Companies featured in the current edition of the newsletter: CNLG, CVM, ENZ, GISV, GNBT, HYTM, ICLK, LPHC, MBND, PLKH, SRRY, TSX: SEE, TAGS, TKO, VYTR, XCR
During a historic week as U.S. voters elected the first minority President in the country’s history, the markets made their own history of a much more dubious sort, as the Dow experienced the largest two-day decline since the index’s inception. Overall, there were few places to hide last week as the market aggressively sold off following the election. The Dow lost 381 points for the week, extending its annual loss to 32.6%. The Nasdaq fared no better, losing nearly 74 points and increasing its year-to-date decline to 37.9%. The S&P dropped 38 points, equating to a yearly loss of 36.6%, while the Russell 2000 lost 32 points, giving it a 34.0% deficit for the year.
After rallying more than 300 points on Election Day, the Dow recorded its biggest two-day drop in the blue-chip average’s history on Wednesday and Thursday as the celebratory party was quickly over and investors’ attention turned back to the economic issues at hand. While the market experienced another rally on Friday, this whip-saw trading pattern may stem from hedge funds looking to raise cash as they face mounting redemptions. Meanwhile, the economy appears to be vulnerable as Wednesday’s ADP employment report estimated that 157,000 jobs were lost in the private sector in October, the largest decline since November 2002. Similarly, the U.S. auto industry is also fighting for its life as both Ford (NYSE: F) and General Motors (NYSE: GM) posted massive third quarter losses last week while rapidly burning through their cash reserves. Several other economic reports added to the selling pressure last week. In particular, September factory orders declined 2.5%, the October ISM Services Index at 44.4 slipped below 50.0, which is viewed as the dividing line between expansion and contraction, Q3 productivity slowed to a 1.1% growth rate from 3.6%, and continued jobless claims of 3.843 million were at their highest level since 1983. The slowing economy was further confirmed by Friday’s weak Employment Report, which showed that 240,000 jobs were lost for the month, with the Unemployment Rate rising to 6.5%.
For those looking for a ray of hope, it appears that investors may have already priced much of the bad news into the price of stocks, if earnings reports from three companies late last week were a barometer. Cisco (NASDAQ: CSCO), Disney (NYSE: DIS) and Qualcomm (NASDAQ: QCOM) each significantly lowered forecasts for the current quarter, yet each stock ended the week significantly above the level it was before the reports. This could be the kind of price action that allows investors to become more comfortable with putting new money to work.
What should investors look for this week? AIG (NYSE: AIG), Dish Network Corp. (NASDAQ: DISH), Sempra Energy (NYSE: SRE), and Tyson Foods (NYSE: TSN) are all expected to report earnings Monday morning, while Starbucks Corp. (NASDAQ: SBUX) will report results after the close. Tyco International (NYSE: TYC), TJX Companies (NYSE: TJX), and Liz Claiborne (NYSE: LIZ) are expected to announce earnings before the opening bell on Tuesday. Macy’s Inc. (NYSE: M), Thomson Reuters Corporation (NYSE: TRI), and Dr Pepper Snapple Group (NYSE: DPS) will announce numbers before the opening bell on Wednesday, followed by Applied Materials (NASDAQ: AMAT) and Computer Sciences (NYSE: CSC) after the close of business. On Thursday, expect announcements from Siemens AG (NYSE: SI) and Wal-Mart Stores (NYSE: WMT) before the open, followed by retailers Kohl’s (NYSE: KSS) and Nordstrom (NYSE: JWN) after the close. Finally, Agilent Technologies (NYSE: A) and J.C. Penney (NYSE: JCP) will report earnings on Friday morning.
The economic data expected next week will be light as financial futures and options markets will close early on Monday and bond markets will be closed on Tuesday in observation of Veterans Day. On Thursday, September Trade Balance and Weekly Initial Jobless Claims will be released at 8:30 a.m., followed by the Treasury Budget for October at 2:00 p.m. On Friday, look for October Retail Sales and October Import/Export Prices at 8:30 a.m., while Business Inventories for September and the Preliminary Michigan Sentiment Index for November should be released at 10:00 a.m.
Hythiam, Inc. (NASDAQ: HYTM), Generex Biotechnology (NASDAQ: GNBT), Vyteris , Inc. (OTCBB: VYTR) and Sancon Resources Recovery, Inc. (OTCBB: SRRY) are expected to present at the three-day Rodman & Renshaw Annual Global Investment Conference beginning Monday in New York. Additionally, Robert W. Baird will host its two-day Industrial Conference in Chicago starting on Tuesday. Also on Tuesday, Merrill Lynch kicks off its three-day Banking & Financial Services Conference in New York, while Credit Suisse hosts a three-day Healthcare Conference in Pnoenix. Meanwhile, the two-day Bank of America 2008 Energy Conference will commence in Key Biscayne, FL on Thursday.
Multiband Corporation, (NASDAQ: MBND), the nation’s largest DIRECTV Master System Operator for Multiple Dwelling Units, said in an 8k filing that it had taken another step towards greatly expanding its business via a merger with the privately-held DirecTECH Holding Company (DTHC) as the two companies entered into a revised agreement for Multiband to purchase 80% of the outstanding shares of all DTHC operating subsidiaries (except for Michigan Microtech, of which MBND previously purchased 51% in January 2008 and would now add an additional 29% stake), for a total sum of $33.9 million (to be paid as $1 million in cash and $32.9 million as a secured promissory note). The agreement is far more favorable for MBND than the previous agreement as it dramatically reduces potential dilution. Previously, DTHC’s shareholders would have owned a majority of the combined company. Multiband also intends to purchase the remaining 20% of all DTHC operating subsidiaries by December 31, 2009, once it obtains approval from its shareholders. This is a major acquisition for the company as combined revenue is expected to exceed $200 million and the combined company should generate significant operating efficiencies. Shares closed at $1.30, down 15 cents for the week.
Investors following the theory that insider buying portends well for a company’s prospects may wish to take a closer look at Conolog Corporation (NASDAQ: CNLG), an engineering and design company that provides digital signal processing solutions to global electric utilities, as the company’s Chairman and CEO has acquired nearly 150,000 shares in the open market over the past several weeks, representing over 5% of the company’s outstanding stock. Such insider buying has taken place at roughly the same time as Conolog announced that it has booked $398,000 in new orders during the month of October 2008. Previously, Conolog reported that it has booked $778,000 in new orders during August and September, resulting in a total of $1,176,000 in new orders being booked during the quarter. For comparison, total revenue was approximately $185,000 during last year’s quarter. Investors should also keep in mind that the company’s sales could expand even further once the new CM-100 multiplexer product is introduced by the end 2008. Shares ended the week at $0.42, up 2 cents.
CEL-SCI Corporation (AMEX: CVM), a company that engages in the research and development of drugs and vaccines used in the treatment of cancer, said last week it had expanded its exclusive licensing agreement for its cancer drug Multikine with Orient Europharma, a leading pharmaceutical company from Taiwan, to also cover South Korea, the Philippines, Australia and New Zealand. As part of this expanded agreement, Orient Europharma will invest $500,000 in CEL-SCI and fund a portion of the company’s global pivotal Phase III clinical trial of Multikine due to start in 2009 for first-line therapy of previously untreated head and neck cancer patients. Orient Europharma’s clinical group will also conduct part of the clinical study in its territory and will be responsible for registering and marketing the product there. Following Multikine’s approval, revenues will be split between CEL-SCI, which will manufacture the product, and Orient Europharma, which will handle the marketing in the region. Shares lost 2 cents last week to close at $0.27.
Enzo Biochem (NYSE: ENZ), a leading biotechnology company, presented its research on understanding the role of Natural Killer cells (NKT cells) in autoimmunity and cancer at the Liver Conference sponsored by the American Society for the Study of Liver Diseases. Enzo has long been involved in the development of molecules, such as glycosylceramides, that can influence NKT cells and their effect on modulation of the immune response. In particular, the company’s scientists have concluded that glycosylceramides can be effective “rectifiers” of deranged immune conditions, such as autoimmune colitis and hepatocarcinoma. Shares ended the week at $5.98, up 22 cents.
Drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT) submitted a profile of its proprietary oral insulin spray product, Generex Oral-lyn, to the Ministry of Health in Syria for registration in the country. It is estimated that among Syria’s population of 20 million, between 3 million and 3.5 million people have diabetes; and the company anticipates receiving registration in the country before the end of 2009. Overall, the company’s Generex Oral-lyn product continues to receive positive publicity both in the U.S, and abroad. The innovative product was featured last week at the 2nd International Diabetes Federation Regional MENA Diabetes Conference and 17th Annual Meeting of the Syrian Diabetes Association. This international conference brought together 400 doctors and endocrinologists from the Middle East and North Africa, whose population suffers from an average diabetes rate of over 20%. The stock lost 3 cents last week to close at $0.35.
Healthcare services company Hythiam, Inc. (NASDAQ: HYTM) reported results for its third quarter ended September 30, 2008 with consolidated revenue of $9.7 million, which includes $8.4 million in revenue from CompCare’s operations and $1.3 million in revenue from Hythiam’s healthcare services business. While consolidated revenue declined from $12.0 million in the third quarter of 2007, which included $9.8 million in revenue from CompCare’s operations and $2.2 million in healthcare services revenue, this decline was a direct result of the company’s decision to streamline operations by reducing operating costs to focus on managed care opportunities. More significantly, the company said that it expected to announce two contracts with healthcare providers by the end of the year for Catasys, its disease management offering which incorporates PROMETA. The company previously announced that at 3 million covered lives, it anticipates reaching operational profitability within its healthcare services business. These agreements would put the company ahead of schedule for its strategic goal of 3 million covered lives by the end of 2009. In the meantime, the company ended Q3 with a consolidated cash position of $15.5 million. Management also said it expected to release ata before the end of the year from several key studies of PROMETA which could help broaden adoption by payors, including expected results of Dr. Ling’s study of PROMETA’s effectiveness in treating methamphetamine addiction, Dr. Volpicelli’s study of alcoholism, and Dr. Anton’s study that combines expected use and cravings data with functional MRI images of the brain. The stock rose 2 cents last week to finish at $0.66.
interCLICK, Inc. (OTCBB: ICLK), the fastest growing advertising network in the US according to comScore, exceeded its previously announced guidance when the company reported results for its Q3 ended September 30, 2008 with revenue of $5.76 million, representing a 65% increase from a year-ago period and a 23.2% sequential quarterly increase from Q2. Meanwhile, gross margin for the quarter was 31.1%, compared to 27% for Q2 of 2008. The company attributes its strong performance to high client retention, successful delivery of higher quality brand campaigns and improved supply chain management. interCLICK also reiterated its Q4 and full-year 2008 guidance with revenue expected to exceed $6.5 million for the final quarter and at least $20.5 million for the full year. Looking forward to 2009, the company expects revenue to grow by at least 60% over 2008 levels. interCLICK expects to continue to significantly outperform its competitors as the company gains market share even during the currently challenging environment for advertising companies. Shares ended the week at $0.97, down 8 cents.
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, said last week it had added two more upscale golf courses to its already impressive roster of famous golf courses to feature its GPS systems. Cedar Creek Golf Course of San Antonio, TX and Amelia River Golf Club of Amelia Island, FL have signed on to become ProLink’s latest partners. Both courses will now be able to help its golfers navigate the courses more easily, while enjoying additional revenue streams via the system’s ability to place food and beverage orders and participation in advertising programs. With so many upscale courses and resorts among ProLink’s partners, advertisers can easily reach this very affluent audience through the company’s on-course advertisement program. Shares ended the week at $0.18, up 6 cents.
Earnings Preview: Tarrant Apparel Group (NASDAQ: TAGS), a design and sourcing company for private label and private brand casual apparel, is scheduled to announce Q3 results for the period ended September 30, 2008 on Monday after the market close and hold a conference call shortly afterwards. While the company is likely to continue to face many of the challenges recently hitting retailers due to sluggish consumer spending, investors are likely to be more focused on what the company says about the previously announced management buyout. The company previously reported net sales of $51.3 million in the second quarter of 2008, a 14.6% decrease compared to the same period in 2007. Last quarter the company said its operating results were impacted by the bankruptcy of Mervyn’s and the poor retail environment. Shares ended the week at $0.51, up 1 cent.
Earnings Preview: Telkonet, Inc. (AMEX: TKO), the leading provider of innovative, centrally managed solutions for integrated energy management, networking, building automation and proactive support services, is scheduled to report third quarter results for the period ended September 30, 2008 on Monday after the market closes and hold a conference call shortly afterwards. The company is expected to continue to grow revenue and reduce costs following a strong Q2 when it had revenue of $5.6 million, an increase of 53% compared to 2007 second quarter, and gross margins of 34%, compared to the prior-year period of 18%, and 23% in the first quarter 2008. The company continues to see strong demand for its solutions from the energy management and hospitality markets, where it has excellent visibility. There appears to be a growing awareness among the hospitality industry of the role that Telkonet’s solutions can play in lowering energy costs. The company also recently announced that it is reducing its corporate headcount by approximately 5% as part of its strategic long-range plan to streamline operations. Telkonet expects this recent action to result in estimated annualized cost savings of approximately $1.2 million per year, which should allow the company to achieve its previously stated goal of operating cash flow break-even by the end of 2008. Shares fell by $0.08 to finish the week at $0.16.
Medical device company Xcorporeal, Inc. (AMEX: XCR) received indsustry publicity last week when the company presented two posters at The American Society of Nephrology’s Renal Week 2008, entitled, “The Wearable Artificial Kidney Removes and Absorbs Uric Acid, Hippuric Acid, Indoxyl Sulphate and Indole Acetic Acid” and “The Push Pull, Double Pulsation Flow in Opposite Phase Improves Ultrafiltration and Convective Transport across the Dialyzer Membrane in the Wearable Artificial Kidney.” Both of these presentations continue to demonstrate the feasibility of a fully wearable hemodialysis device with the potential to effectively remove large molecule toxins. Additionally, an article detailing the company’s Wearable Artificial Kidney entitled “A Wearable Artificial Kidney, Dream or Reality” was published in the November 2008 issue of Nature Nephrology and may be accessed on the web. Shares ended the week at $0.30, down 4 cents.
SeaMiles Limited (TSX: SEE), North America’s premier cruise loyalty provider, announced financial results for its third quarter ended September 30, 2008. Revenue was $3.2 million, a 38% increase from last year’s period. The increase in revenue was primarily a result of the implementation of management’s strategic and operational initiatives to focus on its cruise loyalty programs now that that the company has divested itself of all non-cruise related businesses. The company also reported net income from continuing operations of $645,109, or $0.05 per share, for the quarter versus a loss of nearly $156,000 during 2007’s Q3. Despite current economic uncertainty, SeaMiles has now demonstrated strong operational momentum and appears to be on track to continue its year over year growth. SeaMiles cardholders have complete flexibility when using their points, with no blackouts or restrictions the card allows customer to redeem their points with whichever cruise line they choose. Shares ended the week at $1.60, up 40 cents.
On the Wires: LocatePLUS Holdings Corp. (OTC: LPHC) appointed current board member Christian Williamson as Chairman of the Board. James Fields will remain President and CEO of the company and will continue serving as a member of the Board of Directors while Richard Nagle resigned from the Board citing other commitments and obligations.
SPECIAL SITUATIONS:
Global Investor Services, Inc. (OTCBB: GISV) $0.10
As individual investors become more dissatisfied with the service they are getting from traditional financial services firms, many are turning to self education as they seek to learn how to invest their own portfolios. Furthermore, the fact that many people can no longer count on defined benefit retirement plans from their employers and the current uncertainty surrounding the future of Social Security has lead to a proliferation of self-directed investing. While there have always been a number of publications, such as books and magazines, aimed at helping the aforementioned people learn the basics of investing, a brand new industry has recently emerged that combines the efficiencies of the internet with the benefits of face-to-face learning in order to empower individual investors like never before. This new Online Investor Education and Services Industry has experienced tremendous growth over the past decade and appears to be well positioned to benefit from the recent implosion of the global financial services industry.
This is where Global Investor Services, Inc. comes in. The company is a provider of financial education via state of the art online delivery modules. GISV’s target market is comprised of a large base of entry level investors, active investors in the online brokerage sector and higher-end users of financial information, services and financial news. Meanwhile, GISV has a complete curriculum of learning modules, podcasts, webinars and webisodes that can be delivered remotely via the Internet. As a result, individual investors are able to master their studies of the market anytime anywhere.
GISV focuses on teaching its students a complete investing methodology that focuses on searching for an investment, industry group analysis, fundamental analysis, technical analysis, and portfolio management. The objective is to provide a complete investor education experience for both beginning and experienced investors and to help these individuals better understand the investment decision process. This process allows GISV ample opportunities to up-sell its products as initially a student may sign up for an introductory class, but upon completion may be interested in taking a more advanced class. To this end, the company’s customer management system follows every student at all levels through the use of surveys, competency assessments, learning assignments, hotline, coaching and mentoring.
Similar to most businesses, customer acquisition is the key. In this case, GISV works with marketing partners who attract customers by offering free or low-cost introductory seminars which then allows for up-sell opportunities to a complete online education curriculum and expanded investor services. The major benefit of this business model is that the initial cost of attracting a new customer is borne entirely by the marketing partner while future revenue is split between the partner and GISV.
The company’s longer term goals include the expansion to other markets beyond the United States. The comprehensive investor education curriculum and related investor services will be marketed and delivered on-line in target markets principally via joint venture arrangements in other countries.
Investors should also note that GISV is being lead by a veteran of the Investor Education Industry as Nick Mauro, the company’s CEO, has previously served as the head of Edutrades, another investor education company, between 2002 and 2006 during which time that company’s revenue has increased from $2 million to over $100 million. Mr. Maturo has extensive knowledge, experience and contacts within the Investor Education Industry and the Online Financial sector the give him a significant advantage in negotiating partner deals and in making potential acquisitions.
For astute early-stage investors, GISV may represent a remarkable opportunity as the company’s goal is to replicate and exceed the growth achieved at Edutrades during the aforementioned 5-year period. At only $0.10 per share, there could be significant upside with GISV if the company is able to deliver on its business model.
