Companies featured in this edition of the newsletter: ACTC, CBAI, CNLG, ESYM, GERS, IWEB, PHC, PSTI, SRRY, SVUL
Markets extended their gains into yet another week, spurred on by strength in the financial sector resulting from the announcement of data from the government stress test on banks and more positive economic data suggesting that recessionary pressures may finally be lifting. All told, the Dow managed to close up 362, gaining 4.4% to close at 8574, trimming its YTD losses to 2.3%. The Nasdaq underperformed the rest of the major indices on the week, closing up 1.2% at 1739, but still holds a commanding 10.3% gain on the year. The S&P 500 and Russell 2000 also managed to finish in positive territory, posting gains of 5.9% and 5.1% respectively, bringing them to a 2.9% and 2.5% gain on the year.
The financial sector was once again in the spotlight this week, as investors poured back into financials with reckless abandon, sending the sector surging 23% on the week following results of the government stress tests which seemed to signal to investors that the sector has reached its bottom and is once again a safe place to invest. Results of the tests showed that 10 of the 19 banks tested need to raise capital; of the big banks tested, Wells Fargo, Morgan Stanley and Citigroup have already taken steps to raise the additional capital required by the tests through a combination of stock and debt offerings that should serve to shore up capital.
Economic news on the week also served to stoke investor fervor as there are signs that both housing markets and employment markets are in recovery mode. Pending Home Sales came in at better than expected levels in March while Construction Spending also managed to best expectations, suggesting that a recovery is in progress in the housing market. ADP Employment figures of job losses of 491,000 exceeded expectations of 645,000 jobs being shed, but there is still a ways to go before unemployment figures return to their pre-downturn levels. While things are far from settled, at this point it appears that investors are willing to take any positive developments as a signal to return to the market.
What should investors look for this week? With earnings season and the stress tests in the rearview mirror, economic data will most likely return to the forefront of investors’ attention as Wall St. continues to seek out signs that the economy has started to bottom.
Earnings season is behind, but look for reports from Fannie Mae (NYSE: FNM) Monday before the bell, followed by Macy’s (NYSE: M) Wednesday morning. Sony (NYSE: SNE) and Wal-Mart (NYSE: WMT) report before the bell Thursday with JC Penney (NYSE: JCP) rounding out the week Friday after the close.
Economic releases for the week begin with March trade balance data due out at 8:30am Tuesday followed by the Treasury Budget for April at 2:00 p.m. On Wednesday, look for Import and Export prices, and Retail Sales, all for April at 8:30 a.m. followed by Business Inventories for March at 10:00am and weekly crude inventories at 10:30 a.m. On Thursday, Core PPI, and PPI for April will be released together with weekly initial jobless claims at 8:30 a.m. On Friday, CPI and Core CPI for April and the Empire Manufacturing Index for May will be released at 8:30 am followed by Net Long-term TIC Flows at 9:00am, with Capacity Utilization and Industrial Production for April due out at 9:15 a.m. The week wraps up with Preliminary Michigan Sentiment figures for May at 9:55 a.m.
The conference schedule picks up this week with the end of earnings season. On Monday, the two day Bank of America Securities Healthcare Conference begins in New York, as does the Hard Assets Conference. Tuesday will be a busy day for conferences, as the two-day UBS Global Financial Services Conference begins in New York, as does the two-day Bank of America and Merrill Lynch Education & Business Services One on One Forum. The Credit Suisse Basic Materials Conference which is being held in Boston also begins Tuesday, along with the UBS Industrials Conference in Chicago. Tuesday rounds out with the Merrill Lynch Global Pharmaceutical, Biotechnology & Medical Device Conference in New York and the Credit Suisse Financials one-on-one Conference which is also being held in New York. The week finishes up with Goldman Sachs hosting its Consumer Products Conference on Thursday in New York.
Volume Alert: Shares of Pioneer Behavioral Health (AMEX: PHC), a leading provider of inpatient and outpatient behavioral health services, surged 33% on Friday on more than 8 times average volume, just days before the company is scheduled to release results for its third fiscal quarter ended March 31, 2009. The company will issue results on Wednesday before the bell. The company’s results during its current fiscal year have been adversely impacted by startup costs at two new facilities, which opened earlier this year and are expected to contribute significantly to revenue over the balance of the calendar year as patient enrollment increases. PHC is also awaiting CMS certification at one of the facilities, which could increase utilization significantly. During the second fiscal quarter, the company managed to generate revenue of $11 million. Income from continuing operations during Q2’09 was a loss of $843,000, as compared to income of $834,000 in the same period a year ago. The loss included more than $790,000 in startup losses related to the company’s Seven Hills Behavioral Institute and approximately $307,000 from startup expenses at Capstone Academy. The recently completed sale of PHC’s Pivotal Research Centers to Premier Research Arizona, LLC, during the third fiscal quarter for $5 million is expected to significantly improve the company’s balance sheet in coming quarters as it will allow the company to refocus its assets on their faster growing core business of providing behavioral healthcare services. Shares gained thirty cents on the week to close at $1.20.
Conolog Corporation (NASDAQ: CNLG), an engineering and design company that provides digital signal processing solutions to global electric utilities, announced last week that the company has received orders totaling over $1.1 million for the nine months ended April 30, 2009. The increased revenue generated from sales is most readily attributed to organic growth resulting from expansion into new markets in South America and Europe which the company expects to continue through increased international marketing efforts. Shares remained unchanged on the week at $1.87.
Pluristem Therapeutics (NASDAQ: PSTI) , a company engaged in developing regenerative therapies from stem cells derived from the placenta, announced last week that the Duke Medical Center in Durham, North Carolina will serve as a clinical site for the company’s phase I clinical trial involving PLX-PAD for patients with critical limb ischemia. In related news last week, the company also announced that it has entered into definitive agreements with two institutional investors to sell common stock and warrants valued at $1.3 million. The deal is expected to close on or about the 11th of May 2009, with proceeds from the sale to be used towards the upcoming clinical trials of PLX-PAD. Shares lost twenty cents on the week to close at $1.32.
Stem cell company Advanced Cell Technology, Inc. (OTC: ACTC) took a significant step towards relisting on the Over-the-Counter Bulletin Board when it filed its financial statements for the second and third quarters of 2008. The company is attempting to become current in its filings so that it can relist on the OTCBB. The company needs to file its 2008 fourth quarter and 2009 first quarter statements, in order to become fully reporting. Shares ended the week at $0.098, unchanged.
Cord Blood America, Inc. (OTCBB: CBAI), an umbilical cord blood stem cell preservation company focused on bringing the life saving potential of stem cells to families nationwide and internationally, announced last week that it has begun researching the possibility of either purchasing or building its own secure cryogenic stem cell bank for the storage of multiple stem cell products including umbilical cord blood stem cells. By procuring laboratory space, the company expects to be able to generate supplementary sources of income through expanding the types of cells that can be stored to include adipose tissue and peripheral blood stem cells. Cord Blood sees the new proposal as an important strategic step towards growing to the size and position which they hope to achieve in the future. Shares remained unchanged at under a penny on the week.
Earnings preview: IceWeb (OTCBB: IWEB), a storage technology company specializing in Geographic Information Systems (GIS) that provides services to bureaucratic and corporate organizations, is scheduled to report earnings for its second fiscal quarter ended March 31, 2009 this week. For the first fiscal quarter, IWEB posted revenue totaling $1.7 million compared to $4.2 million for the same period in 2008, reflecting the company’s transition from a reseller of low-margin data products to one offering higher margin proprietary storage solutions. The company, in pre-announcing Q2 results said that it expected to generate the highest EBITDA in its history. Reflecting the transition to sales of proprietary products, the Company said it expects gross margins to exceed 40%, compared to 27% in the first quarter. The company also said it has improved its balance sheet as a result of the divestiture of its IceWEB Solutions Group, Inc. (VA) subsidiary, which is expected to significantly reduce liabilities and indebtedness. Shares gained a half cent on the week to close at $0.075.
Earnings Preview: Sancon Resources Recovery (OTCBB: SRRY), a rapidly growing environmental services and waste recycling company, with operations in both China and Australia, is expected to release results for its first fiscal quarter ended March 31, 2009 this week. During the ’08 fiscal year, Sancon managed to report significant growth and profitability, as evidenced by their 166% growth in revenue to $12.7 million in ’08 from $4.78 million in 2007. Gross profit increased 324% to $5.95 million in 2008 from $1.4 million in 2007, due mostly to explosive growth in the company’s high margin Waste Management Services. EBITDA for the period increased to $1.65 million from $0.02 in the previous year, while ’08 net income was $1.7 million or $0.08 per share, compared to a net loss of $0.17 million in ’07. Investors will most likely be concerned with the company’s ability to maintain profitability in the face of the global economic downturn. Shares gained eight cents on the week to close at $0.30.
Steel Vault (OTCBB: SVUL) an emerging provider of identity security products and services, reported subscriber growth of 70% month over month for its recently launched subsidiary, NationalCreditReport.com. The company plans on continuing to implement their strategy of cost effectively acquiring new customers while providing existing members with valuable products and outstanding customer service. NationalCreditReport.com specializes in providing consumers with accurate, complete and easy-to-understand credit reporting and monitoring services. Shares lost a penny on the week to close at $0.34.
Volume Alert: Shares of EcoSystem Corp. (OTCBB: ESYM), a company innovating industrial-scale applications of bioreactor technology that are designed to resolve compelling ecological challenges while producing value added carbon neutral products, surged 177% on over 2,000 times average volume following an announcement that the company has executed a management services agreement with Global Ethanol, LLC to provide corporate and plant management services to the company. The move is part of the company’s strategic plan to acquire operational renewable energy projects that serve as compliments to their own technology development efforts and should serve to significantly accelerate commercialization of their clean technology efforts. The agreement with Global brings existing operational expertise and commodities management infrastructure that will be an integral part of any future acquisitions that EcoSystem enters into. Shares ended the week at $0.0025, up 177%.
Volume Alert: Shares of Greenshift (OTCBB: GERS), a company that develops and commercializes clean technologies that facilitate the efficient use of natural resources, rocketed 256% on over 2,000 times average volume last week following the news that the company was awarded patent protection from the US patent office for its proprietary corn oil extraction technologies. The company also announced last week that the US FDA has included Greenshift’s technological capabilities in its new projections on the potential contribution of corn ethanol to the renewable fuels industry. GreenShift’s corn oil extraction technologies make possible the production of biodiesel from inedible corn oil, a previously untapped feedstock entrained in the distillers’ grain co-product of corn ethanol production. This increases the yield of biofuel from corn by 7% while reducing the amount of fossil fuels used in the corn ethanol production process by up to 10%. Shares remained unchanged at less than a penny on the week. Shares ended trading at $0.0082, up 256% on the week.
