Small cap power: CIMT

[David Randolph]

CIMT looks interesting but all the stocks that could nto withstand today's market onslaught seems bit scary at the moment. Interestingly, story stocks like ELN and MVIS held really good even though they had big run and no one pointed out that ppl needed excuse to lockin profits. This leads me to believe that big players can make or doom a stock. You just need to be on the right side if you are a short term trader. Notoriously the big money will find new house by the time we short-term retailers try to tip-toe the big players. In the perspective, David's long term approach looks practical. Can't we do away watching every single tick and leave high beta names in rest.

stocky, I'm sorry, I'm not sure I understood what you meant, can you please repeat in other words? Thanks.

There's one bad thing for this stock which is : There's No Marketmaker for it 

That's not bad, since it doesn't change the company's long term fundamental value. But I know what you mean.

Hi David, I am curious how you communicated with the CEO to ask this.  Did you send email, or were you able to talk on the phone?  If you talked on the phone, did you learn or ask anything else?

Hi Tokyo, I've sent an e-mail, which you can read at the previous page of this thread. So far I didn't get any answer. And still no form 4. In fact, in two years insiders didn't buy or sell one single stock.

Cimatron thinks long term, look here:

Cimatron Donates 160 Seats of Leading CAD/CAM Software to the Education of the Future Generation

Interesting, Cimatron's CFO is SILC's ex-CFO:

Cimatron's Skyrocketing Stock: Worth A Look

I hope CIMT's future resembles SILC's.

Just out of curiosity, imagine you bought SILC three years ago, say, at $3. The stock is now 7 times higher than what it was back then. But, two months after buying at $3, you would be losing 46%. Did that mean anything for the long term? No. As SILC rose from $3 to $26, there were several 50% or more drawdowns. A short term trader may look very bright if he was able to escape a 50% drawdown, but three years down the road, did he have a 600% return on any stock, or on his portfolio for that matter? Not even 1 in 1000 chance if you ask me.

And how many times did SILC's EPS decline from the previous quarter while it was rising from $0.5 in 2003 to $26 about a month ago? I'll tell you: 7 times.

This doesn't mean that CIMT will have the same future as SILC in terms of share price, but it goes to show that 1 quarter or a 50% or more share price decline from the high doesn't mean anything for the long term fundamental picture of the company, or the long term outcome of an investment for that matter.

I'll keep holding CIMT for the long term.

[stocky]

I meant to say that though CIMT has great fundamentals but it seems manipulated. That may be the case with most non-liquid stocks. Just try selling few hundred at market and see what I mean. Neverthless, I am long CIMT and hope things workout. I still dont understand why the big-caps are outperforming the small caps. May be David has some observation about this.

[yukiii]

I meant to say that though CIMT has great fundamentals but it seems manipulated. That may be the case with most non-liquid stocks. Just try selling few hundred at market and see what I mean. Neverthless, I am long CIMT and hope things workout. I still dont understand why the big-caps are outperforming the small caps. May be David has some observation about this.

Small-caps have traditionally underperformed during an interest rate "tightening cycle."

"Historically, large-cap stocks outperformed, point-to-point, 80% of the time and by an average of over 300 basis points," or 3%. "Large-caps tend to outperform small-caps, and the leading sectors are the defensives--health care, utilities and [consumer] staples, adding to the fuel is the low USD helping the Large global companies.

[stocky]

Thanks and applaud yukii that helps.

[David Randolph]

I meant to say that though CIMT has great fundamentals but it seems manipulated. That may be the case with most non-liquid stocks. Just try selling few hundred at market and see what I mean.

I think CIMT is more ignored than manipulated stocky.

Neverthless, I am long CIMT and hope things workout.

Me too.

I still dont understand why the big-caps are outperforming the small caps. May be David has some observation about this.

I don't look to understand or even consider that. I want to focus on company by company, individual characteristics and fundamentals. If CIMT starts selling more and profiting more the stock will go up, regardless of what small caps in general are doing. So, why even bother studying macro trends? The problem with macro trends and capital allocation is that it keeps changing: "small caps are outperforming, let me buy small caps. Wait a minute, this week the S&P 500 rose more than the Russel 2000, let me shift to large caps. Hmmm, the FED raised rates again, perhaps I should just get out of all stocks. But the USD is going down, that should be good for exporters. However, there are signs the Japanese and European economies still aren't strong enough to support our exports, let me get out of exporters. Let me jump into gold stocks instead, inflation is around the corner ..." ... and on, and on.

CIMT is suffering from a "worse than expected quarter". In my view people are overreacting and looking through the review mirror, instead of looking ahead. As I look ahead, I see CIMT's fundamentals improving and a much higher stock price, because it is such a small cap technical software global company.

Today's market action felt like a bottom was being made, but I know I'll always feel that way about CIMT.

I'll keep on holding CIMT.

[David Randolph]

CIMT is being punished way more than what it deserves for a weak Q1 2007. Comparisons going forward will probably be more favorable, since in Q2 2006 the company earned just $18 K and in Q3 2006 it even lost ($281 K).

So, just imagine that CIMT will earn, say, $500 K in Q2 2007, it will then be able to make a "Net Income rose 28 fold from the year ago level" press release, and then the stock will jump 500% in one day LOL

It would be ridiculous, but not more ridiculous than the 38% decline we've had due to poor Q1 results, when informed people were already forecasting a weak quarter due to seasonality. Another issue that probably affected Q1 earnings was the fact that Cimatron E version 8 was coming, so prospective buyers probably opted to wait for the new version instead of buying version 7. This happens with cars too, but even more with software. Who went to buy Windows XP one month before Vista's launch? Probably not many people.

The future looks bright for CIMT, still the most attractive stock of the Main Portfolio (even more so after the recent decline), I'll keep holding the stock for the long term.

[Se7en]

There was some talk on the yahoo board that the Cimatron E version 8 can't run on Windows Vista, later other people said that competitors have the same 'problem' so I hope they are right and that this doesn't become a big issue for the company!

[tokyopua]

There was some talk on the yahoo board that the Cimatron E version 8 can't run on Windows Vista, later other people said that competitors have the same 'problem' so I hope they are right and that this doesn't become a big issue for the company!

I used to work in the semiconductor capital equipment field, and we had to do major software releases for our tools.  Major effort was required to port a software release from entirely different operating systems (i.e. Linux to Windows), but even then it was doable and we did it as necessary. 

Of much less difficulty was the porting of software from different versions of Windows (say windows server 2000 to windows XP or something like that).  We never looked to be exactly on time with compatibility to the newest operating system because there were generally bugs and we never felt it was our responsibility to coincide exactly with the release of a new operating system.  I believe it would be similar for CIMT wrt Vista.

My take is that it is a non-issue currently (assuming its true in the first place), and furthermore if it is true it is not likely a permanent issue, but rather one that can be easily fixed in a timeframe that would correspond to customer demand for Vista compatibility (which currently would be likely very low).

I havent looked at the Yahoo boards, but I wonder if people there are trying to scare people into selling them their shares cheaper with this kind of argument.

[echo]

We touched the 200 ema and the support held. The RSI indicates it's oversold so hopefully the downturn is over and we start to head higher here:

[Garoh]

Yes it looks very nice and should close above 2.36 today 

It will be very bullish if it close above 2.46 today ... we  reached a bottom here

[Stocky2000]

cimt should bounce soon from this level if not today...

bought the first time 2.43 now

[David Randolph]

We had a bit of a bounce in CIMT today. As I look ahead into Q2 earnings, the comparison will probably be favorable, since CIMT had $5.044 M in revenue and just $18 K in net income in Q2 2006. If the company earns the same it did in Q1 2007, that is, $181 K (which was viewed as a big disappointment), that's going to be ten times more than in the year ago quarter.

Also, in Q2, the company released CimatronE version 8.0, which seems to have been very well received by the market. This new version doubled the market reach of the company, since now it has a die making application (it didn't have this before). The company's marketing efforts were expanded to levels never experienced in the past.

So, everything looks set for a blowout 2nd quarter, perhaps even better than Q4 2006. The stock may very well rest around current levels for months to come, the only thing I focus on is the long term potential of this micro cap. And that seems huge.

I'll continue holding CIMT with strong hands.

[David Randolph]

Fundamentally there wasn't anything new, but CIMT recovered some more ground, as it was up 2.39% yesterday.

As we've been discussing, the next quarter will probably bring good news and a big rally, since the company earned just $18 K in Q2 2006. This will be an easy to beat number.

But, even if there's no growth and the next two quarters resemble the last two, CIMT will earn $0.186 per share, which means that at the current market price it is trading at about 13.8 times earnings, while the Technical & System Software industry trades at 36 times earnings.

You can see a recent CNBC video on Cimatron at the following link: Cimatron in the News (it takes some time to download)

I'll continue holding CIMT for the long term.

[Houlahan]

Hi David,
Do you know when the CNBC video was released?
It is hard to plot a timeline on their "news".

[David Randolph]

Hi David,
Do you know when the CNBC video was released?
It is hard to plot a timeline on their "news".

I don't know the specific date Houlahan, but it isn't an old video, I guess it is about one week old.