Intelligent Speculator

SWIR- Sierra Wireless (NASDAQ) – (Closing Price – $12.48)

Sierra Wireless reported second quarter results on July 23 and reported another good quarter. However, the company issued guidance below expectations and the stock price took quite a hit.

Sierra Wireless reported revenue of 156 million and diluted EPS of 0.35. Revenue and EPS both improved substantially year over year. For Q3 Sierra Wireless gave guidance for revenue of 140 million and diluted EPS of 0.27. This was below analysts’ expectations of revenue of 157.2 million and EPS of 0.37. Consequently, the stock price sold-off.

However, I think the sell-off was overdone and investors are currently pricing in a lot of weakness into the stock price. Sierra Wireless is almost trading at a single digit forward PE which is fairly absurd for a growing company. (more…)

AKNS – Akeen Solar (NASDAQ) – (Closing Price – $5.03)

I’ve looked into the financials of several solar companies and Akeena Solar is by far the worst solar company I’ve checked out based on fundamentals. Akeena Solar is a good example of what not to look for in a stock.

For the last five quarters the net loss of Akeena Solar has grown. In Q1 of 2007 Akeena Solar reported a net loss 930,000. In Q1 of 2008 Akeena’s net loss ballooned to 4.6 million.

To make matters worse the company is diluting shares like crazy. In Q1 of 2007 the company reported 16.5 million diluted shares. In Q1 of 2008 the company reported 27.8 million shares. That’s a 68% increase in shares. If the company is ever able to report a consistent profit it will not matter because future earnings are currently being offset by extreme dilution.

To add insult to injury insiders of Akeena Solar have been dumping shares.

Increasing losses and heavy dilution are a bad combination. If you are looking to invest in a solar company I would steer clear of Akeena Solar.

Disclaimer: I do not have a position in AKNS.

There have been a lot of dramatic steps taken by the Fed and the SEC to prevent the deserved collapse of some banks. While I understand that they don’t want to see a run on the banking sector I don’t think that would be the case if the market were left to sort things out on its own. The banks that took excessive risk and leverage would be in trouble and the banks that managed their risk and leverage would be fine. In fact the actions taken by the Fed and the SEC are doing more harm than good.

First, the Fed and the SEC are sending the message that financial institutions can profit from excess risk when times are going good and not have to face the consequences of their actions when times turn bad. This is a terrible message to send and it is only going to lead to the same problems in the future. Banks will have no deterrent from taking the same risks in the future if they know that the government is going to bail them out with taxpayer money when the risks turn sour. (more…)

DTLK - Datalink (NASDAQ) – (Closing Price – $4.95) 

Datalink reported solid Q2 results today and the company guided for another good quarter in Q3.

In Q2 Datalink reported revenue of 49.71 million and EPS of 0.08. Revenue improved 4% sequentially and 23% year over year. EPS increased by 0.04 sequentially and by 0.11 year over year. For Q3 Datalink gave guidance for revenue between 49 and 53 million and EPS between 0.06 and 0.10.

Datalink continues to report improvement in its financial results in a challenging economic environment and I expect the stock price to continue to trend up. The need for data storage is going to continue to increase and this bodes well for Datalink in the future.

I don’t see any reason to sell Datalink and I would continue to hold your shares.

Disclaimer: I do not have a position in DTLK.

FEED – AgFeed (NASDAQ)

AgFeed is down quite a bit from my initial recommendation but I think this has more to do with the weakness in Chinese stocks and the stock market in general than it does with AgFeed. Unfortunately, the behavior of most individual Chinese stocks is heavily tied to how Chinese stocks as a group are trading. Since Chinese stocks are out of favor right now this is dragging on AgFeed.

However, AgFeed has given and reaffirmed very impressive guidance and I find it hard to believe that the stock price won’t jump right back up if the company meets its numbers in Q2. I think the selling in AgFeed is overdone and I am going to recommend to average down and buy some more (I am going to use today’s closing price for calculation purposes). (more…)

AIXG – Aixtron (NASDAQ) 

Aixtron has sold off considerably since my last update and I have not found any definitive reason for the sharp decline. However, I do have a theory about what might have happened.

Aixtron had been mentioned as a possible acquisition target of Applied Materials (AMAT). However, on June 6 Applied Materials announced it made a nonbinding proposal to acquire parts of ASM International (ASMI). The stock price of Aixtron dropped considerably in the days following the announcement. I believe some institution or hedge fund had taken a position in Aixtron solely because of its buyout potential and when the AMAT announcement came out they decided to bail. Since Aixtron has a low float this institutional selling caused a significant decline in the share price.

I think Aixtron is a good company to own regardless of a buyout and I think the institution or hedge fund that decided to dump Aixtron made a foolish decision. I still like the company and I am going to recommend buying some more and averaging down (I will use Friday’s closing price for calculation purposes). (more…)