Outlook for the U.S. stock markets and interest rates
1999 Stock Outlook: Review and Update
Outlook for Ex-Soviet Equities
Outlook for Small- and Microcap Sectors
Outlook for Initial Public Offerings
Outlook for Value Stocks
Outlook for Global Stock Markets
Outlook for Value Stocks
Vision Twenty-One
I spoke with Ted Gillet, the CEO of Vision Twenty-One, down in Clearwater at the Taipan Annual Conference. I was very impressed with his presentation and intelligence. However, it was clear that he lacked experience in selling his stock to the public -- understandable for a company headed by a former optometrist that had been recently listed.
This personal observation goes
a long way to explain why this stock is so cheap: its management's
inability to effectively market the stock. But with exemplary
fundamentals and a price that is trading at 30% of sales, I bet
on management's ability to learn how to sell the stock...
Vision Twenty-One is a conservative long-term investment rather than short-term speculation. The investment is predicated on heath care trends and demographics, which point to an aging population with greater need for eye care in all forms. One of the most rapidly growing sectors is laser correction. Vision Twenty-One will soon be a leader in this area due to its ability to up-sell.
Clearly, with all demographic trends going in the right direction, high values on acquisitions, the pay platform for the doctors coming off the bottom line, as well as being the only company in its class -- EYES should at the very least trade at sales. I feel very confident that we are at a bottom. Strong insider buying backs this up.
In the latest quarter, EYES came in 10 cents a share below expectation. This was blamed on an accounting software glitch -- heads rolled and the company decided to take the charge while the stock was low -- a good call since it only cost a dollar off the stock price, unless of course you were involved in the ramp-up prior to the release.
This company, which has almost no competition in the field of comprehensive and consolidated eye care is trading at a hefty discount to book and sales. You don't get any cheaper than this. Next year's anniversary date of the most recent bad quarter should show a phenomenal percentage growth.
EYES is currently a strong buy up to US$6.00.
THERAGENICS (TGX-NYSE)
Theragenics fell below my strong buy recommendation of US$12 before shooting up above US$21. An optimum profit of 75% in less than a month!
(TGX hit US$11 on 10/08/98 and US$21 on 11/04/98. I suggested that you put a trailing stop loss, which would have bumped you out at US$16.80 -- which is a still respectable and official 40% gain in a month.)
If you didn't get
out, don't worry. TGX is currently trading at US$14.50. I believe
that this is a solid entry point for the next run up. Theragenics
will continue to add cyclotrons and will in effect double its
capacity over the next year.
Bracotherapy currently holds 8 percent of the prostate treatment market. It should climb to 25 percent over the next decade as the market itself continues to expand with the aging population in the U.S. and Europe. TGX is the only producers of a palladium 103 radiation capsule and holds extensive patents.
If the good things I hear about TGX's CEO are true, they should continue to beat earnings estimates.
Some caveats
There is a journalistic war being waged between the surgeons who make their living performing prostate surgery and radiologists who believe that seeding is a better choice for early discovered prostate cancer. Periodically, a study will come out pointing one way or the other. It is not uncommon for the media to hype this topic.
Revenue for the nine-month period was up 63% over the same period last year. Net income grew 71 percent. This company has proven yet again that it can support a P/E multiple in the US$40s.
With capacity doubling over the next year as more cyclotrons are added, there remains plenty of upside potential. If you are a short-term trader you can make a lot of money riding the waves.
TGX-NYSE is a strong buy under US$15.
WestPac Bank ADR (WBK-NYSE)
WestPac Bank hit a double bottom,
the first week in September, which corresponded with a volume
spike -- very bullish.
I rated WestPac a buy at US$34 in April of 1998, as a play on the construction, expansion and general good will that comes with being the focus of the next summer Olympics in Australia. It is quite a conservative play on a world-class company that has the possibility of paying off big in a merger. (The four percent dividend doesn't hurt either.)
WBK provides banking services in Australia, New Zealand and the Pacific Islands. Net income according to U.S. GAAP adjustment increased 20% to AUS$1.36B.
Buy up to US$34.
Rollerball
A quick word on Rollerball (ROLL-NASDAQ). Our favorite cheap-Asian-manufacturing/ big-U.S.-Christmas-retail-stock is taking a beating. Currently, you can pick some up for a buck -- well under my entry price of US$2.18.
The company has
had some exposure with MTV's Road Rules Challenge as well as
its RealWorld sponsorship. RollerBall hasn't been able to generate
enough sales to insure future operations without a line of credit.
Currently, credit is very tight on the corporate level, and I
have my doubts that this company will make it past Christmas.
We knew that this was a very speculative stock going in, and sometimes the breaks fall against you. Its time to take RollerBall as a tax loss.
Sell RollerBall.
Balkan Fund
The Balkan fund got crushed when Russia went up in flames over the summer. It went from US$7.10 to US$3.50. However, most of its assets are in cash waiting for a buying opportunity in the ongoing privatization process.
It is also trading 39% below Net Asset value. I can't help but think that with the EURO so close to reality and the war in Kosovo easing, that this would be the wrong time to sell.
Hold the Balkan Fund.
Human Pheromone Sciences (EROX-NASDAQ)
This company is right on track. The hemorrhaging of sales has stopped in the third quarter. The company has been saying for a month or so that a deal with a major company was imminent. That deal should be inked before you read this.
The CEO, Bill Horgan, spoke at
the Taipan Annual Conference in Clearwater and drew more questions
than any other presenter. The interest in this product is immense.
And after giving out a host of free samples, the atmosphere in
the room lightened, lending anecdotal evidence to what I already
knew -- this stuff really works.
The stock price has dipped back below a dollar. I believe that this is a buying opportunity. Human Pheromones has a new, veteran perfume man running the distribution -- the same man who marketed Georgio and Halston.
If the stories I hear are anything to go on -- this guy has been making some substantial progress in dealing with the heavy-handed department stores. The Christmas season, coupled with the deal with an international company, could be what it takes to put Human Pheromones on the next level.
Human Pheromones is a Strong buy under US$1.
Sanyo Electric Co. (SANYY-OTC)
Sanyo was a buy predicated on Japan bottoming. Sanyo trades well below book value and is producing some innovative, alternative fuel systems and batteries.
Mostly, it was a play on Japan's
big bang and bank reform. The idea being that the most bloated
companies with the most progress to make in terms of cutbacks
and sell-offs that were trading at ridiculously low valuations
would benefit from increased competition by becoming leaner.
Sanyo's return on equity (ROE) is 3% and it trades at 39% of
book. Furthermore, they are currently buying back 10% of their
shares, which has put a nice floor under US$14 on the share price.
That said, the company grew revenues at a measly 4% for the year ending 3/98, while income fell 21%. As a turnaround play, it's just not happening.
The volume on this US$5 billion company is virtually non-existent. Even with a ten-year time horizon, after what happened to Sunbeam, I am inclined to sell Sanyo and pick up another more dynamic play in Japan. Nobody ever went wrong taking profits. Its time to book that 10% gain you've made.
Sell Sanyo Electric.