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Marc Forgang's  Instablog

Marc Forgang has been an information technology professional for the past 14 years and an investor in the stock market for over 10 years. Marc provides opinion and feedback on small and mid cap stocks in the areas of technology, retail and transportation to a number of blogs. Marc has developed... More
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  • Finding Hidden Gems in a Recession

    Unlike what the so called experts are saying, I am still trying to find long term investments since I do not have the time to day trade, or follow rumors and fraudulent advice. The financial media believes the recession is over. They seem to forget that unemployment is approaching 10 percent and retail sales are still flat. The big names that have beaten lowered expectations are a bit overbought at this point so it’s time to look for smaller unknown companies that are slowly making a comeback; and the analysts are not following.

    I will provide you with two stocks that have made missteps but have made marked improvement.

    Both of these companies have a few product lines to help get you and them through the recession.

    CalAmp (CAMP) is in the wireless market and manufactures direct broadcast satellite (DBS) hardware for EchoStar and DirecTV. They have also broadened their wireless services division to include fleet monitoring, public safety and other mission critical systems over the past few years. Revenue bottomed out earlier this year and is expected to increase in coming quarters. The one misstep was a manufacturing flaw in hardware being developed for EchoStar’s DISH network which halved their revenue. They have since settled with EchoStar and the supplier that allegedly created the problem, and expanded their wireless offerings and the future looks bright. CAMP had just over a 2 dollar high and just under 40 cent low in the past 52 weeks.

    In the first quarter 2010, the company reported revenue of 23 million dollars with a net loss of 4 million dollars or 16 cents a share. CAMP is expecting revenue in the range of 23 to 25 million dollars next quarter and a range of 26 to 32 million dollars for the 2nd half of 2010. The company may even return to profitability the 2nd half of 2010. There is still risk with this company and they have paid down debt however it is an ongoing concern.

    Cryolife (CRY) is a biomedical services company in the tissue preservation and surgical adhesive markets. Their BioGlue product continues to increase revenues for the company and the FDA has given the go-ahead to process human heart valves. The one misstep was providing infected tissue for a knee surgery which ended up killing the patient. This resulted in numerous lawsuits, and an FDA ban on tissue processing that was lifted in 2003. Shares traded as low as 2 dollars in 2002. It has since peaked over 15 dollars late in 08 and has been between 5 and 6 dollars for the past 5 months.

    The company has over 18 million in cash and negligible debt. 2nd Quarter 2009 results will be released on July 30th however the company has been profitable since 2007. 2009 full year revenue is expected to be in the range of 113 and 119 million dollars. Revenue has increased at least 10 percent year over year since 2006.  With modest revenue increases over the past few quarters, given the recession, the company continues to innovate its tissue processing, and adhesive products.

    Both of these companies should survive the recession; they have moderate risk because of their past histories. Considering these stocks are both in the single digits it may be worth the risk if you are like me and tired of losing money on blue chip companies and banks.

    I am have owned both of these gems for over 5 years now as I still believe in the long term success of companies that are able to make a comeback, have sustainable product lines and continue to innovate.

    Disclosure: Long CRY, Long CAMP

    Jul 23 10:50 pm | Link | Comment!
  • Cheesecake Factory, A Moving Price Target.

    As I predicted in February, Cheesecake Factory’s (CAKE) share price has risen into the teens although this quarter’s earnings even surprised me. The Cheesecake Factory once again has proven its staying power considering the economic environment with earnings of 17 cents per share. 

    As management has promised, CAKE has cut costs, reduced debt and growth has slowed to 1-2 openings this year. A surprising improvement from last quarter’s comparable restaurant sales helped earnings however there are a few more difficult quarters ahead given unemployment and foreclosure rates in states where CAKE has a larger presence including California and Florida.  
     
    Let us review what analysts have predicted over the past month or so for CAKE:
     
    • A Piper Jaffray analyst downgraded CAKE to sell on February 13th with a target of 6 dollars,
    • KeyBank upgraded CAKE to a buy on April 16th with a target of 17 dollars,
    • Goldman Sachs downgraded CAKE to neutral on April 20th with a target of 13 dollars,
    • Standpoint Research downgraded CAKE to a hold on April 22nd.
     
    There were other analysts that set a price target of under 10 dollars in mid February.  Analysts have become trigger happy in this current market. I ask why the target varied between 6 dollars and 17 dollars in just a two month period. Aren’t they all getting the same information?  This should be a lesson to them and the investment community to start looking at fundamentals to avoid unintended manipulation of a stock’s share price.  During this period CAKE has seen a low of around 7 dollars March 5th and a high above 15 dollars on April 22nd based on analyst comments and other market sentiment.
     
    I believe CAKE management will handle the recession well, given the company’s proven history. I would be a buyer of CAKE under 20 dollars however as in past history, CAKE stock becomes inflated when they beat the street views and the stock tends to drop to reasonable levels.  Investors interested in CAKE should consider a long term commitment if they want to see reasonable gains.  I have been long CAKE since 1997.
    Tags: CAKE
    Apr 23 10:59 pm | Link | Comment!
  • Betting On The Big Banks

    If you purchased Bank of America (BAC) stock in early March at under 3 dollars like I did and sold it last week when it reached a 3 month high of 11.40, you would have made almost 4 times your original investment. Unfortunately I sold a week too soon and only doubled my money.

    At this point gambling on any of the big banks that suddenly find they really didn’t need the TARP funds, is like a roll of the dice; seems like yesterday they were begging for government support.
     
    The following shows the closing 2 month lows, highs and current share price for big banks including BAC. Take note how each of these investments more than doubled in less than 2 months.

    Stock
    Date
    Closing Price
    BAC (Bank of America)
    March 6th
    $3.14
    BAC (Bank of America)
    April 13th
    $11.02
    BAC (Bank of America)
    April 21st
    $8.76
    C (Citigroup)
    March 5th
    $1.02
    C (Citigroup)
    April 14th
    $4.01
    C (Citigroup)
    April 21st
    $3.24
    WFC (Wells Fargo)
    March 5th
    $8.12
    WFC (Wells Fargo)
    April 17th
    $20.26
    WFC (Wells Fargo)
    April 21st
    $18.81
    JPM (JP Morgan Chase)
    March 9th
    $15.90
    JPM (JP Morgan Chase)
    April 13th
    $33.70
    JPM (JP Morgan Chase)
    April 21st
    $32.53

    Since we the taxpayers are funding these behemoths, frothing with both quarterly profits and loan losses, we should require them to be a bit more up front when discussing quarterly earnings. Case in point, Bank of America reported a 4.2 billion dollar profit Monday, however the fine print shows that they sold a portion of their investment in China Construction Bank. In addition they profited on Countrywide and Merrill Lynch which they purchased with government help for pennies on the dollar. They also had to set aside over 6 billion in loan loss reserves proving the recession is still on-going.
     
    JPMorgan Chase’s profit of over 2 billion could be partly attributed to the handover of the prized franchise of Washington Mutual by the government at pennies on the dollar.
     
    I believe this lack of transparency is causing wild swings for financial stocks since early this year when Wells Fargo gave us a rosy forecast. As foreclosures continue to rise, these banks should just report the facts and stop forecasting. These companies should get back to basics by loaning money to taxpayers at a reasonable rate since we are minority owners and in turn paying us back in preferred dividends for the money we graciously loaned them.
     
    Treasury Secretary Tim Geithner’s comments Tuesday that the TARP banks have enough capital help lift these stocks. At this point he should keep his comments to himself and let market fundamentals decide the fate of these volatile investments.
     
    If I had to choose one bank that does have a bright future it would be Bank of America. It is the largest consumer banking powerhouse with the market lead in deposits. I don’t own it currently however I am waiting on the sidelines to get back in, once the market manipulation dies down a bit.
    Tags: BAC, C, WFC, JPM
    Apr 21 11:31 pm | Link | Comment!
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