Huntsman: Company Wins Court Ruling

Profitable Readings recommended Huntsman Corp on June 19. SEE Post. The stock has surged nearly 75% today on news it has won its court hearing against Hexion. Payments regarding the merger have yet to be worked out. Yet, this bodes well for the future of the stock.SEE Bloomberg Article.

IHS Inc: The Next Thomson

Recommendation:

IHS, a leader in providing proprietary research information, should continue to see its revenues rise as it continues to be a buyer of quality companies as evidenced by the announcement of its recent acquisition of Global Insight.

Analysis:

• Back in the mid 1990’s it appeared that Thomson owned every financial application used by the investment banking community. If it did not own it they would soon. Thomson moved quickly to consolidate its position with the acquisition of Primark and later on with Nelson’s Information Group. IHS appears to be heading in the same direction. On Friday IHS announced it would be acquiring economic research provider Global Insight. IHS may become the new Thomson for the decade.
• IHS’s move to acquire a company in a uncertain market is a positive sign. Its acquisition of Global Insight adds yet another top quality brand to its collection of companies which includes Cambridge Research Associates. Cambridge Research is considered one of the leading research firms covering the energy industry.
• The company has had very good year over year revenue numbers. In its’ third quarter announcement on September 18, it raised its 2009 estimates.

Prediction:

The stock currently trades at 49.96. Ticker (IHS). The PE is 34.64. Expect the stock to reach 55 in six months(March 22, 2009).

OptionsXpress: Future Looks Bright

Recommendation:

OptionsXpress, which provides electronic option trading for individual investors, should continue to see its revenue grow as long term interest in the stock market will not wane.

Analysis:

• The stock market, despite the recent turmoil of the past week, is not going away. In fact, stock markets around the world continue to increase in popularity among people who view them as a place for creating wealth. As these markets grow there will be need and interest for new financial instruments to meet this demand. Options are one of these instruments that will fill that void.
• The company was just named to Fortune ” Top 100 Fastest Growing Companies.” Influential independent research provider Red Chip Review also maintains coverage of the company. Red Chip Review has been a leader in locating rising stocks and was one of the first to recognize the growth of high flier Iomega.
• For the 2Q results ending June 30, 2008 the company reported that it was able to maintain a 60% pre-tax margin in spite of the uncertainty in the markets.

Prediction:

The company currently trades at 23.45. Ticker (OXPS). The PE is 14.57. Expect the stock to reach 31 in six months(March 21, 2009).

***Weekend Edition*** September 21, 2008

Special Commentary: The Future of Wall Street

The events of the last week on Wall Street have lead many to compare the current state of markets with that of the Crash of 1907, 1929, 1987 and The Recession of 1990-1991. It am not sure which analogy is correct. However, the emerging theme that arises is that Wall Street survived each one. This may seem like an obvious observation, yet one that deserves being stated as many suggest we are “in unchartered territory” or that “Wall Street model is broken.” I tend to agree with Evan Newmark of the Wall Street Journal who suggests what we are witnessing is the decline of old firms and the rise of new ones. See: “Dear Main Street a Letter of Explanation from Wall Street.” Harvard professor Niall Ferguson also makes this case arguing that we are seeing a “Darwinian” process play out with perhaps hedge funds being the largest beneficiares. In addition to hedge funds, I believe, smaller players such as Jefferies, Moelis, and Lazard stand to gain from the coming Wall Street shakeup. Wall Street, as financial columnist Andy Kessler notes, is the “ultimate chameleon” and will remerge selling new products when the dust settles. Wall Street is the ultimate survivalist.

OYO Geospace: Oil’s Lifeline

Recommendation:

OYO Geospace, whose products produce 4-D seismic images of potential oil fields, should see its revenues continue to grow as oil companies come under increasing pressure to locate more oil.

Analysis:

• Fortune Magazine just listed the company in its “100 Fastest Growing Companies.” The magazine also went a step further by listing the company as one of its six stocks to buy now.
• The venture capital field is moving at a fast and furious pace to put money into companies exploring the alternative fuel space as well as wind, energy, and ocean and tidal power. The reality is that many of these ventures will ultimately fail. In fact most future inventions can be viewed as rather improvements on an existing product. What is most realistic is the development of some alternative fuel sources. However, oil as a commodity will not go away overnight.In fact if products such as OYO’s can increase the discovery of oil to the point where oil becomes cheap again this may in fact stall and interest in developing alternative sources.
• The company’s third quarter earnings announced in August beat expectations. The company’s management noted that the backlog remained solid.

Prediction:

The stock closed at 44.40. Ticker (OYOG). The PE is 17.17. Expect the stock to reach 54 in six months (March 19, 2009)

***Weekend Edition*** September 13, 2008

I attended the DNI Open Source Conference this past weekend. The conference was well attended with over several hundred people and had an all star panel of experts from the government, academia, and the private sector. Much of the content highlighted existing and new angles being covered by open source practitioners. For the relevancy of this site I am going to discuss the presentation given by George Hoguet. He is a Managing Director of Senior Portfolio Manager specializing in Emerging Markets at State Street Capital. In his talk he touched up the theme of both information overload and the speed at which everyone is trying to make sense of the same information simultaneously. He mentioned he currently receives over 150 emails every day informing him of what is going on in the world. However, Hoguet also noted there are 400,000 Bloomberg terminals in the world all competing against one another with the same information. In particular, he referenced the book ” High Performing Investment Teams” by Jim Ware and Jim Dethmer. In the book the authors contend there are 6 traits high performing teams possess. These are:

• Curiosity
• Accountability
• Candor
• Authenticity
• Awareness
• Genius
• Appreciation

Sonic Foundry: Riding The New Multimedia Wave

Recommendation:

Sonic Foundry, the once high flying tech stock, seems to have recovered momentum as more educational institutions and companies adapt its streaming media product for distance learning and training and development.

Analysis:

• I came across this company in the course of looking up information on the Huntsman/ Hexion trial. Huntsman was recommended on June 19, 2008 by this blog. SEE: Post. I was curious to see what new information had come to light. In the search I ran into a company, CourtroomLive, who has the ability to provide live court feeds for a price. CourtroomLive, as it turns out, is not a public company. However, its website lists a glowing recommendation for Sonic Foundry. Sonic Foundry provides the technology behind its courtroom feeds. It seems to me that CourtroomLive’s business will only grow. Investors, especially hedge funds, are placing a greater premiun on the need to know what is going on not today, not this hour, but this minute. Thus, Sonic Foundry should be a indirect beneficiary of this movement.
• An examination of the company’s website revealed the company has a roster of a several universities and colleges using its product for podcasting and virtual learning. This is a fast growing and competitive field to be sure. Yet, Sonic appears to be positioned well. Beacon Rock Research sees it as a leader in this category. See report writeup. Companies such as Blackboard operate in this space and it would appear the barrier to entry is quite low. It would not be surprising to see some of the larger technology companies move into this area as online learning gains in popularity. Yet, in addition to the research recommendation Sonic Foundry has also received praise on its products from technology research firm Frost & Sullivan and by Deloitte & Touche.
• The company has experienced a bumpy ride to growth. Its IPO price was $7.50 in 1998 and quickly peaked at 53 on March 17, 2000 just before the NASDAQ peaked later than month. While the company is currently not profitable it recently cut its losses in half according to its 3Q numbers. Given this occured during a difficult market environment suggests it has room to grow.

Prediction:

The stock is currently trading at .67. Ticker (SOFO). The PE is NA. Expect the stock to reach 1.10 in six months (March 9, 2009)

***Weekend Edition*** September 6, 2008

Highlight:

Profitable Readings Stock Market Performance

Introduction:

In the Intelligence Community a high premium is placed on secrecy and analytic confidence. Are you protecting the information? How certain are you of it and its importance? Finally, what is most important is ACCOUNTABILITY. You must stand by your results. Here at Profitable Readings transparency tends to win out over secrecy given the fact that this is a public site and holds no government secrets. A high value is placed on analytic confidence and accountability. To this end the results up until Friday have been posted on the right hand side. This is thanks to the great site IBM has made free and open to the public. It is called “Many Eyes.”

Example:

I highly recommend checking out IBM’s free “Many Eyes.” It allows one to view data in several different formats from decision trees to bar graphs.Here is the original story and the site itself. The New York Times has a great writup on the site.

See the site.

Implication:

The returns have suffered along with the stock market in general. However, Profitable Readings still stands by its investment recommendations in general and believe over a short period of time this portfolio will continue to outperform the general market. This visualization technique allows us to understand the winners and losers and work towards improving the performance.

Autodesk: The Time is Now

Recommendation:

Autodesk, whose core products are software used by architectural and movie studios to design buildings real and imagined, should see its revenues rise as the infrastructure and construction boom plays out around the globe.

Analysis:

• Here is a company I continued to read about in the 1990’s and 2000. I am not familiar with the actual software, but was always impressed how it kept appearing in news articles mentioning its growth. I checked on Google Finance and the stock is up over 280% in the last 5 years. Yet, its potential has not been tapped.

• The company has been the subject of not one but two stories of BusinessWeek this year. Both of which were very positive in their description of the companies from its growth potential to its management decisions. See “Autodesk Turnaround Secret” in March and May “Autodesk Digital Dreams” in June.

• China’s growth is a cliche if the conversation stops there. Yet, if you hone in the specifics and ask yourself how can I profit from it Autodesk provides one such scenario. Here is an excerpt from the Forbes article ” Autodesk shares jump after solid 2Q results.” “Other growth drivers, Dunham added, include the surging infrastructure build-out in China and the Middle East , as well as an “increased awareness” around digital prototyping. Emerging markets made up 18 percent of the quarter’s total revenue, and grew 40 percent from the prior-year period.”

Prediction:

The stock currently trades at 35.00. Ticker (ADSK). The PE is 22.48. Expect the stock to reach 42 by March 3, 2009.