We have recently become used to all kinds of dour predictions being treated as established fact, as though the only thing to do is to wait for them to be realized. So far the only prophecy of doom to become reality is that of commodities specialist Jim Rogers, who predicted two years ago that we would see oil prices reaching $100 a barrel. All that is left for us to do now is to wait for a severe recession in the US, and for the dollar to plunge to further depths.
It was just last week that someone at the 2007 "Globes" Israel Business Conference predicted that the dollar would fall by a further 60%, but it has already rebounded considerably since then. To judge by Monday's headlines, we should even be rushing out to invest in the dollar.
To put it differently, a dire prophecy for 2008 which just seven days ago was a fait accompli has now evaporated into thin air for the time being. It will be interesting to see what happens in the equities markets, once the prediction that the US is on the verge of a severe recession becomes another prophecy forgotten as though it had never been within a few months. That, I believe, is what will happen.
As for the macroeconomic outlook, I always prefer the views of the managers of the big corporations in the US over those of the economists, be they former central bank governors or other experts. In recent weeks I have heard comments from two managers of Dow Jones-list companies, both from the industry sector, who believe, based on what they have seen and heard on the ground, that there will not be a recession. One was General Electric Co. (GE) CEO Jeff Immelt who has just reiterated the company’s guidance for double digit earnings growth of at least 10% for 2008. The other is United Technologies Corp. (UTX) CEO George David who was interviewed on CNBC television last Friday.
Attunity - time for an upside?
It's been some time since I last wrote about enterprise software company Attunity (ATTU), one of the most disappointing stocks in my portfolio, tracked by "Globes," which has managed this year to slump to a new multiyear low of $0.36, a price which I never dreamed it could reach even in the worst of scenarios.
Its management and owners never dreamed it would fall this low either. Had I taken tax considerations into account, I would have offloaded the stock without further delay and offset the resulting heavy loss against the substantial profit I made recently on the sale of stocks such as Omrix Biopharmaceuticals Ltd. (OMRI), and Sigma Designs Inc. (SIGM), thereby greatly reducing my tax liability.
I believe this tax issue accounts for part of the pressure Attunity has come under of late, due to the considerable temptation for those people that have made profits on sell-offs of other stocks. Attunity started 2007 at $1.35, almost four times its current price. For reasons of business development and others, I am placing Attunity at the top of my list of stocks that have a very good upside potential, either at the start of the new year, or even beforehand, because of the famous "January Effect."
The "January Effect" has been all but forgotten in recent years since it has shifted over time, and has been appearing before the end of the year. This year, as a result of the exceptionally acute credit crisis, the "January Effect" could resurface in its classic format. In other words, investors who sold shares before the year end for tax reasons, then buy back certain stocks they wish to continue holding, because they still believe in the company's prospects over the longer term. The authorities in the US insist on a 30 day interval between a sale and purchase by the same investor, which means that most purchases are made in January.
Getting back to the main issue, Attunity CEO Aki Ratner promised in the company's third quarter report that it would move to operating profitability in the first quarter of 2008. I assume that this unequivocal statement is backed up by orders the company has already received, and others that will follow in the first quarter of 2008.
Considering this, and the cost cutting moves that have already been introduced, I am convinced that Attunity's share will start heading north as the date for the first quarter report approaches, since although the company has been letting investors down for years, it has never issued guidance as unequivocal as this.
On December 31, Attunity will hold its annual shareholders meeting, at which it will seek its shareholders' approval in principle for an eight for one stock split next year, as well as approval to raise a further $3 million in an issue of convertible notes and warrants. I know from my experience with companies whose shares sink to less than $1 and who try to save themselves from the cruel fate of being delisted from Nasdaq, that the reverse split trick usually doesn't work, and the stock invariably collapses yet again.
This will work only if there is, at the same time, a U-turn in the company's business that will help the share maintain a positive momentum, as was the case five years ago with Orckit Communications Ltd. (ORCT), which made a five-for-one reverse split on the eve of its massive contract win Japanese telecommunications infrastructure company KDDI Corp .
I believe that the Attunity management is hoping it will not have to fall back on chicanery such as a reverse split, and that the stock will rebound to a price higher than $1 on the basis of announcements of contract wins and a likely switch to operating profitability.
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.