Dick Davis Digest

Capital Gold Corp (CGC)

chloe — Fri, 05 Mar 2010 22:00:34 +0000

This past month Capital Gold Corp. (CGC, AMEX) announced the long awaited roll-back on a 4 to 1 basis and it was good to see our share price remain solid after the news. We had a brief dip but overall I would say the rollback went very well and the recent AMEX listing should do wonders for additional interest in the story. CGC is in a very good position and will begin to get the attention of more and more investors as the profits continue to roll in and the company looks to do more exploration drilling. They have the money to create more value and that value sooner or later will be realized when a bigger fish comes to buy them out at a very attractive level. CGC is once again a STRONG BUY and becomes the number 1 listed company on our Top 10 List.

Greg McCoach
The Mining Speculator

Aflac Inc. (AFL)

chloe — Thu, 25 Feb 2010 23:27:27 +0000

While people in the U.S. are familiar with Aflac, Inc.’s (AFL, NYSE) memorable (if not annoying) “duck” mascot, most Americans would likely be surprised to know that the company actually does most of its business in Japan. Aflac is the world’s largest underwriter of supplemental cancer insurance, with the largest chunk sold in Japan. The firm also sells other types of insurance, including long-term care, accident, and life. Japanese operations account for around three-quarters of total revenue and profits. Aflac has ample growth opportunities in Japan. Deregulation of insurance sales at banks has opened a new channel for Aflac to promote its products. Sales through banks now generate around 7% of Aflac’s total revenue, and that percentage is expected to grow. In the U.S., business has been hampered by high unemployment—Aflac tends to sell its supplemental policies through the workplace. However, hiring should improve as the year progresses, which should be a plus. For 2010, per-share profits are expected to jump 10% to $5.28 per share. The stock trades at just 9 times the 2010 estimate, a fair price to pay for a company posting double-digit earnings growth. … The company’s direct-purchase plan has a number of attractive features. Minimum initial investment is $1,000. There are no fees on the buy side. Aflac administers its own plan and has an excellent reputation for quality service for its DRIP (dividend reinvestment plan) participants. The market is overdue for a correction. Aflac will probably pull back 10% to 15% in a correction. However, I would feel very comfortable nibbling on the stock at current prices and buying more aggressively on pullbacks to the mid $40s.

Charles B. Carlson
DRIP Investor

National CineMedia, Inc. (NCMI)

chloe — Thu, 18 Feb 2010 19:53:00 +0000

Theater advertiser National CineMedia, Inc. (NCMI, Nasdaq) has recently given us a sneak preview of its coming attractions. The company isn’t planning to officially unveil its fourth-quarter results until next month, but management pre-announced that sales for the year reached $380 million and cash flow topped out near $190 million. Those totals are both on par with last year, which is more than many companies can say at this point. They are also well above earlier expectations. More important, there is likely to be even more progress in the year ahead. In fact, the company is forecasting 2010 revenues to climb $20 – $30 million and surpass the $400 million level for the first time. That guidance will likely have Wall Street revising its more modest figures upward. The robust guidance doesn’t surprise us—part of our bullish outlook stemmed from the fact that advertisers would come out from hibernation this year and start reaching out to customers. … More than 660 million people watched a movie in the National Cinemedia network last year. The company has picked up a wide range of new clients anxious to reach out to that crowd, including Taco Bell, State Farm, E*Trade and Outback Steakhouse. Going forward, we see rising cost per thousand (CPM) rates and stronger inventory utilization. That means incremental sales with hardly any additional spending—and thus, a nice bump to the bottom line. The upped guidance reinforces our positive opinion on NCMI, and the stock remains one of our top ideas.

Nathan Slaughter
StreetAuthority Half-Priced Stocks

Cirrus Logic, Inc. (CRUS)

chloe — Fri, 12 Feb 2010 01:47:20 +0000

Cirrus Logic (CRUS, Nasdaq), which specializes in high-precision analog and mixed-signal integrated circuits, hasn’t budged above 10 since 2002. But now it is showing signs of serious revenue growth—from $174 million last year to $250 million next year, with earnings projected to advance from 16 cents a share to 41 cents and 65 cents in the 2010 and 2011 fiscal years, respectively. Expected 5-year earnings growth is 19% a year for a stock trading at just 10 times earnings, for a rock-bottom PEG of 0.58.

Stephen W. Quickel
US Investment Report

RehabCare Group Inc. (RHB)

chloe — Thu, 04 Feb 2010 19:22:28 +0000

RHB is currently above its 50-day moving average of $28.46 and its 200-day moving average of $22.94. The stock has been under heavy accumulation for the past three months. The company, RehabCare Group Inc. (RHB, NYSE) provides rehabilitation management for over 1,200 hospitals, nursing homes and other long-term care facilities. The stock returns 8% on earnings. The company is profitable and it should continue to profit from the government’s proposed health care bill, if it passes.

Kenneth Coleman
Kenneth Coleman’s Investment Tracker

Qualcomm, Inc. (QCOM)

chloe — Fri, 29 Jan 2010 00:44:43 +0000

Qualcomm’s (QCOM, Nasdaq) overall Quadrix score of 61 reflects below-average scores for Value, Earnings Estimates, and Performance — all languishing in the low 40s. But Wall Street profit estimates have stabilized recently, and the stock has rallied nearly 16% since Qualcomm posted solid September-quarter results. The company’s outlook will be tied to the performance of smartbooks—new, hybrid gadgets that combine features of smartphones and netbooks. Smartbooks have larger screens and keyboards than traditional mobile phones. Their batteries last longer than those of netbooks, and they receive continuous online access through 3G phone networks. Several versions em- ploy Qualcomm’s Snapdragon processor, which is important for Qualcomm considering it has thus far failed to take a significant share of the netbook market. Wall Street expects Qualcomm’s earnings growth to get back on track, with per-share profits projected to climb 81% in the December quarter and 13% in the year ending September. The consensus projects profits will grow at an annualized rate of 17% over the next five years. Qualcomm will report December-quarter results on Jan. 27. For now, Qualcomm remains a Long-Term Buy.

Richard J. Moroney, CFA
Dow Theory Forecasts

American Science and Engineering (ASEI)

chloe — Thu, 21 Jan 2010 21:33:37 +0000

Airline security has gotten plenty of lip service over the years since September 11, 2001, but the actual investment in new technology has been far from aggressive, despite the fact that the U.S. spends twice as much on defense-related R&D as all other nations combined. Although bomb and weapons screening companies have made remarkable technical progress in the last five years, their advances have garnered little interest. This state of affairs corresponded with almost a decade of seemingly secure aviation operations. The events surrounding the Christmas Day bomb attempt on NW Flight 253 should go a long way to dispel that illusion. After that incident, Homeland Security Secretary Janet Napolitano stated that the DHS will accelerate plans to acquire and deploy full-body scanners at airports. There are 40 full-body scanners in place at this time. The government purchased 150 in 2009 from L-3 (LLL) and Rapiscan (OSIS), but never deployed them. That is typical of the DHS mentality…until now. The Transportation Security Administration (TSA) now expects to purchase another 300 scanners via competitive bid. Still, 450 scanners for a 50 million passenger per month industry is just a first step. U.S. security officials have also been meeting with international counterparts to promote tighter airport security. Amsterdam’s airport operator Schiphol Group will buy 60 body scanners ASAP. L-3 and OSIS have gotten the lion’s share of the orders for body scanners.
American Science and Engineering (ASEI, Nasdaq), however, is the only explosive detection company offering a comprehensive suite of detection equipment, from personal scanning to cargo inspection, from explosives to nuclear weapons. ASEI makes its own proprietary version of the ‘Peeping Tom’ scanners called SmartCheck that will pick up explosives attached to a human body while protecting the privacy of the passenger by showing only body outlines, no private parts. The company also has products that allow an inspector to look inside a truck or cargo container and spot organic material, such as explosives. ASEI is getting repeat orders from Middle East customers to scan vehicles and trucks entering high-risk facilities. Although ASEI was left out of recent TSA purchases, we expect the company will get a fair share of the new orders. In the most recent quarter, ASEI earned $1.18 per share, a 31 cent surprise. Net income rose 45% year over year on a 9% increase in revenues to $61 million. The company has net profit margins of 15% and an ROE of 20%, which compare very favorably to the industry average of 0%. Additionally, ASEI has virtually no debt, while its competitors have an average debt-to-equity ratio greater than 1. All three major explosive detection companies have rallied strongly since Christmas, but we think the current pullback in the market will be a buying opportunity for these names. We particularly favor ASEI.

Gregory Spear
The Spear Report

Compass Diversified Holdings (CODI)

chloe — Wed, 13 Jan 2010 19:55:23 +0000

This Connecticut-based company takes stakes in small businesses. Compass Diversified Holdings (CODI, Nasdaq) has interests in six companies, including circuit board-maker Advanced Circuits, American Furniture Manufacturing, and employment staffer Staffmark. The company currently pays a $0.34 per share quarterly dividend, which translates to an annual payment of $1.36. At today’s price, Compass yields a phenomenal 10% ($1.36/$13.06). The company’s initial public offering was in May 2006, and dividends per share have increased 29% since then. CODI shares have nearly doubled from their March lows. However, earnings have been lower in the soft economy of the past year. In the third quarter, net income fell to $2.8 million versus $6.8 million a year ago. Cash flow available for distribution fell to $11.7 million from $15.7 million. The company said that the lower cash flow was due to the impact of the slow economy on subsidiary Staffmark, which faced weak demand for staffing from businesses. While profits have declined from a year ago, all six businesses were profitable in the third quarter, and American Furniture and medical device-maker Anodyne actually increased profits over the period. In addition, earnings company-wide are improving. Net income dropped to $2.8 million in the third quarter, but was a sizable improvement from a net loss of -$40 million in the first nine months of the year. … With business looking like it is improving, cash available for distributions should rise back above dividends paid. But for now, the company is still dipping into reserves. This situation could provide a great time for aggressive investors to lock in a double-digit yield.

Carla Pasternak
High-Yield Investing

Par Pharmaceutical (PRX)

chloe — Wed, 09 Dec 2009 21:33:31 +0000

Par Pharmaceutical Companies, Inc. (PRX, NYSE), incorporated in 1978 as Par Pharmaceutical, Inc., is a Delaware holding company that, principally through its wholly owned subsidiary, Par Pharmaceutical, Inc. is in the business of developing, manufacturing and distributing generic and branded drugs in the United States. … Most companies are seeing their revenues and profits shrink in this environment, so when I see a company that has been able to double its revenue over the past year, that certainly grabs my attention. PRX’s revenue nearly doubled to $295 million from $149 million one year earlier. Earnings also surged to $26 million. PRX’s revenue included $161 million in sales of generic Toprol-XL, or metoprolol (the brand version is Lopressor), which is used to treat angina, high-blood pressure, and heart failure. Par Pharma has recently won regulatory approval to sell its tramadol product, a generic version of the painkiller Ultram. According to my numbers, PRX should be selling in the low $50s over the next three to five years. It is currently trading around the mid $20s; so PRX has large upside potential. Place a sell stop at 25% below your entry price. As the stock rises, continue to raise your stop so that you are trailing the Friday close by 25%.

Dennis Slothower
Stealth Stocks

Citigroup (C)

chloe — Fri, 04 Dec 2009 20:43:09 +0000

We must admit that on the face of it, an investment in Citigroup (C, NYSE) seems tenuous given the continued economic downturn. However, on a price-to-book basis, Citigroup is cheap trading at 0.9 times tangible book value. In fact, among peers, both Citigroup and Bank of America are the only big banks that trade as such which is likely why John Paulson has made such a big wager on their eventual return from the abyss. And with Citigroup’s “liquidation” price of just $4.47, we believe a long-term investment in the bank makes sense from a value perspective. What’s more, with a return to profitability, Citigroup should eventually move beyond the crisis with a tighter business model as it focuses on a few core areas, casting aside the businesses that cost it heavily during the bubble. In the short term, we also think that a planned move towards a TARP repayment and the delay in FASB 166/167 will be enough to boost the stock as the company’s earnings and loan loss provisions improve. As such we rate Citigroup as a buy below $4.12.

Steve Christ
The Wealth Advisory