09/04/2006
VOLUME 253
Companies featured in the current edition of the newsletter: CDGT, CYTR, GNBT, HYTM, IMMG, RTK, UDTT, USAT
Stocks closed last week with all of the major averages at their best levels in three months following positive economic news. The Dow gained 180 points, pushing its year-to-date gain to 7%, while the S&P 500 rose nearly 16 points and is now up an even 5% for the year. The tech-heavy Nasdaq reversed its recent underperformance of the other indices as it gained almost 53 points to pare its year-to-date loss to just 0.6%. Meanwhile, the small-cap Russell 2000 was the best performer of the week with an increase of 22 points, or 3.2%, pushing its year-to-date gains to 7.2%.
Most of the news last week was bullish. Oil prices fell by more than $3 last week to close at $69.20. Also bullish on the inflation front was a small 0.1% gain in August hourly earnings after a rise of 0.5% in July and 0.4% in June. An uptrend in hourly earnings had raised concerns that wage growth would pressure companies to raise prices. These inflation numbers added to the growing conviction that the Fed may not raise rates further this year. Fed funds futures now assume less than a 20% chance of another rate hike before year-end. The economic numbers showed steady growth as second quarter real GDP was revised to show growth of 2.9% from a previously announced 2.5% which is consistent with the Fed’s goal of achieving a “soft landing.” The ISM survey of manufacturers slipped modestly to a still-healthy 54.5%. Consumer confidence increased in late August to 82.0 as gasoline prices fell. Meanwhile, construction spending slowed 1.2% and signed sales contracts for existing homes plunged 7%.
What should investors look for this week as many traders return to work after Labor Day? One of the more significant corporate events is likely to occur on Tuesday during this holiday-shortened week, when Applied Materials (NASDAQ: AMAT) holds an analyst meeting. On the earnings front, Pathmark Stores (NASDAQ: PTMK) will announce earnings on Wednesday morning, followed by home-builder Hovnanian Enterprises (NYSE: HOV) reporting results after the close. Thursday morning, logistics company UTi Worldwide (NASDAQ: UTIW) posts results, while after the bell, National Semiconductor Corporation (NYSE: NSM) releases earnings which, together with Applied Materials’ comments from earlier in the week, could influence the outlook for the semiconductor sector. On Friday, Parker-Hannifin (NYSE: PH) holds an analyst meeting.
The economic calendar will be relatively light this week. On Wednesday morning, Revised Productivity for Q2, August ISM Services and Weekly Energy Inventories will be reported, while the Fed’s Beige Book will be released later in the afternoon. Thursday will bring Weekly Jobless Claims along with July Wholesale Inventories. Meanwhile, Consumer Credit from July will be announced on Friday.
The conference schedule will be especially active this week. Citigroup holds its 13th Annual Global Technology Conference in a three-day event beginning Tuesday in New York. Additionally, Lehman Brothers holds a three-day CEO Energy Conference also beginning Tuesday in New York. Kaufman Brothers holds a two-day Investor Conference in New York beginning Wednesday. Roth Capital Partners holds a two-day New York Conference beginning Wednesday in Manhattan. Companies presenting include Hythiam, Inc. (NASDAQ: HYTM) on Wednesday at 2 p.m. and USA Technologies (OTCBB: USAT) at 3:30 p.m. Goldman Sachs holds a three-day Retailing Conference beginning Wednesday in New York.
Volume Alert: Shares of CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical company focused on developing products primarily in the area of small molecules and ribonucleic acid interference (RNAi), soared 37% on nearly 14 times average volume after the company announced that it had received $24.5 million as part of a royalty agreement with the privately-funded ALS Charitable Remainder Trust. The money will fund the drug development of a treatment for amyotrophic lateral sclerosis, or ALS, also known as Lou Gehrig’s disease. As part of the agreement, the ALS Charitable Remainder Trust will receive a 1% royalty payment from any worldwide sales of CYTR’s arimoclomol, which recently completed a Phase II clinical trial with the release of results expected early in the fourth quarter of 2006. Based upon the investment terms, it suggest the potential value of arimoclomol as an ALS treatment is approximately $2.5 billion, which is more than 20 times the current market capitalization of Cytrx. The deal, however, is non-dilutive to existing shareholders as the company did not sell any equity. The funding should enable the company to be able to complete a key late-stage trial for arimoclomol. The company also believes arimoclomol may show promise as a treatment for Huntington’s, Alzheimer’s and Parkinson’s diseases, as well as stroke and cystic fibrosis. The stock ended the week at $1.65, up 45 cents.
Rentech Inc. (AMEX: RTK), a developer of alternative energy sources, commented on the recently announced agreement between its technology licensee DKRW Advanced Fuels and Arch Coal, one of the largest coal producers in the United States, under which Arch acquired a 25% stake in DKRW. Arch has also agreed to invest $25 million in DRKW and it has entered into a new agreement whereby Arch and DKRW will explore potential reserves and project opportunities in two other coal basins. DRKW is developing an initial 10,000 barrel per day Wyoming coal-to-liquids (CTL) project that will utilize Rentech’s patented and proprietary synthetic fuels process. This agreement reflects the growing recognition by leading coal companies such as Peabody Energy and Arch Coal of the unique role that Rentech’s technology can play in developing a cost-effective alternative source of energy. It also creates the potential for the expansion of DKRW’s coal-to-liquids development with a significant partner who owns large coal reserves. Shares rose 19 cents to close at $5.15 and in the process break through $5, which represented a key level of resistance.
Generex Biotechnology Corporation (NASDAQ: GNBT), a leader in the area of buccal drug delivery, has been granted a new drug delivery patent in Mexico. This patent covers claims to the composition, process and methodologies for the delivery of macromolecules via the buccal cavity of the mouth and could help the company introduce its lead insulin product, Generex Oral-lyn, in this country of over 2 million diabetics. Overall, Generex currently holds a total of 78 patents worldwide, 20 of which are in US, and has another 62 patent applications pending around the world. Shares ended the week at $1.53, down 10 cents.
IMPART Media Group, Inc. (OTCBB: IMMG), an innovator in the creation of out-of-home digital advertising content and information network management, announced that it will begin offering ImpartQ Interactive (IQI), the latest addition to its Impart IQ product line. IQI elevates networked digital signage and kiosk information system applications by displaying rich interactive content, coupled with either customer or Impart provided infotainment programming to fully engage customers in out-of-home spaces. ImpartQ Interactive adds a new, in-house subscription services to IMPART’s quickly expanding, recurring revenue business model as the media experience continues to transcend from passive to interactive in out-of-home public spaces. Company’s management believes that its client base will expand exponentially as it continues to add to the robust feature offerings available with the IQ Box. Shares ended the week at $0.88, down 12 cents.
USA Technologies, Inc. (OTCBB: USAT), a developer of cashless vending and energy management products, continued to showcase its EnergyMiser product line to large potential customers last week as the company demonstrated to the Pennsylvania Government how the energy-saving line could save the state an estimated $56 million in energy costs annually. Although an agreement with Pennsylvania is yet to be signed, it is possible to speculate that in the near future the state may join other high-profile EnergyMiser customers such as Pepsi, US Military bases, Government agencies, major cities, 22 energy utilities and thousands of schools, colleges and universities. Shares ended the week at $7.40, unchanged.
China Digital Media Corporation (OTCBB: CDGT), a rapidly developing digital media company in China, entered into an agreement to acquire a minority ownership interest in Arable Media Limited, a Hong Kong registered company that specializes in the development of middleware software and applications for digital TV set-top-box and digital broadcasting system. CDGT will also become the exclusive distributor and wholesaler of Arable’s products and applications. Overall, this new relationship will enable CDGT to develop additional applications for its digital set-top-box which could provide new sources of revenue from existing customers. Shares ended the week at $0.92, down 1 cent.
Universal Detection Technology (OTCBB: UDTT), a developer of early-warning monitoring technologies to protect people from bioterrorism and other infectious health threats, announced that it plans to commercialize newly licensed technology from the California Institute of Technology into a Microbial Monitor for Hospitals. The technology is being developed by the Jet Propulsion Laboratory to serve as an indicator for spacecraft cleanliness and should be easily convertible to also measure cleanliness in a hospital environment where elevated microbial levels are a concern. With the recent increase in levels of hospital borne infections, the device would notify hospital officials of increased microbial levels so they can take necessary precautions to protect the patients. There is a huge potential market for a device such as this Microbial Monitor for Hospitals as according to the Center for Disease Control, hospital acquired infections lead to about 90,000 deaths annually in the US and add about $5 billion a year to the cost of patient care. The stock closed the week unchanged at $0.01.
