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162% returns from PLD Telecom in four short weeks!
Blowing in the wind: 55% profits from York Research -- in just two months!
Could it be? Yes, Charlie. It's Taipan's World Investor
by Chris DeHaemer
Some wise soul once said that stocks go up and stocks go down. True enough. It's time to celebrate the winners and kick the dogs.
All things being equal, there's no way way to deny it. We've come out on top! Our 1999 wins are solid. And mark my words, even our dogs, good solid companies like TSRI, ANTL and even EROX, push come to shove, will be worth the wait in the long run.
Enough chest thumping. Here's what's been going on with the Taipan World Investor picks. And here's exactly what you should expect from them in the next couple of months:
Stalingrad, the city by the bay -- raging profits from Russia's rising star.
On April Fools' Day, Russki telecom giant PLD Telecom (PLDI-NASDAQ) was in no mood for hilarity. It gapped up to US$5.25 for a solid 162% since the March issue hit your mailbox -- blowing through my nine-month target in less than a month!
The stock was moving on AT&T takeover rumors and a strong year-end report.
Revenues increased to US$145.4 million over 1997's US$114.4 million. Gross profit landed at US$100.0 million and margins were 68.8% compared to 1997's US$75.2 million and 65.7% margins. EBITDA was US$36.0 million compared to 1997's US$30.3 million. Operating income came in at US$9.9 million versus 1997's US$12.0 million. That type of steady growth during Russia's devastating economic turmoil shows the resiliency of this company.
Why you need to be online
If you happened to browse the Taipan web site that day, you got out at the peak. (That's the whole point of the website! Since Taipan publisher J. Christoph Amberger is still steadfastly refusing to add a free picture archive of Jenny McCarthy glamour pics to the site, the only thing we members of the Taipan crew can offer you there is up-to-date, timely alerts to help you take advantage of opportunities just like that...)
If you did not, I'm sure you took my advice from the article and took profits at US$4 for a tidy 100% gain.
The folks in Russia who can afford cutting-edge information services need them even more during economic catastrophe. This trend, coupled with the resurgence of emerging markets around the globe, allowed us to book a tremendous profit with scarce downside risk.
Taipan believes that PLDI will present another buying opportunity in the near future. It's trading at less than book and at 2/3rds of sales. Visit TaipanOnline or watch this space for the optimal time to get back in.
But wait. There's more!
Lock in 55% in nine weeks from York Research
Less than three months ago, I told you about a beaten-down company that was building North America's largest windmill. I told you about strong insider buying and the economic benefits of the green power movement combined with the deregulation of the power industry as a whole.
If you acted on my article in the February issue of Taipan you are up 55 percent from US$4.50 as York powered through US$7.
Cranking out projects
At last count, York Research (YORK-NYSE) was consolidating just below resistance at US$7.50 -- it's time to book the profits.
York has successfully bought their project in Big Spring, Texas, which boasts the largest wind turbine in North America online as well as received a second wind-power contract from TU Electric/Lone Star Gas. I believe that this news is fully digested in the market.
The news surrounding these projects compounded with Ira Einhorn Daty (a.k.a. Earth Day) hype has given a lift to the share price. The share price is now hitting a ceiling below its 52-week high.
Word was put out on TaipanOnline to sell above seven. Chances are you got out above that point. If not, sell it today and lock in profits. I expect no more catalysts for upside movement.
Westpac gearing up down under
After a six-month wait, Westpac Banking (WBK-NYSE- ADR) is back in the black and paying a US$1.28 annual dividend to boot. If you had paid attention to America's banking crisis in the early nineties, you would have realize that the test by fire tempers companies -- makes them stronger.
The banks in Australia went through the same problems over the same period. Solid financials and a drop in price due to the Asian crisis resulted in a buy recommendation on Westpac's ADR.
Can I have more?
Last September, when the rest of the world was crying in their mug of devaluation, we boldly strode forward and accepted a 4 percent dividend and a 18 percent gain in the share price. The stock has pulled back a bit since then.
There is still plenty of upside in this conservative play. Westpac has remained profitable during the past year and stands to gain considerably due to weak competition from Thai and Malay financial institutions and heavily indebted Japanese banks.
Nor does the current price take into consideration that there are four large multinational banks in a country of 17 million. A merger will transpire within the next 18 months. U.S. based multinationals such as Citigroup are searching for footholds in Asia. When this happens, our projected sixty percent return in eighteen months on a very conservative investment will seem more than respectable.
Here comes the SUNW
There are two things I know about Sun Microsystems. One, it is a winning company in a hot industry similar to IBM or Microsoft. Secondly, companies that reach a share price of US$100 tend to split. Market psychology being what it is, share prices rise on splits. Granted, there is no more logic to it than that since it has happened a thousand times before it will happen again.
After getting in at 106 -- you could have got in as low as 100 -- SUNW bounced on a split announcement and continued strong revenues. Well, call me illogical because I've made money in SUNW -- 39 percent from the high -- 22 percent from yesterday's close. That's probably not enough to buy you a new Harley, but we are still in it. The makers of Java will prevail.
Break out the Y2K-Jelly!
Y2k has run its course or will have by the time Q3 and Q4 numbers are reported. That means that companies that have been beaten up industry-wide due to limited IT budgets and personnel will see a ramp up in new contracts. People who have been fixing Y2K bugs will be able to turn their attention to implementing cost-saving IT systems.
TSRI is trading at the bottom of its range and US$2 below our recommended entry price. Last month, they beat Street estimates, coming in at 20 cents a share instead of 17 cents. At the time the market didn't care.
However, a recent burst of volume leads me to believe that something is afoot. The bet is that the downward momentum in the share price is over and the growth in IT services isn't.
| This year’s EPS |
Last year’s EPS |
% Change |
| Q199: 0.20 |
Q198: 0.17 |
17.60% |
| Q498: 0.22 |
Q497: 0.15 |
46.60% |
| Q398: 0.18 |
Q397: 0.08 |
125.00% |
| Q298: 0.17 |
Q297: 0.10 |
70.00% |
Media Arts Group gets stoned
After reporting slower earnings -- traditional in the March quarter, as you can see from the chart below -- MDA (MDA-NYSE) was downgraded and abused in print, or rather abused in bytes on TheStreet.com. This is a company that reported 53 percent growth with a p/e of eight. And that's on trailing earnings. This gives us a good chance to get in on the kitsch biz under US$8.
Marlton Technology (MTY-AMEX) -- Our situational small cap that was beaten down due to an unrelated margin call came out with another fine year of earnings. It never quite reached our price target of US$3.50 before running up 28 percent to US$4.50. We don't chase stocks at Taipan, so we had to let it go. Though MTY remains a solid company, it is no longer a buy.
| REVENUE (in thousands of US$) |
| Quarters |
1996 |
1997 |
1998 |
1999 |
| JUN |
9,109 |
8,718 |
13,189 |
26,339 |
| SEP |
8,054 |
11,323 |
17,224 |
29,595 |
| DEC |
12,189 |
15,471 |
26,796 |
39,020 |
| MAR |
10,400 |
11,506 |
25,441 |
31,368* |
| Totals |
39,752 |
47,018 |
82,650 |
126,322* |
| *estimated |
Human Pheromone Sciences successfully completed its reverse split
At the same time EROX (yes, it is EROX-NASDAQ) has cut its losses 60 percent from the same period a year ago and is on track to return to profitability by the end of the year. EROX is now licensing its product to a major international retailer.
Look for advertised products containing human pheromones to put some lift into this forgotten microcap. EROX is trading at 2/3rds sales with no debt. The technology alone is worth more than its market cap.
We remain up 50% from our initial buy at US$0.25.
In addition to his duties at Taipan, Chris DeHaemer is the editor of The Hammer.
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