Free Stock Picks April Update Part 2

Here are the rest of my current stock picks:

SILC – Silicom Limited
The stock price of Silicom Limited have been erratic since my initial buy recommendation but the stock price is currently trending up. Silicom is set to report first quarter earnings on April 28 and I expect there will be a run-up in price before earnings. I will provide another update after earnings are announced.

SWIR – Sierra Wireless:
The stock price of Sierra Wireless has also been erratic since my last update but the stock price is currently undergoing a pretty strong rally. Sierra Wireless is heavily shorted and a short squeeze is already underway. The fundamentals of Sierra Wireless didn’t merit such a huge selloff and I think the stock price could easily rally to 20 - 25 dollars after earnings. Sierra Wireless reported first quarter results last year on April 26 so they should report earnings later this month. (You should also check out NVTL).

Short Recommendation:

SWC – Stillwater Mining Company:
Both Stillwater Mining Company and PAL have sold off since my initial short recommendation but they haven’t dropped as much as I expected. I still think there is further downside left and I would continue to hold your short position.

Disclaimer: I have a long position in SILC. I don’t have a position in the other stocks mentioned.

Free Stock Picks April Update

I usually don’t write about my stock recommendations unless they report quarterly earnings or some other important event happens (press release, news event, etc). However, I am going to start updating all my recommendations at the beginning of each month to keep you better informed on how each stock is doing and report on any important news.

Buy/Hold Recommendations:
CAAS – China Automotive Systems:
China Automotive Systems reported sound Q4 results on March 25 and the stock price has rebounded quite a bit from its lows. Today, the company announced that it completed its 35.5% acquisition of Henglong Automotive Parts and the transaction will be immediately accretive to earnings. China Automotive Systems is trading at a nice valuation and the company’s fundamentals should continue to improve in the coming year. I still think the company is a good buy. (more…)

China Automotive Systems Q4 07 Results

CAAS - China Automotive Systems (Nasdaq) - (Closing Price - $5.73) 

China Automotive Systems reported fourth quarter results on Tuesday March 25 and reported sound results.

China Automotive Systems came in with revenue of 37.71 million and earnings per diluted share of 0.09. Revenue for the quarter was up 36% year over year and up 21% sequentially. EPS was up from 0.06 last year but was down from the prior two quarters. The company said EPS in the fourth quarter was hurt by higher R&D and SG&A expenses. For the full year diluted EPS improved 76% to 0.37 from 0.21 last year.

The stock price of China Automotive Systems hit a 52 week low of $4.40 just before earnings but has rebounded nicely since. At Friday’s closing price the company is trading at a trailing PE of 15. This is much cheaper than the company has traded at in the past two years. (more…)

BAC Cover Recommendation

BAC - Bank of America (NYSE) - (Closing Price - $35.96) 

Bank of America is down moderately since my initial short recommendation and I think now would be a good time to cover and take the gain off the table. I still think financial companies are going to see further weakness but they will most likely rally tomorrow when the Fed cuts interest rates. If the Fed cuts by a point, which I have a feeling is going to happen, financials could get a significant short term boost. Instead of holding through the volatility I think it would be wise just to cover.

If you shorted Bank of America when I gave my recommendation you are sitting on a 9.5% gain in just a couple of weeks. That is not an insignificant gain considering the short amount of time it took to obtain it. You could have made an even better gain shorting other financial companies when I gave my recommendation. If you shorted Bear Sterns (BSC) you would be sitting on a huge gain.

If you are a very short term trader and like to trade in and out of stocks it may be wise to consider buying financial stocks tomorrow, especially if the Fed cuts by a point. If financials rally tomorrow I would trade the news but get out quickly.

Disclaimer: I have no position in BAC, BSC, or any other financial company.

PAL and SWC are Good Short Plays

SWC - Stillwater Mining Co. (NYSE) - (Closing Price - $18.37)

The prices of palladium and platinum recently spiked to all time highs due to power disturbances that resulted in rolling blackouts in South Africa. Speculators seized on this news to bid up palladium and platinum prices to ridiculous levels.

The stock prices of North American Palladium (PAL) and Stillwater Mining Co. (SWC) spiked in tandem with palladium and platinum prices and both companies present good shorting opportunities.

The stock price of PAL more than doubled earlier this year and SWC tripled. Obviously, speculators sent these stocks up to unsustainable prices and I think they will quickly drop back down.

The price of palladium has been dropping quickly and I expect platinum to drop quite a bit from its record levels. The concern over supply due to power distruptions in South Africa has eased and the momentum has dried up. I expect the stock prices of both of these companies to see significant declines.

You can pick either stock to short but I am going to give a recommendation to short SWC at today’s closing price.

Disclaimer: I have no position in PAL or SWC.

Good Time to Short Financial Stocks: My Pick BAC

BAC - Bank of America (NYSE) - (Closing Price of Friday 2/29/08 - $39.74)

Financials have been one of the worst performing stock sectors over the last few months and I think the weakness in the sector is going to continue. The housing market is no where close to finding a bottom, the economy and job growth are slowing, and gasoline prices are projected to hit all time highs this summer. All of these things are going to bode ill for financial companies in the form of increasing foreclosures and overdue credit card and loan payments. Consequently, I think it is a good time to short financial companies.

Financial companies rallied earlier this year when the Federal Reserve caved into Wall Street demands and drastically cut interest rates by 1.25 points. However, the rally didn’t last long and the share prices of financial companies are once again dropping quickly. I think you can take your pick of which financial company to short but I am going to give a recommendation to short Bank of America. (more…)

MCZ Q3 2008 Results

MCZ - Mad Catz Interactive (American Stock Exchange) - (Closing Price - $0.82)

Mad Catz announced its fiscal third quarter 2008 results after the close yesterday and reported decent results. However, the stock sold off around 19% today because the company didn’t report an improvement in EPS and investors in the current market are extremely skittish and impatient.

Mad Catz came in with revenue of 34.27 million and earnings per share of 0.06. Revenue declined 6% year over year and EPS declined by a penny. The CEO blamed the shortfall in revenue on the strategy of eliminating less profitable product placements and focusing on higher margin products. While this strategy resulted in a higher gross profit margin, it didn’t translate into improved EPS. This is one reason investors decided to jump ship today.

I don’t think the focus to eliminate less profitable products was the only reason to blame for the decline in sales year over year. Consumers worried about a potential recession reigned in their spending this holiday season. This also factored into the sales shortfall. In spite of the weariness of consumers I still figured Mad Catz would post an increase in profits. However, Mad Catz reported big increases in sales/marketing expenses and G&A expenses. These unexpected increases resulted in the decrease in EPS year over year. (more…)

Sierra Wireless Q4 2007 Earnings

SWIR - Sierra Wireless (Nasdaq) - (Closing Price on Friday 2/8/08 - $15.92)

Sierra Wireless announced its fourth quarter earnings on January 31 and reported very impressive results.

Sierra Wireless reported revenue of 135.6 million which was a sequentially increase of 22% and a year over year increase of 99%. Sierra Wireless reported diluted EPS of 0.37. This was up moderately from the previous quarter’s result of 0.35 and up significantly from 0.12 last year. For next quarter Sierra Wireless gave guidance for revenue of 136 million and EPS of 0.30.

In the conference call the CEO mentioned he expects continued revenue growth, improved earnings, and business diversification in 2008. He stated that revenue in Q1 will be constrained by component supply limitations but this should clear up by Q2. He also mentioned that the introduction of Gobi and Erickson has increased competition in the embedded module segment but he expects growth in that segment this year.

The stock price of Sierra Wireless briefly traded above seventeen dollars the day after earnings but has sold off since. Investors are selling off stocks indiscriminately and tech stocks and small caps in particular have been getting hit hard. Unfortunately this is depressing the stock price of Sierra Wireless. Over the long term the stock price of any stock will ultimately follow the improvement or deterioration of a company’s fundamentals. Since the fundamentals for Sierra Wireless continue to improve I would continue to hold or accumulate more shares.

Disclaimer: I have no position in SWIR.

Silicom Announces New Chinese Order

SILC - Silicom Limited (Nasdaq) - (Closing Price - $16.70)

Today Silicom Limited announced an order for $1.8 million from “one of China’s largest domestic server companies, representing its first significant penetration into the vast Chinese market.” The stock traded up over 14% on the news.

This is obviously a positive development for Silicom Limited and the stock price is starting to gain some strong momentum. The company just reported very good fourth quarter results and I wouldn’t even consider selling right now.

Some other stocks in the WAN optimization field that have seen undeserved fifty percent drops from their highs last year are BCSI and RVBD. These two stocks are definitely worth further research.

Disclaimer: I have no position in any of the stocks mentioned.

8×8 Reports Q3 08 Results, Shows Continued Improvement

EGHT - 8×8 Inc. (Nasdaq) - (Closing Price on Friday 2/1/08 - $1.22) 

8×8 Inc. reported their Q3 2008 financial results on January 30 and reported record revenues and a small profit.

8×8 reported revenue of 15.8 million which was a 7% increase sequentially and a 19% increase year over year. 8×8 reported net income of 1.39 million and EPS of 0.02 per diluted share. During the quarter, 8×8 sold two of its non-core patents for 1.2 million and accounted for the sale as other income. Without the one time gain related to the patent sale and a gain related to the change in the value of warrant liability 8×8 would have reported a small loss. However, this loss is smaller than the previous quarter and the same quarter last year and the company is still on the right track towards sustained profitability. Overall 8×8 reported a nice quarter.

In the conference call the CEO mentioned a few positive catalysts to look for in the coming year. The CEO stated that the company is seeking to further monetize its intellectual property and to expect the introduction of new services in the coming year. He also said the goal is for consistent profitability going forward.

8×8 is continuing to show improvement in its financial results and I would hold or accumulate more shares.

Disclaimer: I have no position in EGHT.