Companies featured in this edition of the newsletter: ACTC, CHIP, CVM, DKAM, ENZ, IWEB, MBCI, MFGD, PHC
Markets rebounded last week, on the strength of upbeat productivity and manufacturing reports that led to solid gains in all of the major indices. Despite news that the unemployment rate had hit its highest levels in 25 years, the Dow managed to end the week up 310 points, gaining 3.2% on the week to close at 10,023, up 14.2% on the year. The Nasdaq posted a gain of 3.3%, closing at 2112 and extending its yearly gains to 34%, while the S&P 500 and Russell 2000 advanced 3.2% and 3.1% respectively on the week to bring their YTD performance to 18.4% and 16.2%.
Several better than expected economic reports provided buying incentive throughout much of the week, as investors managed to shake off the previous week’s negative bias to send indices into positive territory despite some less than encouraging unemployment data released towards the end of the week. Advance Q3 productivity readings gave investors looking for signs of continued recovery reason to jump back into the markets, as the report showed significantly higher growth than expected, coming in up 9.5% versus consensus estimates calling for an increase of only 6.5%. The unexpected surge marked the largest productivity gain since 2003, a fact which was not lost on investors as the news helped spur the week’s biggest gains, leading the Dow higher by almost 200 points following the announcement on Thursday. Further good news was extrapolated from ISM Manufacturing data for October which also came in better than expected, as did September construction spending and pending home sales which served to further soothe investor sentiment. In light of these positive developments, news that the unemployment rate had reached its highest level in 25 years, coming in at 10.2% versus a forecast calling for 9.9%, did little to temper enthusiasm, as even a tepid employment report couldn’t keep markets from finishing in positive territory following the announcement.
The Fed’s decision to leave its benchmark rate unchanged at historic lows also served to stoke buying sentiment on the week, and on the corporate front, earnings reports were generally positive, as Cisco managed to beat estimates while providing a strong forecast and announcing that the company had authorized the repurchase of up to $10 billion of its stock; other notable earnings beats on the week included CVS, Kraft and Qualcomm. Commodities also continued their run last week, as gold gained 6% to hit a new record high before retreating to close at just under $1100 an ounce, and oil posted a modest gain of 1% in volatile trade. Thanks to the preponderance of positive developments on the week, all ten sectors of the S&P managed to finish the week in positive territory, led by Industrials at 6.1% and Consumer Discretionary at 4.7%.
What should investors look for this week? There will certainly be considerable discussion about Healthcare Reform, after President Obama’s healthcare bill passed in the House by a razor-thin margin of 220-215. Earnings reports slow considerably, but look for results from Macy’s (NYSE: M) pre-market on Wednesday, followed by Dendreon (NASDAQ: DNDN) and Applied Materials (NASDAQ: AMAT) after the bell. Kohl’s (NYSE: KSS) and Wal-Mart (NYSE: WMT) report before the open Thursday, with Walt Disney (NYSE: DIS) set to release their results after the close. JC Penney (NYSE: JCP) rounds out the week on Friday morning before the bell.
Economic data will be light on the week, but look for weekly initial jobless claims along with continuing claims on Thursday at 8:30am, followed by weekly crude inventories at 11:00am and the Treasury Budget for October at 2:00pm. Import and Export Prices for October will be released at 8:30am Friday morning along with Trade Balance data for September, followed at 9:55am by Preliminary Michigan Sentiment for November.
Conference schedules will be considerably busier this week with things set to begin in New York on Monday with the Stifel Nicolaus Aerospace, Defense and Airline Conference. On Tuesday, the Bank of America/Merrill Lynch Banking and Financial Services Conference kicks off in New York along with the Deutsche Bank FinTech Senior Executive Forum, and the Jefferies Healthcare Summit which is being held in Boston; Piper Jaffray holds their Global Internet Summit in Menlo Park, CA that same day. Citigroup will hold their Industrial Manufacturing & Transportation Conference in New York on Thursday and Credit Suisse hosts their two day Healthcare Conference beginning that same day in Phoenix.
Enzo Biochem (NYSE: ENZ), a leading vertically integrated biotechnology company engaged in the research, development, manufacture, licensing and marketing of innovative health care products, technologies and services based on molecular and cellular techniques, reported on its therapeutic platforms utilizing oral immune regulation for immune mediated diseases at the Bio-Europe 2009 15th Annual International Conference in Vienna, Austria last week. Management commented on the therapies which include Alequel, an individualized therapy for treatment of Crohn’s disease, and Optiquel, an oral, novel peptide for autoimmune uveitis, in addition to progress made in the development of its drug screening platform that has yielded orally delivered small molecules having potentially significant effects for bone disorders and diabetes. In other news last week, Enzo reported that favorable results of the company’s clinical trial for treatment of non-alcoholic steatohepatitis (NASH), the most common form of chronic liver disease in the Western world, were presented at the annual meeting of the American Association for the Study of Liver Diseases. The study was designed to evaluate safety and efficacy of the drug and reported no treatment-related adverse events; in addition, data supported the role of NKT-based immunotherapies in patients with insulin resistance and NASH, and were consistent with Enzo’s pre-clinical and clinical studies involving the development of new therapeutic platforms for immune mediated diseases according to management. Shares gained fifteen cents on the week to close at $5.66.
Verichip Corporation (NASDAQ: CHIP), a provider of radio frequency identification systems for healthcare and patient-related needs, which recently acquired identity security provider Steel Vault to form PositiveID Corp, a provider of identification technologies and tools for consumers and businesses, announced last week that it has been selected as a finalist for the South Florida Business Journal’s 2009 Technology Awards in the Hardware category. The awards were created to honor the area’s best technology-based companies, the CEOs or CIOs leading the way, and the companies making the best use of a technology in South Florida, and look for growing start-up companies, trendsetting innovations, products and services to highlight. Shares lost seven cents on the week to close at $1.47
CEL-SCI Corporation (AMEX: CVM), a developer of vaccines for the prevention and treatment of infectious diseases and a late-stage oncology company, announced last week that it had been granted clearance to proceed with its first clinical study evaluating the efficacy of its LEAPS H1N1 investigational therapy on the blood of hospitalized H1N1 patients by an Institutional Review Board of The Johns Hopkins University School of Medicine. In order for the FDA to consider a next-stage clinical trial to evaluate LEAPS-H1N1 treatment of hospitalized patients with laboratory-confirmed H1N1 Flu under an Exploratory IND, the FDA has asked CEL-SCI to submit a detailed follow-up regulatory filing with extensive additional data. CVM is working actively with its CRO in conjunction with Johns Hopkins to prepare submissions to the FDA in order to support the fastest and most effective way to conduct clinical trials going forward for this unique investigational treatment. Shares gained seventeen cents on the week to close at $1.22.
Earnings Preview: Pioneer Behavioral Health (AMEX: PHC), a leading provider of inpatient and outpatient behavioral health services, is scheduled to announce results from its 2010 fiscal first quarter on Wednesday, November 11th before the market opens, and will hold a conference call to discuss the results at 9:00am that day. For the fourth fiscal quarter of 2009, the company managed to increase net revenue from continuing operations to $11.7 million for the three months ended June 30, 2009 from $11.5 million for the three months ended June 30, 2008. Income from operations was $381,661 for the 2009 fiscal fourth quarter compared to $97,540 for the 2009 fiscal third quarter, and $394,571 for the fiscal 2008 fourth quarter. Net income before taxes for the 2009 fiscal fourth quarter improved approximately $305,000 sequentially to $317,086. Investors are likely to focus on the company’s ability to maintain profitability and increase demand at its Capstone and Seven Hills Behavioral Facilities. Investors will also likely be focused on top line revenue growth as management had indicated on the company’s Q4 conference call that it expected sequential quarterly revenue and profitability to accelerate. Shares gained sixteen cents on the week to close at $1.18.
Advanced Cell Technologies (OTCBB: ACTC), a company engaged in the development of regenerative therapies utilizing stem cells, presented a corporate overview and update on the company’s upcoming developmental milestones for its therapeutic program last week at the BIO Europe 2009 Conference in Vienna, Austria. Among the milestones mentioned were the reiteration of plans to file an IND for its retinal pigment epithelial program (RPE) prior to the end of 2009, and the company’s goal of becoming one of the first to treat a patient with an embryonic stem cell based therapy, which it hopes to achieve by the third quarter of 2010. Pending FDA approval, ACT hopes to commence Phase I clinical trials for its first IND designation in the summer of 2010, and anticipates filing an IND for an additional retinal indication in a similar timeframe. Shares remained unchanged at $0.10 on the week.
Drinks Americas Holdings (OTCBB: DKAM), a company that develops, owns, markets, and nationally distributes alcoholic and non-alcoholic premium beverages associated with renowned iconic celebrities, announced last week that the company has reduced its debt by 15%, in the aggregate amount of $1,002,450 through agreements reached with the CEO and members of its Board of Directors to satisfy obligations owed to them for a portion of an outstanding loan by issuing them 1.8 million shares of common stock and warrants to acquire 9.8 million shares of common stock exercisable at $0.15. The warrants are priced at a 250% premium to the stock’s current price, with fifty percent of the warrants able to be exercised at anytime during the ten year term while the other 50 percent will only be exercisable after the company has achieved positive EBITDA for two successive quarters. The company believes that pricing the warrants at such a high premium above the stock’s current price while tying 50% of the warrants’ exercisability to a performance based metric such as back to back quarters of profitability will demonstrate their level of commitment to shareholders. Shares remained unchanged at $0.04 on the week.
IceWEB (OTCBB: IWEB), a leading provider of purpose built appliances and building blocks for cloud storage networks, announced last week that it has entered into an agreement with ExxonMobil Global Services Company, an operating division of ExxonMobil, the largest publicly traded international oil and gas company, under which it will design Geographical Information Systems (GIS) and provide technicians to support Exxon’s use of the technology. The company also announced last week that it has been awarded a significant contract by a Federal Agency to provide its Iplicity Unified Storage Platform to support a large Unix environment providing over 100 terabytes of disk capacity that will enable the Agency to capture and archive critical log data. Management indicated that Iplicity was chosen for this contract because of its ease of use, high performance, and advanced data replication capabilities. Shares gained three cents on the week to close at $0.20.
MabCure, Inc. (OTCBB: MBCI), a biotechnology company using its proprietary technology to create highly specific monoclonal antibodies (MAbs) for the early detection of cancer, announced last week that it has signed a research agreement with AZ Sint Lucas Hospital, in Brugge, Belgium to conduct preclinical research intended to broaden the utility of MabCure’s monoclonal antibodies relating to diagnosis of cancer in tissue specimens. The partnership is designed to expand the current scope of the company’s diagnostic products beyond their current ability to detect malignancies in physiological samples such as urine and serum. Management believes that this partnership has the potential to expand the utility of the company’s portfolio beyond its current multi-billion dollar potential market by allowing them to detect cancer from biopsied tissue samples, allowing them access to a much larger sample base than they are currently able to diagnose. Shares gained six cents on the week to close at $1.13.
Money4Gold Holdings (OTCBB: MFGD) $0.18
As a result of the recent economic downturn and the quantative easing measures implemented by the government in an attempt to stave off damage to the financial system in the wake of the collapse, many investors have begun to worry about the long term effects that these policies may have on the economy. Foremost among these concerns is the threat of inflation brought on by the aggressive stimulus measures which has led investors towards commodities, and especially gold, as a means of hedging against potential future inflationary pressures. As a result of the explosive demand for gold, producers are experiencing difficulties meeting production demands due to the high costs and hardships associated with extracting these precious resources from the earth, resulting in a need to find a more efficient, dependable method of production. Money4Gold is an emerging leader in the precious metals space that is well positioned to capitalize on the supply problems and record run up of gold prices characterizing markets of late thanks to a unique business model affording it significant advantages over traditional gold producers.
What sets MFGD apart from traditional gold producers is the source from which it obtains its raw materials. Rather than extracting gold and other precious metals from the ground as producers traditionally have, Money4Gold obtains its materials from the general population in the form of unused or broken jewelry, essentially mining from consumers rather than the earth. This strategy offers significant advantages over traditional production methods as it is significantly less costly, more efficient, and environmentally friendly. These efficiencies in combination with a critically important partnership with one of the country’s largest and most respected precious metal refiners allow the company to offer investors dramatically higher margins when compared to traditional precious metal producers.
Despite the fact that Money4Gold is currently the only publicly traded precious metals recycling company in the United States, they are not the only company engaged in this enterprise; however, Money4Gold’s pre-established relationship with refiner Republic Metals, superior marketing and customer service help provide it with significant competitive advantages that keep the company one step ahead of its peers. One of the reasons that the company has such bright prospects is its relationship with Republic Metals, which is one of MFGD’s largest shareholders and also has a representative on the company’s board of directors. Because of this relationship, the company is able to offer consumers significantly higher prices for their jewelry than the competition, due to the fact that they are able to cut out the middle man and deal directly with the refinery. To further improve the situation, Republic services MFGD’s raw gold at cost, with the savings passed on to the consumer in the form of higher payouts than the competition, which in turn leads to happy customers and more gold for the company. In addition to this critically important and unique strategic relationship, the company also owns and operates its own internet lead generation system and aggressively markets its services through a multitude of channels including internet, radio, and television spots featuring world famous pitchman Anthony Sullivan. MFGD has rolled out international service offerings in multiple languages to complement its US operations, expanding the business into Canada, the UK, and most recently Germany, with plans to permeate additional international markets which should serve to greatly enhance the company’s already strong position.
With significant competitive advantages in an industry that is poised for explosive growth due to the ever increasing demand for gold, Money4Gold appears to be well positioned to reap the benefits of investors’ preferences towards hedging against inflation. This increase in demand, in combination with the existing problems that traditional gold producers have displayed in keeping up with supply suggests that the precious metals recycling industry will continue to experience significant growth as suppliers continue to seek out novel sources of obtaining more gold. As one of the emerging leaders in this space, it appears that now is an opportune time for investors to consider MFGD as the company is still operating largely under the radar of the investment community; whether or not they will remain so is still to be determined, but the fact remains that the demand for gold doesn’t appear to be slowing anytime soon while producers continue to struggle to keep pace, making this a tantalizing prospective investment given the current economic climate.