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Commtouch Software Ltd. (CTCH) has yielded a 36.5% return for investors since the beginning of the year. 2006 was clearly the start of a positive turning point for this company. Very seldom does one encounter management teams that can make the turnaround in their business and pull their companies out of a crisis.

This is not to say that Commtouch is now a phenomenal business success, but the company has been managed wisely and efficiently and time is on its side. Its quarterly report on trends in spamming has long since become a global accepted source of information on this, and I will not be surprised at all if sooner or later Commtouch's reports become the standard monitoring tool worldwide. They won't make any money on it, but it will bring the company recognition from all corners of the globe, and every such report draws yet more visitors to its site and more investors on the hunt for opportunities.

Commtouch's founder and CEO, Gideon Mantel, has shown himself to be a good marketing executive and good manager. The company's latest report indicates that in the war waged by companies against spammers, the latter are gaining the upper hand. Between 85% to 95% of all email traffic circulating the web in the first quarter of 2007 was spam. Zombies have been spreading throughout the world rapidly, and have now been found in more than 100 countries.

The term zombie - which is defined in the dictionary as the 'living dead' - refers to a group of computers that is connected to the net, but whose owners are unaware that they are being used by spammers. These computers are used by spammers and distributors of viruses to run what are known in web slang as 'bots' which refers to computer programs that run automatically. These programs, when run on various networks, are known as botnets, and their proliferation poses a real danger to users, since they cause considerable disruption and the infections they cause are difficult to trace. Incidentally, the two most common categories that are most likely to carry infections are sex sites, followed in second place by spam links to sites with stock picks, an interesting and deadly combination.

Either way, I expect to see the revival continue both for the company itself and of course, the stock. I have been receiving a good many queries from investors worldwide about this company, which was once worth $1 billion when no one had heard of it and today, now that everyone has heard of it, is worth $123 million. I must stress here, however, that stocks like Commtouch currently represent a highly speculative investment, in which the economic side is not their strong point.

CTCH 1-yr chart

CTCH

Published originally by Globes [online], Israel business news - www.globes.co.il
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.

Source: Commtouch: A Speculative Stock With Strong Management