2007 was a good year for The 10Q Detective—even Force Protection finally came crashing back to earth.
HITS: 19 Wins
11-09-07. “Albeit several quarters of poor earnings visibility has already been discounted by investors in high-end homebuilder Toll Brothers (TOL-$20.89), a further weakening of demand in key markets and the risk of additional inventory impairment charges reflect our view that new monies should continue to stay on the sidelines.” Current Price: $16.04
11-06-07. “The 10Q Detective brings to the attention of investors that a substantial portion of sales at fast-growing Hansen Natural Corp. (HANS-$58.02) is derived from energy drinks, with more than 89 percent of its 1H:07 sales coming from energy drinks (up from 84.7% of net sales last year)…. Hansen’s management acknowledges that future growth will be even more dependent on the introductions of new energy drinks in the fast-growing, $3.2 billion a year energy-drink market. If the FDA steps in to “leash the beast,” the share price of Hansen Natural could be in for an unhealthy stumble.” Current Price: $42.77
10-24-07. The fact that the market valuation of Millennium Cell (MCEL-$0.62) was composed of promises rather than actual product performance—or the attainment of previously specified timelines—illustrates why the share price has lost about 49 percent in value over the last 52-weeks….The 10Q Detective does not see any BUY catalysts on the event horizon. Current Price: $0.35
09-07-07. Back in September, the 10Q Detective warned its readers that Tilman J. Fertitta, the Chairman and CEO of Landry’s Restaurants, Inc. (LNY-$28.12), was treating the restaurant and hospitality chain like “a personal fiefdom….[and] contrary to management’s expectations, the Golden Nugget casinos were not making up for slower organic growth from the restaurant business.” Current Price: $15.99
08-22-07. “Although the 10Q Detective agrees that Advanced Environmental Recycling Technologies’ (AERT-$1.43) core competency is extracting value from turning recycled plastics into new products, management has yet to demonstrate that it can successfully launch a non-deck product. For example, the Company is behind schedule in launching its new outdoor fencing product (LifeCycle)…. Given the uncertainties as to when and at what pace existing business segments will recover, the 10Q Detective is avoiding purchase of AERT shares.” Current Price: $0.76
08-13-07. “In our view, although Polo Ralph Lauren (RL-$81.71) is trading at a slight discount to other players in the space—a current P/E multiple of 22 times fiscal 2008 EPS and a TTM multiple of 24.97 times, respectively—we believe the stock price fairly values the expected earnings growth.” Current Price: $56.59
06-28-07. “We believe that investors should be concerned about Brooke Corporation’s (BXXX-$14.75) business strategy, which remains dependent on growth via its acquisition strategy. However, this roll-up strategy is founded on some questionable lending practices and a balance sheet that appears inflated (given probable reserve deficiencies).” Current Price: $6.65
06-25-07. “Of equal—or greater concern—to the 10Q Detective, is the questionable accounting practices we have unearthed in our review of iMergent, Inc.’s (IIG-$25.18) quarterly filings.” Current Price: $8.98
05-21-07. “Until the directors and executives start spending less time gazing in front of the store mirrors—and more time looking at how to turnaround this troubled retailer—there are no catalysts in play (such as a sale or spin-off of Barneys) to push Jones Apparel Group’s (JNY-$28.57) share price back above the $30 level.” Current Price: $14.03
05-07-07. “The stock of Reddy Ice Holdings, Inc.’s (FRZ-$30.07) is currently trading near 52-week highs, buoyed by investors attracted to Reddy Ice’s 5.5% dividend yield. However, we believe investors ought not ignore that the dividend payout is governed by strict agreements governing Reddy Ice’s debt—and the Company is highly leveraged, too.” Current Price: $21.81
04-25-07. “We have several concerns regarding the quality of Books-A-Million (BAMM-$17.40) sales/earnings. In our view, growth is actually being driven by artificial and/or temporary sources.” Current Price: $10.05
04-19-07. “In my view, the FDA will not give the nod to ADVEXIN until Introgen Therapeutics’ (INGN-$5.27) scientists (i) identify a set of prognostic indicators associated with high response rates and increased survival in prior Phase 2 clinical trials of Introgen's ADVEXIN therapy and (ii) design, enroll, and carry-out a NEW clinical trial of aforementioned cancer patients with the predictive biomarkers….Sadly, the empirical data presented—to date—suggests that the pocketbooks of Introgen insiders are doing better than the health of the patients in the Company’s cancer trials.” Current Price: $2.66
04-18-07. “The crux of this exercise is to demonstrate that real estate mogul Donald cares about Donald—not the shareholders of the casino holding company [Trump Entertainment Resorts (TRMP-$17.10)] bearing his name.” Current Price: $3.55
04-07-07. “The 10Q Detective would prefer to see visible signs of a turnaround—like sustainable improvements in cash flow and margins—before committing monies to electronics retailer Circuit City Stores, Inc. ($18.47).” Current Price: $4.30
03-28-07. The 10Q Detective sells short 500 shares of USANA Health Sciences (USNA-$50.10). Current Price: $35.00
03-12-07. “Given the lack of share-net visibility, competitive forces in Asia [market share vs. margins], and the Kim family influence—if downturn lasts longer than anticipated, debtload [high leverage and restrictive loan covenants] could be problematic. In our view, risk-reward favors a cautious outlook on Amkor Technology (AMKR-$12.02). Current Price: $7.14
03-02-07. “with slowing organic growth, investors might want to temper their expectations—given the coming cycle of lower margins, increasing financial leverage, and stated risks that go with the expansion into new markets….In our view, given the lackluster performance of new restaurants, Red Robin Gourmet Burger (RRGB-$39.13) is “Mo-Cheese-than-Burger,” and its stock warrants no better than a Market Perform.” Current Price: $27.80
02-07-07. “Despite a lack of earnings’ visibility, as previously mentioned, the share price of Toll Brothers ($34.43) is responding to an uncertain turnaround in the housing sector. For investors looking to buy Toll Brothers, we suggest a wait-and-see approach.” Current Price: $16.04
01-08-07. “the current valuation of Fording Canadian Coal Trust (FDG-$19.95) is unjustified, and presents a compelling inflection point for purchase.” Current Price: $38.15
Misses: Two Losses
05-16-07. “Commercial roofer Aduddell Industries (ADDL-$0.56) is implementing vertically integrated growth strategies that—if successful—should produce the catalysts necessary to drive organic and acquisition-based growth.” Current Price: $0.09
07-20-07. “Flamel Technologies S.A. (FLML-$21.72) is a drug delivery company with expertise in polymer chemistry. In our view, recent price weakness is temporary, and affords investors an inflective buying point.” Current Price: $9.40
HITS: 19 Wins
11-09-07. “Albeit several quarters of poor earnings visibility has already been discounted by investors in high-end homebuilder Toll Brothers (TOL-$20.89), a further weakening of demand in key markets and the risk of additional inventory impairment charges reflect our view that new monies should continue to stay on the sidelines.” Current Price: $16.04
11-06-07. “The 10Q Detective brings to the attention of investors that a substantial portion of sales at fast-growing Hansen Natural Corp. (HANS-$58.02) is derived from energy drinks, with more than 89 percent of its 1H:07 sales coming from energy drinks (up from 84.7% of net sales last year)…. Hansen’s management acknowledges that future growth will be even more dependent on the introductions of new energy drinks in the fast-growing, $3.2 billion a year energy-drink market. If the FDA steps in to “leash the beast,” the share price of Hansen Natural could be in for an unhealthy stumble.” Current Price: $42.77
10-24-07. The fact that the market valuation of Millennium Cell (MCEL-$0.62) was composed of promises rather than actual product performance—or the attainment of previously specified timelines—illustrates why the share price has lost about 49 percent in value over the last 52-weeks….The 10Q Detective does not see any BUY catalysts on the event horizon. Current Price: $0.35
09-07-07. Back in September, the 10Q Detective warned its readers that Tilman J. Fertitta, the Chairman and CEO of Landry’s Restaurants, Inc. (LNY-$28.12), was treating the restaurant and hospitality chain like “a personal fiefdom….[and] contrary to management’s expectations, the Golden Nugget casinos were not making up for slower organic growth from the restaurant business.” Current Price: $15.99
08-22-07. “Although the 10Q Detective agrees that Advanced Environmental Recycling Technologies’ (AERT-$1.43) core competency is extracting value from turning recycled plastics into new products, management has yet to demonstrate that it can successfully launch a non-deck product. For example, the Company is behind schedule in launching its new outdoor fencing product (LifeCycle)…. Given the uncertainties as to when and at what pace existing business segments will recover, the 10Q Detective is avoiding purchase of AERT shares.” Current Price: $0.76
08-13-07. “In our view, although Polo Ralph Lauren (RL-$81.71) is trading at a slight discount to other players in the space—a current P/E multiple of 22 times fiscal 2008 EPS and a TTM multiple of 24.97 times, respectively—we believe the stock price fairly values the expected earnings growth.” Current Price: $56.59
06-28-07. “We believe that investors should be concerned about Brooke Corporation’s (BXXX-$14.75) business strategy, which remains dependent on growth via its acquisition strategy. However, this roll-up strategy is founded on some questionable lending practices and a balance sheet that appears inflated (given probable reserve deficiencies).” Current Price: $6.65
06-25-07. “Of equal—or greater concern—to the 10Q Detective, is the questionable accounting practices we have unearthed in our review of iMergent, Inc.’s (IIG-$25.18) quarterly filings.” Current Price: $8.98
05-21-07. “Until the directors and executives start spending less time gazing in front of the store mirrors—and more time looking at how to turnaround this troubled retailer—there are no catalysts in play (such as a sale or spin-off of Barneys) to push Jones Apparel Group’s (JNY-$28.57) share price back above the $30 level.” Current Price: $14.03
05-07-07. “The stock of Reddy Ice Holdings, Inc.’s (FRZ-$30.07) is currently trading near 52-week highs, buoyed by investors attracted to Reddy Ice’s 5.5% dividend yield. However, we believe investors ought not ignore that the dividend payout is governed by strict agreements governing Reddy Ice’s debt—and the Company is highly leveraged, too.” Current Price: $21.81
04-25-07. “We have several concerns regarding the quality of Books-A-Million (BAMM-$17.40) sales/earnings. In our view, growth is actually being driven by artificial and/or temporary sources.” Current Price: $10.05
04-19-07. “In my view, the FDA will not give the nod to ADVEXIN until Introgen Therapeutics’ (INGN-$5.27) scientists (i) identify a set of prognostic indicators associated with high response rates and increased survival in prior Phase 2 clinical trials of Introgen's ADVEXIN therapy and (ii) design, enroll, and carry-out a NEW clinical trial of aforementioned cancer patients with the predictive biomarkers….Sadly, the empirical data presented—to date—suggests that the pocketbooks of Introgen insiders are doing better than the health of the patients in the Company’s cancer trials.” Current Price: $2.66
04-18-07. “The crux of this exercise is to demonstrate that real estate mogul Donald cares about Donald—not the shareholders of the casino holding company [Trump Entertainment Resorts (TRMP-$17.10)] bearing his name.” Current Price: $3.55
04-07-07. “The 10Q Detective would prefer to see visible signs of a turnaround—like sustainable improvements in cash flow and margins—before committing monies to electronics retailer Circuit City Stores, Inc. ($18.47).” Current Price: $4.30
03-28-07. The 10Q Detective sells short 500 shares of USANA Health Sciences (USNA-$50.10). Current Price: $35.00
03-12-07. “Given the lack of share-net visibility, competitive forces in Asia [market share vs. margins], and the Kim family influence—if downturn lasts longer than anticipated, debtload [high leverage and restrictive loan covenants] could be problematic. In our view, risk-reward favors a cautious outlook on Amkor Technology (AMKR-$12.02). Current Price: $7.14
03-02-07. “with slowing organic growth, investors might want to temper their expectations—given the coming cycle of lower margins, increasing financial leverage, and stated risks that go with the expansion into new markets….In our view, given the lackluster performance of new restaurants, Red Robin Gourmet Burger (RRGB-$39.13) is “Mo-Cheese-than-Burger,” and its stock warrants no better than a Market Perform.” Current Price: $27.80
02-07-07. “Despite a lack of earnings’ visibility, as previously mentioned, the share price of Toll Brothers ($34.43) is responding to an uncertain turnaround in the housing sector. For investors looking to buy Toll Brothers, we suggest a wait-and-see approach.” Current Price: $16.04
01-08-07. “the current valuation of Fording Canadian Coal Trust (FDG-$19.95) is unjustified, and presents a compelling inflection point for purchase.” Current Price: $38.15
Misses: Two Losses
05-16-07. “Commercial roofer Aduddell Industries (ADDL-$0.56) is implementing vertically integrated growth strategies that—if successful—should produce the catalysts necessary to drive organic and acquisition-based growth.” Current Price: $0.09
07-20-07. “Flamel Technologies S.A. (FLML-$21.72) is a drug delivery company with expertise in polymer chemistry. In our view, recent price weakness is temporary, and affords investors an inflective buying point.” Current Price: $9.40
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