Great Calls on Oil

I have written quite a few articles about the speculation in oil over the last few months and I want to revisit some of those articles because I have been proven correct.

First, there can no longer be a debate about whether the excessive rise in oil futures was due to speculation or supply and demand fundamentals. It was obviously due to speculation. In fact, the last thing oil was trading on during its run was supply and demand.

Oil was trading based on the falling dollar, potential supply disruptions in Nigeria and Iran, and self-serving bullish calls (actually flat our pumping) from Morgan Stanley and Goldman Sachs (their hedge funds were long oil). When oil was making its run towards $150 traders were completely ignoring supply and demand fundamentals because demand destruction had been evident for a few months. (more…)

AgFeed Releases Q2 Results

FEED - AgFeed Industries (NASDAQ) - (Closing Price - $12.77)

AgFeed Industries reported second quarter results today and reported excellent numbers. The company also raised its already impressive full year guidance.

AgFeed reported revenue of 35.6 million and diluted EPS (earnings per share) of 0.12. Revenue improved by over 400% YOY (year over year) and 193% sequentially. Diluted EPS doubled YOY and quadrupled from the previous quarter. AgFeed raised its full year revenue guidance from 135 million to a range of 145 – 155 million and raised its adjusted net EPS guidance from $0.96 – $1.10 to $1.08 – $1.20. The company mentioned the second half of the year traditionally represents its two strongest quarters.

AgFeed opened the day up over 19% from the previous close but finished the day with a gain of only 2%. I attribute this decline to day traders who were looking to sell after earnings regardless of results. I think the stock price will start to trend up after the short term traders exit their positions.

AgFeed just reported very impressive results and the company is coming into its strongest two quarters so I see no reason to sell. I would continue to hold your shares.

Disclaimer: I have no position in FEED.

8×8 Q1 09 Results

EGHT - 8×8 Inc. (NASDAQ) - (Closing Price on Friday 8/8/08 - $1.09)  

8×8 reported first quarter results for 2009 on July 31 and reported moderate results.

8×8 came in with revenue of 16.28 million and diluted EPS (earnings per share) of 0.02. Revenue was up 10% year over year but was essentially flat from the prior quarter. In the conference call it was mentioned that licensing revenue was impacted by licensing deals that were pushed into Q2. Diluted EPS increased by a penny both year over year and sequentially.

8×8 announced it added 1053 new business customers and that business service revenue grew to 56% of total revenue compared to just 44% last year. Business revenue continues to grow which is offsetting the decline in residential and video revenue. (more…)

SILC Q2 08 Results

SILC - Silicom Limited (NASDAQ) - (Closing Price - $5.82)

Silicom Limited reported Q2 results on July 28 and reported very disappointing results.

The company reported revenue of 5.17 million and diluted EPS of 0.05. Revenue was down 22% year over year and down 33% from the prior quarter. EPS was also down substantially from 0.25 last year and 0.26 in the prior quarter.

The weak quarter was blamed on the decline in the shekel/dollar exchange rate, the difficult market environment, and a significant reduction in orders from Silicom’s largest customer.

The CEO did voice some optimism by stating that one customer intends to make Silicom’s BYPASS cards a standard rather than an optional feature and that discussions have nearly concluded with several new accounts.

The stock price took a big dive after earnings were announced but has currently found support. Silicom’s stock price is trading below book value so I don’t see much, if any, downside left.

I think a lot of the weakness with tech stocks in general is cautious spending by companies due to the uncertain economic climate. I think economic conditions will start to improve in the coming quarters so I think it would be unwise to sell Silicom at the current price. I am going to recommend to continue to hold.

Disclaimer: I currently own shares in SILC.

SWIR Q2 08 Results

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…)

Wall Street Humor

Akeena Solar: Worst Solar Stock

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.

No Sympathy For Financial Companies

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 Q2 08 Results

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.

Free Stock Picks - July Report Continued

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…)