James Levy's  Instablog

 (CORRECTED VERSION)

As an equity investor who is very doubtful of the underlying health of our government stimulus addicted economy, my central focus now is to find fast growing companies that can build shareholder value even if the overall market declines. I believe that I have found one such company in NanoLogix (NNLX.pk)

I came across this company while researching a previous article on another producer of medical testing kits, Trinity Biotech (TRIB). Of course, I was skeptical when I saw that the company was listed on the OTC section of the pinksheets, and had a total market capitalization of less than 50 million dollars. However, after several weeks of due diligence (including purchasing the BioNanoPore (BNP) UltraFast test kit myself) I am now sufficiently confident to recommend that other microcap investors consider investing in this share as well.

NanoLogix has applied nanotechnology to radically improve the age-old Petri dish used for the detection and identification of microorganisms. This is a major breakthrough in the new field of rapid diagnostics.
 
To quote Bret T. Barnhizer, NanoLogix´s well respected and investor friendly President and CEO,


 ¨¨(Our BioNanoPore technogy does)  not change the rate of growth.  We make it possible to see microbial growth earlier.  BNP enables the microbes to have a platform in which to grow.  The BNP membrane is then transfered from the growth agar to the staining agar.  Within a few minutes you can see the microcolonies that have formed on the BNP membrane.

Prior to BNP there was no way to view microcolony growth.  The microcolonies exhibit the same characteristics as the standard growth colony which would then be seen in 24 to 72 hrs+ with standard petri technology. ¨¨

 

 The benefits of Ultra-Fast diagnostics are far-reaching:

• Ultra-Fast diagnostics allow researchers in the lab to test for potentially pathogenic agents faster and develop effective countermeasures more rapidly and economically. This quality presents exciting opportunities in the pharmaceutical design process. 

• More effective drug treatments can begin when an infectious disease is identified at an early stage. The spread of infectious disease may be reduced by earlier intervention. 

• In combat theaters and homeland security settings, the presence of specific pathogens can be detected closer to the epicenter of release.

• Industrial production – of food, beverage, drugs, or beauty products - can be paralyzed by microbial contamination.  Ultra-Fast diagnostics can help minimize the impact by limiting the spread of spoiled product.

The volume of Petri dishes used for traditional tests is millions per day worldwide. NanoLogix anticipates that the BNP™ Ultra-Fast technology will capture a portion of that market. 

NanoLogix has received notification from New Brunswick Scientific of a November 20th shipping date for ordered production equipment for its clean room production facility at the company’s Hubbard, Ohio headquarters. This order consists of four machines for production of BNP rapid-detection kits and is anticipated to be the first of many for kit production.

I would encourage any investor interested in this share to engage in their own due diligence, beginning first at the company´s excellent website (www.nanologix.com)
where there is a wealth of independent research papers which validate the company´s claims concerning the advance in ultra-fast diagnostics with Bio Nano Pore technology.

 DISCLOSURE: The author holds a substantial long position in NanoLogix common shares.

 

 

 

 

Trinity Biotech (TRIB) is a U.S. listed Irish company which develops, manufactures and sells medical diagnostic products. These products are both laboratory-based tests and point-of-care diagnostics, which are administered and read in the presence of the patient. Its clinical laboratory portfolio includes instruments and assays for diagnosing blood disorders, infectious diseases and diabetes. In the point-of-care market, the company primarily sells  tests for diagnosing HIV and other conditions at testing centers, public health facilities, and hospitals.

Though a small company with approximately $130 million in annual sales, Trinity is a global operation with manufacturing facilities in its native Ireland as well as in Germany, Sweden and the United States. Trinity offers its customers (which include the World Health Organization and the Centers for Disease Control) a portfolio of over five hundred products which are sold in over 80 countries though its own sales force as well as a network of distributors and strategic partners. .

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Teradyne is the world´s leading supplier of automatic test equipment used by the semiconductor and telecommunications industries.  This Massachusetts based company is positioned at a key juncture of the ongoing electronics revolution, including wireless devices of all kinds. Teradyne will declare earnings on July 29th. The consensus earnings are $-0.24, with a high and low of $-0.21 and $-0.28, respectively. At Sector Alpha, we believe that the current price of $8 and market capitalization of under $1.4 billion represents an attractive entry point for investors. Here´s why:

1)  Teradyne is an excellent company with very experienced management which has survived and thrived through many economic cycles since the company was founded in 1960. Under the trying circumstances of  2008, the company gained market share from its competitors for the third year in a row. Management  moved very quickly with cost control measures in response to the huge reduction in demand for semiconductors and semiconductor testing equipment in the 4th quarter of 2008 and first quarter of 2009. As a result of these measures and recent signs of improvement in semiconductor demand,  the company is expected to return to full year profitability in 2010.

2) Teradyne is leveraged play on the semiconductor cycle, which is now turning up. When the Philadelphia Semiconductor Index (SOX)  fell off a cliff in the the second half of 2008, Teradyne fell further. Now that the this index is recovering, Teradyne is recovering faster.  Standard & Poors rates the company as a strong buy, with a price objective of $10.

3) Teradyne is a emerging market play with first class US management and transparency. Teradyne gets the vast majority of its revenue from outside of the US, with the emerging markets of Asia representing and ever increasing proportion of sales. As hundreds of millions of new consumers in these companies reach the point where they can afford their first mobile phone or personal computer, Teradyne´s high value added testing services will be as essential as ever for the manufacturers of the chips which are at the heart of all of these devices.

4) Terradyne is followed extensively by a large number of top technology analysts, a majority of which now rate the share as a  ¨HOLD¨. These research departments will upgrade their opinions of Teradyne when the semiconductor cycle has further consolidated its recent improvement, which unfortunately will be only after the share has further appreciated. We are purchasing Teradyne now before these upgrades are announced, and long before the share is ¨priced for perfection¨ with a strong semiconductor cycle again in full swing.  

Disclosure: The author holds a long position in Teradyne common shares.

 

Qwest Communications International  (Q) provides long-distance, wireless and other telecommunications services within its 14-state service area in the Midwest and Rocky Mountains regions. The company also operates a national fiber optic cable network. Qwest will announce earnings on July 29th. The consensus earnings are $0.09, with a high and low of $0.11 and $0.08, respectively. The mean estimate has not changed significantly as the end of the quarter nears.

Qwest is an excellent dividend play. At the current share price, Qwest offers a dividend yield of approximately 8%. Most analysts, including Standard & Poors, believe that Qwest generates sufficient cash flow to support its dividend policy as well as capital spending to defend its market share in this highly competitive sector. Investors often underestimate the importance of dividend returns to long term investing success. With this dividend, Qwest is giving investors significant quarterly cash payments while they await events that could drive future stock price appreciation.  Among these potential events are the following:

1) Qwest will likely sell its long distance network at a future time. While the company has not issued official information on this matter, press reports have indicated that the company values this asset at $2 to $3 billion, while current bids in the midst of the credit crisis are only in the $1 billion area. For a company with a capitalization of less than $7 billion, a future sale of the long distance network at a price closer to the valuation sought by Qwest could result in a significant increase in the share price.

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Amkor is a global leader in semiconductor assembly and testing services. The company offers both semiconductor companies and Original Equipment Manufacturers a complete set of microelectronic design and manufacturing services on an outsourcing contract basis, and counts many of the world´s leading electronics and semiconductor companies among its more than 200 customers. A public company since 1998, this share came to my attention when it was featured among other  ¨Phoenix¨ candidates who might rise from the ashes of a severely depressed stock price after excessively leveraging their balance sheet. See more on this in an  excellent article by Seeking Alpha contributor Cam Hui on Feb. 24, 2009,  ¨ Are Phoenix Stocks Getting Ready to Rise? ¨.

In the case of Amkor Technologies, the share was at only $2 on February 24th, and is now trading at $6. This Phoenix has risen, and we believe it will fly much further in the coming quarters, as the current price does not fully reflect the value of this company. Here are our reasons:

1) Earnings Improvement, return to profitability: Amkor  earnings will be announced July 29th. The consensus earnings are $-0.01, with a high and low of $0.00 and $-0.04, respectively. The mean has trended upward from the last estimate of $-0.02. Semiconductors are a notoriously cyclical industry, and the global financial crisis has made this last cycle particulary tough for companies like Amkor, which were hit with a sharp decline in revenue in the fourth quarter of 2008 and the first quarter of 2009. However, the company has reacted with strong cost cutting measures, and consensus estimates predict a return to sustained profitability from 2010 onwards. There are clear indications from Amkor´s customers that the cylcle is beginning to turn up, with particularly strong demand for mobile devices and high-end handsets. With a gross margin of 32% on sales, the earnings recuperation could be better than forecast if demand improves more quickly than the current forecast.  

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