DESC

[David Randolph]

Sold DESC @$6.81

[stockwatcherbp]

I have decided to hold this stock a little longer.  I made my decision based on the close today.  The stock closed today above the body of the doji made yesterday  .  I know that earnings are coming out soon, and I still think this stock will have a run up into earnings.  My target is currently around 8-8.50.

[jb]

Wow what is up with this stock today? They came out with amazing earnings last night, and the stock is reacting like they just declared bankruptcy!!

[David Randolph]

Probably it's just that old thing jb, «RULE 22: Buy the rumor, sell the fact».

I don't expect DESC to close that gap opened, that was a breakway gap. I'll probably buy some of DESC next week.

[jb]

Thanks David, I hope so, I made a bad move and bought at $7.30 afterhours when they announced earnings, the numbers look great so I bought Guess I have a lot to learn.

Have a good weekend.

[valueseeker]

I held my $6/shr after David sold, but certainly did not see this drop coming.

I also saw a great report yesterday (i.e. beat their own revenue guidance by 20%). I took the opportunity to increase my position by 50% under $6 this morning.

I compared to BCON, DESC has $40-50M revenue (it looks like BCON is still in trial period), although BCON does have a larger market cap.

Many positive factors in DESC:

- Very good revenue growth so far and even a lot more 2nd half (quotation increased by 5x so far this year)
- Hot area (energy bill to be signed by the President on Monday), and also what the market needs
- Many analysts interest on the CC today, and the mood seems to be upbeat
- management seems to be conservative in guidance but they are clearly very upbeat about the growth potential
- possibly profitable in 2-3 Qs (their own target is to be 1st to be profitable in the new energy sector)
- I saw many $1M worth of orders (i.e. 200K orders) went through last week, clearly MMs are accumulating

One negative:

- Margin is going to be about only 25% (don't know why the margin is so low), but management is going to focus on improving the margin

It seems that this one has both short term and long term potentials

[valueseeker]

Sorry, I meant DESC has a larger market cap (compared to BCON).

They beat their recently revised (revised only 2 weeks ago) revenue guidance by 20%.

[valueseeker]

I just saw this on www.q-trader.com, and it's very similar to my own conclusion:

DESC reports stellar results, bright future ahead...

DESC suffered a "sell the news" today as investors took earnings day profits on what has been a monster run over the past few weeks. We are buyers of the dip and believe today's conference call was nothing short of phenomenal. Our impression was that the institutional shareholders on the call were duly impressed with what was said and will be buying this dip, along with us.

Here are some highlights from the conference call:

Positive

DESC's Northern Power subsidiary has formed an Operation & Maintenance division to obtain long-term, lucrative, and high-margin service contracts for distributed power projects around the globe. The division burst out of the gate with a $10 mil backlog in the first 3 months of operations, and the company sounded incredibly optimistic about it's prospect's going forward. We believe an O&M division provides DESC an incredible opportunity to leverage their reputation and expertise to generate recurring, high-margin revenue. If the O&M division's current growth rate is maintained or accelerated, there is a high probability that DESC will once again have to raise revenue guidance in the near-future. We all know what happened last time they did that, and keep in mind the O&M revenue was not accounted for in the Q2 results.

Company signaled a potential sales explosion from the HOGEN distributors in the near-future. They cited a 500% increase in quotation activity since the mega distributors signed on a few months ago, and keep in mind they are still training sales reps and have not even commenced sales. Chip was very direct in saying that the distributors are overwhelmingly enthusiastic about sales prospects for the HOGEN's, a product with multi-billion dollar potential. In his words, it is a "dream come true."

The distributors have trained hundreds of sales reps and are soon to commence sales. This product is going from a mom and pop sales force to the largest gas products distributors in the world.

Company has an internal goal of achieving 25% blended gross margins by the end of '06, which would represent a dramatic improvement over current levels. Chip emphasized that gross margins would be helped more so by the high-margin product launches (O&M, Hogens) than be operational improvements at Northern Power's core divisions. However, he did say there were measures being taken to control costs at the core divisions as well.

Negatives


Concern over gross margins was the major negative. The company posted a substantial increase in YOY and sequential revenue but didn't manage to reign in gross margins enough to impact the bottom line. The company said the gross margin trouble was attributable to overflow from pre cost-control Northern Power contracts, as well as a transitional phase at Proton. According to Chip, who has proven himself quite credible, these gross margin issues are being resolved and shareholders can expect the staggering top-line growth will translate into EPS improvements going forward.

[David Randolph]

Thanks David, I hope so, I made a bad move and bought at $7.30 afterhours when they announced earnings, the numbers look great so I bought Sad Guess I have a lot to learn.

The lesson you should take: don't buy just because of news, specially if the stock previously had a big run up - the news probably was already discounted.

But I guess DESC has upside potential, just wouldn't like to see it penetrate the gap on the chart, after all this was a breakaway gap, so the stock should run away from this level ...

[KCScott]

I'd really like to buy back into this stock - phenominal long term investment.

Nature abhors a Vacuum - will wait for that gap at 5-5.5 to fill.

I am surprised it's not there yet

[KCScott]

Started down, but showed good strength in picking up 2%.

I'm sure some of that was momentum from the energy bill, or maybe the proverbial bounce, but still thinking this may pull back some more before it's next charge up.

My re-entry point still at that 5 - 5.50 range

[David Randolph]

I have 15 minutes to write about 3 buy backs I'm going to make today. The chart and the rest of the thread tells the whole story. More details on the first update after the close.

DESC is buy back #1 !

(This recommendation was made by David Randolph from 3 Stocks on Fire. 3 Stocks on Fire is a Community of stock traders and investors. Our 2851 members change trading ideas and strategies on our message boards everyday. We welcome you as a new member of the 3 Stocks on Fire Community, please take 10 seconds to register and receive our free newsletter)

[KCScott]

David,

Great company - I've been waiting to re-enter

Hasn't this stock been teetering into the gap enough to think support is eroding?
I'm no TA master by any means, but always operated under theory that all gaps eventually get filled.

It's got a nice jump this morning, but that may be due to 3SOF?
LOL - You'r becoming the E.F. Hutton on the internet

[David Randolph]

Hasn't this stock been teetering into the gap enough to think support is eroding?
I'm no TA master by any means, but always operated under theory that all gaps eventually get filled.

Support is the ascending trendline, not the gap. Gaps get filled, except for runaway gaps, which is the case with DESC (well, they may get filled, but probably just some years later).

It's got a nice jump this morning, but that may be due to 3SOF?
LOL - You'r becoming the E.F. Hutton on the internet

Not at all, the stock had 600 trades at this moment, only about 50 or 60 3 Stocks on Fire members read this recommendation and probably only 5 or 10 followed it.

Anyway, that won't be a problem after October 1st, when this board will only be available for subscribers (there are 70 subscribers at this moment, many thanks for them  ).

Who's that E.F. Hutton? Thanks.

[KCScott]

What I meant to say was I have watched this stock trade - intraday down into the gap - My thought was since there was a sizeable gap between 4.88 - 5.50 that a good re-entry point was around 5.00

How do you differentiate a breakaway gap from a "regular" gap?

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While the board is free (I'm also weighing becoming a paying member) - I'll guarantee your generating a lot of folks who stop in and take a look to see what your selections are. They may never even register, just read.

Not sure how old you are, but when I was a kid there were a series of commercials for a brokerage house called E.F. Hutton. The commercial would always be a large gathering of people (restaurant, ballgame, etc.) and then show 2 people talking. One guy would say to another "Well my broker is E.F Hutton" and the crowd would go silent with everyone bending an ear to eavesdrop.

Then the  tag line of the commercials in a James Earl Jones voice: "When EF Hutton talks - People listen"