3SOF

cxti.ob os another China stock to get whacked.  I'm back in at 5.26

We already talked a lot about JADE, as one can see on the Stocks Covered List. I put some questions to ravenquork that he was kind to answer yesterday: ravenquork's post

I believe his estimates are conservative enough and I enjoy the way they were constructed (applause for ravenquork), with implied dilution and all. He sees 2007 EPS of $0.44 and 2008 EPS of $0.58.

Considering his 2007 EPS estimate and the stock now trading at $10.11, I say the forward earnings multiple is 23. That seems high to me, because I don't think the market will attach an above average valuation to JADE, because the company doesn't file forms 10 with the SEC (just the form 20) and, well, dilution from last year levels is 32%, not just 10% as ravenquork is estimating.

I would say that at 15 times 2007 estimated earnings JADE would then be attractive, and that means 15*$0.44 = $6.6 (oooppsss)

Anyway, my current rating is neutral, I like the idea of taking precious metals out of mines and then sell jewelry in the Chinese market.

Rating

Neutral.

This analysis was written by David Randolph from www.3stocksonfire.org after a very brief study. He might have missed several important issues about the stock that you may add to this message board and complete the analysis. David makes 10 new analysis per trading day on www.3stocksonfire.org member's request. He already covered 250+ stocks which you can find on the Stocks Covered List. This effort is also a way to find very attractive picks for the 3 Stocks on Fire Portfolio, a very concentrated Portfolio with the objective of turning $15,000 into $150,000 using small cap momentum+value stocks. To know more please read the 3 Stocks on Fire Portfolio FAQ. To receive our newsletter, be able to write on the message board and vote on polls, all you need to go through is a free 10 second registration process.

on CPNE, I think their biz model is working great now. the onlinesupplier.com problem of not having good dicounted products is not an issue right now. they have enough time to improve on that.

David, what's your stop on EXM?

1. Introduction

BRCD is a $3.6 B market cap company, so it is way out of our league here on the 3 Stocks on Fire Portfolio message board (please read the FAQ). But since I put it on the poll and people voted for it, I'll cover it.

2. Technical analysis
2.1. Long term chart



The medium term chart shows a bullish picture, as BRCD is trading above the 50 and the 200 days moving averages.

2.2. Short term chart



Over the short term the stock opened with a gap up towards the $9.42 resistance level. Candlesticks say it will come back down to close that gap at $8.73 over the short term, but I still didn't check which were the news out.

3. Fundamental analysis
3.1. Market Cap & Business Description

Market cap is $3.6 B. Brocade Communications Systems, Inc., through its subsidiaries, engages in the design, development, marketing, sale, and support of data storage networking and data management solutions.

3.2. Share count evolution

I don't see significant dilution since 2003.

3.3. Balance sheet analysis

Balance sheet looks healthy, with a current ratio of 2.43 and $542 M in cash.

3.4. Revenues

Revenues were stable until 2005, but got a 31% boost in 2006 to $750 M. The price to sales ratio is 4.8, and the industry average is 1.15.

3.5. Earnings

Diluted normalized EPS for 2006 was $0.33, and that puts the trailing earnings multiple at 28. The industry average earnings multiple is 27.

Estimates for fiscal 2007 (ends in calendar October 2007) call for very strong revenue growth, to $1.26 B. EPS is expected to come in at $0.42, putting the forward earnings multiple at 22.

3.6. Recent News

The news moving the stock today is:

• Brocade 1Q Profit More Than Triples
AP (Mon 4:37pm)

Without special items, EPS for the quarter came in at 17 cents, 4 cents above the consensus estimate. Several analysts upgraded the stock following the news. If they just maintain this kind of profitability for the next 4 quarters, they'll earn $0.68 per share, and then the forward earnings multiple would be 13.53, not considering potential growth from this quarter.

4. General Overview

BRCD is a big company already, but I enjoy the sector very much and indeed, it looks cheap when compared to its industry peers.

5. Rating

Positive.

This analysis was written by David Randolph from www.3stocksonfire.org after a very brief study. He might have missed several important issues about the stock that you may add to this message board and complete the analysis. David makes 10 new analysis per trading day on www.3stocksonfire.org member's request. He already covered 250+ stocks which you can find on the Stocks Covered List. This effort is also a way to find very attractive picks for the 3 Stocks on Fire Portfolio, a very concentrated Portfolio with the objective of turning $15,000 into $150,000 using small cap momentum+value stocks. To know more please read the 3 Stocks on Fire Portfolio FAQ. To receive our newsletter, be able to write on the message board and vote on polls, all you need to go through is a free 10 second registration process.

Taking advantage of the market today

ETLT @ .75

CPNE @$2.23

ACKH .. Risky but added some .515

I hope the market isn't like this the rest of the week

I'm still holding my CPNE.OB and my ETLT. I did not buy more of either.

Quote from: mbaugh on February 27, 2007, 01:03:11 PM
David, what's your stop on EXM?

Stop? I don't use stops. My experience tells me they don't work over the long run.

However, I bail out when I feel I have to like everybody else. Not today, though.

Quote from: David Randolph on February 27, 2007, 11:59:38 AM
We already talked a lot about JADE, as one can see on the Stocks Covered List. I put some questions to ravenquork that he was kind to answer yesterday: ravenquork's post

I believe his estimates are conservative enough and I enjoy the way they were constructed (applause for ravenquork), with implied dilution and all. He sees 2007 EPS of $0.44 and 2008 EPS of $0.58.

Considering his 2007 EPS estimate and the stock now trading at $10.11, I say the forward earnings multiple is 23. That seems high to me, because I don't think the market will attach an above average valuation to JADE, because the company doesn't file forms 10 with the SEC (just the form 20) and, well, dilution from last year levels is 32%, not just 10% as ravenquork is estimating.

I would say that at 15 times 2007 estimated earnings JADE would then be attractive, and that means 15*$0.44 = $6.6 (oooppsss)

Anyway, my current rating is neutral, I like the idea of taking precious metals out of mines and then sell jewelry in the Chinese market.

Hi David,
I appreciate the kind words regarding the format of my post. I have never written a report for other peoples eyes, only for my self, which is a much simpler process . I learned a few things in writing it. One thing is that I routinely accept single source data, which is not always accurate. You are of course right regarding the form 10. Without them I had to piece some data together.  Jade does report  on a form 6  several times a month. I am not familiar with form 6, but it seems to cover almost any event from press release to financial information. Any advice on using the form six or the significance of filing 6 versus 10? The seemingly best figures I could come up with for share expansion were:
Diluted Weighted Average Shares
06  17.64  (23%)  05 14.32 (18%)  04 12.11 (24.4%)   03 9.71 (15%)    02 8.498.67
Average Dilution is 18.8%  Share

I do not want to beat a dead horse here, but receiving feed back on my comments (agree or disagreeing) on this board are very informative and useful to me.
While browsing google for additional information for JADE, I came across this:
http://www.newratings.com/headlines/LJ-International_USG553121058.html

"NEW YORK, February 23 (newratings.com) - Analyst Sally H Wallick of JM Dutton reiterates her "speculative buy" rating on LJ International Inc (LJI.BER), while raising her estimates for the company. The 12-month target price has been raised from $9 to $16.

In a research note dated February 22 and published this morning, the analyst mentions that the company has posted its first positive quarterly EBITDA in 4Q06 on account of the robust performance of ENZO's Macau store and strong demand during the Christmas season. ENZO's increasing contribution to revenues and earnings is expected to boost LJ International's growth potential in the next two-to-three years, the analyst says. The EPS estimate for 2007 has been raised from $0.35 to $0.57"  My analysis showed  07  $0.44 and $15.4   This would put Davids estimate, using a PE of 15, at an 07 share price of $8.55

How much faith does anyone here put in a research note like Dutton's? It would be very easy for me stroke my own ego by agreeing with Dutton since they came up with a share  price very close to mine. I know from experience that making any kind decision based on ego is doomed from the start. Also, I have a basic distrust of analysts public reports.  What are your thoughts on the value af a report like Dutton's.
Bye the way, I have a very small, in the money position, in JADE and view the value of these posts as educational.

Thanks again for your comments.

1. Introduction

AOB is also a $500 M plus market cap that I previously held. Back then I thought it was a great long term holding, but I guess my hands were weaker or something, because I didn't grab the majority of the move (as it happens with most novice players, they get burned so often holding bad stocks that they can't let the profits run when they're holding the good ones).

2. Technical analysis
2.1. Long term chart



AOB's long term chart is bullish, however perhaps now is a good time to revisit the 200 days moving average, coming up at $7.91 today. Technically that would be a nice place to establish a long term position.

2.2. Short term chart



The short term chart looks like the one of a stock that is indeed topping, but that is always very hard to know. One can try to pick a top and then the stock rallies and the long term trend resumes (as it happens on the majority of occasions).

AOB opened with a gap down today ... the chart doesn't tell me if it is a buy/hold or sell. Let me make some fundamental tests to see if they provide any help.

3. Fundamental analysis
3.1. Market Cap & Business Description

Market cap is $717 M. The Company is engaged in the development and production of plant based pharmaceutical products and plant based nutraceutical products.

3.2. Share count evolution

There was dilution in the past, but not over the latest 3 or 4 quarters.

3.3. Balance sheet analysis

Current ratio is almost 5, so the balance sheet is strong. But the book value is just $141 M, so the price to book value ratio is high, at 5.1.

3.4. Revenues

There was strong revenue growth over the years and in 2006 revenues for the first 9 months were $45.73 M, up 38% from 2005 levels. For the full year of 2006 analysts are expecting revenues of $107 M, so the price to sales ratio is a very rich 6.7. Well, if you consider AOB a Biotechnology company, the price to sales ratio is about half the industry average.

3.5. Earnings

EPS for 2005 was $0.31, and analysts are expecting $0.45 for 2006 and $0.58 EPS for 2007. The trailing earnings multiple is 25 and the forward earnings multiple is 19. I can't consider that cheap, even more so for a Chinese company with all the risks that involves.

3.6. Recent News

• American Oriental Bioengineering to Release Fourth Quarter and Full Year 2006 Financial Results
PR Newswire (Wed, Feb 14)

The company will release 4Q results on March 12.

4. General Overview

I guess AOB could use that correction, so those multiples come back down to more realistic levels in my opinion. If the fundamental trends persist a dip to the 200 days moving average could be a nice buying opportunity.

5. Rating

Neutral.

This analysis was written by David Randolph from www.3stocksonfire.org after a very brief study. He might have missed several important issues about the stock that you may add to this message board and complete the analysis. David makes 10 new analysis per trading day on www.3stocksonfire.org member's request. He already covered 250+ stocks which you can find on the Stocks Covered List. This effort is also a way to find very attractive picks for the 3 Stocks on Fire Portfolio, a very concentrated Portfolio with the objective of turning $15,000 into $150,000 using small cap momentum+value stocks. To know more please read the 3 Stocks on Fire Portfolio FAQ. To receive our newsletter, be able to write on the message board and vote on polls, all you need to go through is a free 10 second registration process.

Man, I hate days like this. I didn't add to stocks I already held but I did buy GIGM at a low price and now that's even dropped further.

Stupid question really but I will toss it out there...why don't markets go up like this? Why do they only go down like this and then take a couple weeks or so to recover or longer?

QuoteHow much faith does anyone here put in a research note like Dutton's?

Well, I like to read Dutton's analysis, but they're obviously biased to the bull side, or else they would be out of business soon.

Companies pay to get a credible analyst coverage, but of course they would stop paying if those reports were negative. Moreover, other Dutton's potential clients would walk away, saying "I'm not going to pay for you to issue a negative report on my company, like you did on XYZ".

I also don't trust coverage coming out of big powerhouses like Goldman Sachs, Morgan Stanley, JP Morgan and firms like these.

Although I like reading what others think and enjoy learning from their methods, ultimately I trust my own analysis and strategy.

Thanks for your post ravenquork, keep up

Man the only stock I see on fire today is the QID. DOW looks like it may see -300 points today. NASD -100 points maybe... All from the Chinese and Greenspan. I think its time to short the market this is the change in tide I been watching. I was waiting for early summer to enter but this may be the turning point on the markets. David time to pick some shorts on fire for the portfolio?

Quote from: lancefur on February 27, 2007, 02:13:54 PM
Man, I hate days like this. I didn't add to stocks I already held but I did buy GIGM at a low price and now that's even dropped further.

Stupid question really but I will toss it out there...why don't markets go up like this? Why do they only go down like this and then take a couple weeks or so to recover or longer?

They go up like this and more, in bear markets

Once I saw the Nasdaq up 14% in just one trading day, I believe it was the 3rd of January 2001, after the FED cut rates by 50 basis points by surprise when the market was open!

Me too, I hate days like these, when I looked to the Main and saw it down almost 4% on the day I felt like vomiting.

But then I remember some days where I lost 30 or 40% in one day, years ago when I played futures so I put things in perspective.

What I'm going to do is finish these analysis because that's my job and my life, I can't let the market interfere with the normal course of life, it can't! I suggest you do the same ... anyway, I've seen several big market breaks starting, and this doesn't feel like one, there wasn't enough optimism in the air prior to this, in fact, the media and the general sense of the public has been quite bearish lately. Not the right environment for a big crash, they always come as a surprise.

But a 5 or 10% correction? Unfortunately, it can happen ... good luck for us.

Quote from: nullzero on February 27, 2007, 02:25:01 PM
Man the only stock I see on fire today is the QID. DOW looks like it may see -300 points today. NASD -100 points maybe... All from the Chinese and Greenspan. I think its time to short the market this is the change in tide I been watching. I was waiting for early summer to enter but this may be the turning point on the markets. David time to pick some shorts on fire for the portfolio?

I went to cash, this is crazy!  I am glad I sold QID cause it was weird to be long and short at the same time, but it was good to prepare for a correction cause I had NO compunction about axing all my stocks, it was just something I had to do.  Sucks to have lost some money, but I am looking at what is left and happy I have a nice profit for the year so far.  Off to apply for a margin account now.