as 30 cents in late May, more than doubling from levels a few months earlier. With the stock near all-time low levels, any kind of storm-related events could send it higher.
