Stone Fox Capital's  Instablog

Over the last week, Foster Wheeler (FWLR) has been busy announcing deals from Saudia Arabia to Vietnam to Columbia. Its a good sign that the order rate may finally be improving with the global economy on strong legs. If the 200EMA can hold around $29.25 we'd be buyers there. If not, it might be a definite buy when the gap is filled around $24.


Disclosure: Long FWLT

Its long been known on Wall Street that Transport typically lead market breakouts. Today the Transport Index broke above recent resistance around the 4100 level and signaled a clear breakout. More from FundMyMutualFund on this subject.







It clearly supports our case that the market is about to breakout of a range between the 1,085 and 1,110 on the S&P500 that its been stuck in for the last 5 weeks or so. A clear move in any direction after such a consolidation will likely be very powerful. Possibly running all the way to 1,200 before stopping. Confirmation tomorrow will be key. As you can see from the below chart, the SP500 has made a clear new high close and any run tomorrow could easily post a new intraday high as well signaling a clear breakout following the Transports. A close above 1,120 sinalling the all clear for computer programs and hedge funds.

Local.com (LOCM), a leading local search company, upped guidance today from a 2% sequential gain to an 8% sequential gain. Revenue is expected to be in the range of $16.4M and adjusted earnings in the $.10 to .12 range. All from a stock just trading above $5 before the announcement.

The earnings run rate is now on a $.40+ level with expectations for at least 24% revenue growth next year. Analyst still report earnings on a GAAP basis which is bizarre for a small tech company. Since the average analyst expects GAAP eps to grow by $.30 in 2010, we feel comfortable that adjusted net income could easily top $.70 on a conservative basis. Slap at least a 20 PE on that estimate and the stock zooms to $14 from the current high $5s.


New Guidance

• The company now expects total revenue for the fourth quarter to be between $16.2 and $16.6 million, which at the midpoint would represent an 8% sequential increase over the third quarter of 2009. The company expects net income (loss) for the fourth quarter of 2009 to be between ($100,000) and $150,000 or between ($0.01) and $0.01 per diluted share, and to include the following items:
• depreciation and amortization of approximately $900,000; and
• stock based compensation charges of approximately $700,000.
• Excluding the above items from net income, fourth quarter Adjusted Net Income is now expected to be between $1.5 million and $1.8 million or between $0.10 and $0.12 per diluted share.

Old Guidance

• The company expects fourth quarter 2009 revenue to be between $15.3 and $15.6 million, which at the midpoint would represent a 2% sequential increase over the third quarter of 2009. The company expects net loss for the fourth quarter of 2009 to be between $100,000 and $0 or between ($0.01) and $0.00 per share, and to include the following items:
• depreciation and amortization of approximately $900,000; and
• stock based compensation charges of approximately $600,000
• Excluding the above items from net income, Adjusted Net Income is expected to be between $1.4 million and $1.5 million or between $0.09 and $0.10 per diluted share for the fourth quarter of 2009.

LOCM has now made a habit of over delivering on promises which is something that should really begin catching on with the investing community. They were always long on potential with an attractive website name in local.com and short on results but that has apparently changed during the worst economy in 70 years. 47% growth rates are unheard of these days and soon LOCM will be discovered. Trading at about 13x its run rate earnings seems incredibly cheap.


Disclosure: Long LOCM