Tag - Xfml

Jim Nelson is the managing editor of the Penny Sleuth e-letter, a free daily newsletter that focuses on small-cap, options and high-growth opportunities. Along with analysts Greg Guenthner and Jonas Elmerraji, Jim is an editor of Penny Stock Fortunes, a premium small-cap newsletter. Jim is also the editor of Lifetime Income Report, Agora Financial's new income investment advisory that launched in February.

 

I recently sat down with him to give us a little perspective on the small-cap market these days. As a big fan of small-cap stocks myself, I'm always interested in hearing what other small-cap experts have to say. Plus he'll share with you a few of the stocks he's watching now. Here's what he had to say…

 

Ian: Jim, first and foremost, "penny stocks" are one of the most misinterpreted investments on the market. How do you define them?

Jim: Ian, the term "penny stock" is misleading to many investors. Basically, we consider penny stocks to be any small caps that trade under $10 per share. But share price isn't the most important thing here — total market capitalization is.

We define a small cap as any stock whose total market cap rings in at $1.5 billion or less. While those cutoffs can be subjective, those are pretty common ranges for penny stocks to trade in.

Ian: Some investors tell me they think penny stocks are risky. What's your response to that?

Jim: Risk is a very important question when it comes to penny stocks. You see, small companies behave very differently than larger companies like GE or Microsoft. That said, the stocks we look at are real companies with growing, sustainable businesses — while they may be subject to somewhat bigger price swings than blue chip stocks, they also bring the potential for much bigger profits because most of their growth is ahead of them.

The vast majority of small caps we look at trade on major exchanges like the NYSE or Nasdaq… only a select few carefully vetted over-the-counter stocks reach our readers.

Ian: How are penny stocks performing in this market?

Jim: For the most part, penny stock performance mirrors the rest of the market. But what's unique about penny stocks is the fact that historically, they lead the charge out of recessions and into prosperity.

That changeover is something we've seen a lot of — probably more than many blue chip investors — in 2009… While we generally focus on broadening Penny Sleuth readers' "investment toolboxes" in our free daily issues, we do occasionally talk about specific small-cap opportunities in the Sleuth. Two of our most recent mentions were Xinhua Finance Media (Nasdaq:XFML) and GP Strategies (NYSE:GPX) — these penny stocks brought in returns of 45% and 77%, respectively, during a rough time for the rest of the market.

And in Penny Stock Fortunes, our premium newsletter, in which we recommend small-cap plays every month, we've closed gains as high as 279% already this year.

Ian: What's your fundamental strategy right now?

Jim: With an economy that's still far from recovered and credit that's hard to come by, three of the biggest metrics we've been targeting have been a strong balance sheet, positive free cash flow and a bargain-priced price-to-book ratio.

In this climate, we're after penny stocks that can thrive and not just survive this economy… that's why a solid balance sheet position and positive free cash flow are so important. We've seen scores of businesses deemed "too big to fail" collect emergency funds from Uncle Sam to keep from going belly up; penny stocks don't have that luxury. That makes ensuring that a small-cap company can pay its bills on the top of our priority list.

And an attractive price-to-book ratio shouldn't be discounted either… when the stock market "fell through the floor" in 2008, it dragged just about every publicly traded company with it — whether or not the company was overvalued at the time. In the aftermath, we've found that there are many companies trading vastly below their fair values. That's true even today. We've been lucky enough to snap up many beaten-down companies early enough that we were left with respectable gains after more mainstream investors realized the value proposition that was going on at the time.

Ian: You said that penny stocks historically lead the way out of recessions… Where will this recovery come from?

Jim: It's funny you mention that — a few months back, we set out to create a small-cap recovery index to determine exactly which industries were leading the charge to recovery, as well as how far along recovery actually is.

The project is a complicated one. It involves the selection of hundreds of stocks and additional metrics like unemployment and savings rates. Once these benchmarks are selected and compiled, we will begin to see a picture developing that will reveal investor sentiment and market performance. Eventually, when enough data are compiled, we will have a more accurate picture of where the market is headed. 

Ian: More specifically, into which industries are you putting your money?

Jim: Two industries sure to set fire to the market over the next few years are "green tech" and telecommunications. Green tech stocks are, obviously, on every investor's mind — especially people who put their money in small-caps. Finding the right ones is the hard part.

For instance, Maxwell Technologies (Nasdaq:MXWL) popped on our radar awhile back. We got in while it was still trading as a penny stock. We've since booked our gains on that one, but we're always watching in case we get a second chance to act.

Telecoms, at least in emerging economies, have the benefit of billions of potential customers and fat profit margins. Just look at Nortel Inversora (NYSE:NTL). This Argentinean telecom is growing its top line in a country where millions of new Internet and phone users are subscribing every year.

Ian: Say someone who had never invested in penny stocks before approached you. What would your first piece of advice be?

Jim: You need a discount broker you can trust — one that won't charge you an arm and a leg to buy and sell stocks. If you are paying $3 per share and getting charged $50 for each trade, you're putting yourself in a huge hole from the start. There are plenty of discount brokers, but you need to know what exactly you're looking for. We keep our Penny Sleuth readers up-to-date on which brokers are out there and of any changes to their fee schedules.

Jim, thanks for spending some time with us today and sharing your thoughts on penny stocks with Daily Profits readers.

Jim Nelson is the managing editor of the Penny Sleuth e-letter, a free daily newsletter that focuses on small-cap, options and high-growth opportunities. Delivered at least five times per week, Penny Sleuth shows readers everything from macroeconomic trends and technical analysis to individual penny stock and option investing ideas.

Click here to start your FREE Penny Sleuth subscription today!

Chinese media company XFMedia (Nasdaq:XFML) said late Wednesday that its management members, including the company’s CEO and four independent directors, purchased shares of the company. The stock is seeing slight upside in pre-market trading as a result, as it’s generally a good sign when management eats its own cooking.

Shares gained 6.4%, or $0.17, to $2.83 in pre-market trading. For detailed price information and recent news stories about XFMedia, click XFML.

This week, we examine a pair of small-cap media plays in China: a broadcaster (providing financial content) and a recruitment firm that publishes one of China's leading newspapers and websites for job seekers.

"With a recession nipping at our heels here at home, is it even possible to find an undervalued, bubble-proof Chinese stock these days?" asks Jonas Elmerraji in The Penny Sleuth.

"One company is looking pretty salacious for the American investment dollar right now: Xinhua Finance Media Limited (Nasdaq:XFML)," he says. The stock has a market cap of $282 million.

The company, he says, is a media operation that creates and broadcasts finance and entertainment content to millions of Chinese people. But, he adds, "Here's the kicker: the company targets high net worth individuals in China. We're talking professionals who can give advertisers the most bang for their buck (or yuan, as the case may be)."

XFML is an "interesting story," he says, because it takes middle-class Chinese consumers on "from all sides," including print, TV broadcasts, online ads and mobile devices that reach more than half a billion people.

"And management's no slouch either. Their CEO was chosen as one of The Wall Street Journal's Top 50 Women in 2004," Elmerraji says.

The company has only been listed here in the United States for the past year, but he says it’s already posted positive earnings, a double-digit profit margin, and some impressive net assets on the books. "How impressive?” he asks. “More . . .

Penwest Pharmaceuticals (Nasdaq: PPCO), Qiao Xing Universal Telephone, Inc. (Nasdaq: XING) and BluePhoenix Solutions, Ltd. (Nasdaq: BPHX) are among the most actively traded companies in Tuesday pre-market trading among those with market capitalizations under $750 million:

Canadian Solar Inc. (Nasdaq: CSIQ), CDC Corp. (Nasdaq: CHINA) and China Finance Online Co. (Nasdaq: JRJC) are among the most actively traded companies in Wednesday pre-market trading among those with market capitalizations under $750 million:

Momenta Pharmaceuticals, Inc. (Nasdaq: MNTA), Jones Soda Co. (Nasdaq: JSDA) and Xinhua Finance Media Ltd. (Nasdaq: XFML) are among the most actively traded companies in Tuesday pre-market trading among those with market capitalizations under $750 million:

The Russell 2000 (NYSE: IWM) and the other major U.S. indices fell today as credit worries resurfaced following news of losses at Citigroup. The small-cap index fell 7.34 points, or 0.92%, to 790.44. The Dow Jones Industrial Average (INDU) lost 51.70 points, or 0.38%, to 13,543.40.

On a year-to-date basis, the Russell 2000 has increased 0.38%, while the Dow has added 8.57% and the S&P 500 has gained 6.04%.

The bears dominated trading today following news that Citigroup Inc. (NYSE: C), the largest U.S. bank, expects to incur additional losses of up to $11 billion after already suffering $6.5 billion in credit-related losses in the third quarter.

Analysts forecast that the credit problems will negatively affect Citibank in the fourth-quarter and lead to a net loss.

That was enough to scare investors, who had been hoping that this summer’s credit problems were in the past. Wall Street will now keep a watchful eye on other banks and brokerages for signs of additional losses stemming from the recession in the U.S. housing sector.

Many financial institutions bought securities backed by subprime mortgages that have become worthless in the wake of falling home prices and a wave of foreclosures by cash-strapped homeowners. No one knows for certain the extent to which the subprime debacle will damage the financial sector.

Multi-Fineline Electronix, Inc. (Nasdaq: MFLX), BioSphere Medical, Inc. (Nasdaq: BSMD) and 1st Independence Financial Group, Inc. (Nasdaq: FIFG) are among the biggest percentage gainers in Monday's trading among companies with market capitalizations under $500 million.

Here are today's biggest percentage gainers:

Origin Agritech Ltd. (Nasdaq: SEED), NPS Pharmaceuticals, Inc. (Nasdaq: NPSP) and ShengdaTech, Inc. (Nasdaq: SDTH) are the most actively traded companies in Thursday pre-market trading among those with market capitalizations under $750 million:

Xinhua Finance Media Ltd. (Nasdaq: XFML), China Technology Development Group Corp. (Nasdaq: CTDC) and China Techfaith Wireless Comm. Tech. Ltd (Nasdaq: CNTF) are the most actively traded companies in Monday pre-market trading among those with market capitalizations under $750 million:

eFuture Information Technology Inc. (Nasdaq: EFUT), Ampex Corp. (Nasdaq: AMPX) and 3SBio Inc. (Nasdaq: SSRX) are among the biggest percentage losers in Thursday's trading among companies with market capitalizations under $500 million.

Here are today's biggest percentage losers:

China Sunergy Co., Ltd. (Nasdaq: CSUN), Uranium Resources, Inc. (NasdaQ:URRE) and NeurogesX Inc. (Nasdaq: NGSX) are among the most actively traded companies in Friday pre-market trading among those with market capitalizations under $500 million:

Shares of Xinhua Finance Media Ltd. (Nasdaq: XFML) are trading higher ahead of the opening bell this morning after the Chinese financial and entertainment media company reported second-quarter revenue above estimates and issued revenue guidance above current expectations.

For the three months ended June 30, Xinhua Finance Media booked revenue of $29.0 million, while four analysts polled by Thomson Financial were expecting revenues of $23.39 million. Revenues increased 222% from a level of $9.0 million in the second quarter last year.

Net income increased 748% year-over-year to $2.8 million from $0.3 million in the second quarter of 2006.

Shares of Alnylam Pharmaceuticals, Inc. (Nasdaq: ALNY) are rising following news this morning that the Cambridge, Mass.-based company has entered into an alliance with Roche Holding Ltd., according to which Roche obtains a non-exclusive license to Alnylam’s technology platform for developing RNAi therapeutics. Alnylam will receive $331 million upfront. The agreement could be worth more than $1 billion when factoring in future milestone payments. RNAi is a natural mechanism that the body uses to inhibit expression of certain genes. Shares are up $9.19, or 60%, to $24.39.

Shares of Novavax Inc. (Nasdaq: NVAX) are rising following news this morning that the Rockville, Md.-based pharmaceutical company has signed a non-exclusive, worldwide license agreement with industry giant Wyeth (NYSE: WYE) to obtain rights to a patent application covering virus-like particle technology for use in human vaccines in certain fields of use. The stock is up $0.02, or 1%, to $3.07.

Shares of Champps Entertainment, Inc. (Nasdaq: CMPP) are gaining following news this morning that the Littleton, Colo.-based operator of dining restaurants will be acquired by F&H Acquisition Corp., the holding company for Fox and Hound Restaurant Group, for $74.8 million. The stock is up $0.77, or 17%, to $5.40.

Shares of Entrust Inc. (Nasdaq: ENTU) are falling on news on July 4 that the Addison, Texas-based provider of security software expects a net loss of $0.02 per share in the second quarter ended June 30, compared to breaking even a year earlier. Analysts were looking for a profit of $0.03 per share. The stock is down $0.25, or 6%, to $3.75.

From all appearances, Xinhua Finance Media (Nasdaq: XFML) seems like the ideal opportunity for small-cap investors looking to profit from China’s lucrative media industry. However, with its string of recent management troubles and unclear acquisition strategy, investors might be wise to look elsewhere.

For sure, China’s media industry would be a great sector to get into. The television, print and Internet segment is definitely booming as firms rake in the cash from advertising revenues. The country’s 2006 total advertising revenue in radio, film and television reached US$14.43 billion, a growth of US$2.63 billion, or 33%, from 2005, according to a recent report by China’s State Administration of Radio, Film and Television. iResearch Consulting Group, an Internet research firm based in Shanghai, estimated Chinese online advertising sales for last year to be around US$555 million, a jump of US$150 million or a 48% increase from 2005. Meanwhile, annual revenues from print-media are at least US$6 billion, with a growth rate of around 6%. 

This growth is fueled by the explosive Chinese economy as advertisers try to tap into the country’s growing middle class, which is now estimated to be at 80 million, an increase of 14.5 million, or 22%, since January 2005. With the prospects of millions in ad revenues, entrepreneurs see enormous business opportunities and have been investing heavily in Chinese media groups for the past few years. Two of the biggest media groups include the Southern Daily Group, based in the southern city of Guangzhou, and the Shanghai Media Group.

So where does that put Xinhua Finance Media? Based simply on its name, it would seem the firm is in a prime position to seize the bounties. As a spin-off from the Chinese government’s official media mouthpiece Xinhua, the company could ideally leverage this unique relationship to navigate through China's archaic bureaucratic hurdles and government controls on the media to seize on emerging opportunities.  For example, it could quickly get government approvals for the opening of new print magazines and acquisitions of media companies, which often take years of waiting, with the application often rejected. There is also definitely a demand for English and Chinese financial news, particularly among the growing hordes of Chinese investors trying to cash in on the current Chinese stock market boom. According to the China Securities Depository and Clearing Corp, the number of individual trading accounts has soared by 30% over the past year, to 95 million.

The Russell 2000 small cap index has remained below the flat line this afternoon. At 2:38 p.m. ET the Russell 2000 had lost 1.08 points, or 0.13%, to 852.33. The Dow Jones Industrial Average was down 16.58 points, or 0.12%, to 13,651.53.

Shares of GSI Group, Inc. (Nasdaq: GSIG) are trading lower following news after the opening bell that the Billerica, Mass.-based supplier of precision technology components has purchased British beryllium mirrors maker Thales Optronics for an undisclosed amount. Additional information was not released.

Shares of G. Willi-Food International Ltd. (Nasdaq: WILC) are rising on news this morning that the Israeli food importer reported a first-quarter 2007 net income of $1.6 million, or $0.15 per share, compared with a net income of $5.5 million, or $0.63 per share, recorded in the first quarter of 2006.  Wall Street was expecting earnings of $0.14 per share.  The stock is up $0.06, or 1%, to $7.96.

The following are the most actively traded companies in pre-market trading among those with market capitalizations under $500 million:

U.S. stocks entered the Memorial Day holiday with solid gains despite news of a worse-than-expected drop in home sales.  The Russell 2000 added 6.13 points, or 0.74%, to 829.93.  The Dow Jones Industrial Average moved up 66.15 points, or 0.49%, to close at 13,507.28.

Shares of Canadian bottling company Leading Brands, Inc. (Nasdaq: LBIX) finished the day in the winners column following news that it beat revenue estimates.  Revenues for the fiscal year ended Feb. 28 were $50.37 million, an increase of 28% compared with $39.3 million in the prior year, Leading Brands reported before the opening bell.  Analysts were expecting the company to bring in $47.08 million.  The net loss for the year was $3.55 million, or $0.23 per share, compared with a net loss of $1.28 million, or $0.08 per share, a year earlier.  However, the company attributed the loss to a one-time charge of $3.2 million associated with the purchase of new plant equipment.  Shares rose $0.42, or 14%, to close at $3.34.

Lincolnshire, Ill.-based Biosante Pharmaceuticals, Inc. (AMEX: BPA) will make a private placement of 2,754,999 million shares of its common stock at a purchase price of $6.00 per share to institutional investors, the company said before the start of trading.  Investors will also receive warrants to purchase 688,750 shares of common stock at an exercise price of $8.00 per share.  Biosante said it expects net proceeds of about $15.6 million, which it will use to expand its Phase III clinical program of a treatment for female sexual dysfunction.  The stock shed $0.35, or 5%, to end at $6.50.

Shares of Abraxas Petroleum Corp. (AMEX: ABP) jumped up in midday trading today and closed with a gain of $0.65, or 18%, to $4.25, on news the San Antonia, Texas-based company will redeem its existing $125 million senior secured notes.  Abraxas will get rid of its debt after a series of transactions that are expected to be completed today.  The sudden infusion of cash came after the company formed a master limited partnership with Abraxas Energy Partners, L.P., which resulted in a net gain of $147.3 million.  The excess funds will be used to fund future drilling operations, the oil and gas explorer said.

These are the biggest percentage gainers in Friday's trading among companies with market capitalizations under $500 million:

Investors turned bullish this morning as U.S. stocks begin to recover from the steep drop on Thursday.

At 10:03 a.m. ET the Russell 2000 had gained 3.07 points, or 0.37 percent, to 826.87.  Dow Jones Industrial Average was up 23.97 points, or 0.18 percent, to 13,465.10.

Nasdaq grabbed headlines after it said it will pay $3.7 billion for Swedish stock exchange OMX AB.  A previous bid for the London Stock Exchange failed.

A report on existing homes sales for the month April by the National Association of Realtors is due this morning.  Investors will turn their eyes on the numbers for clues as to the future development of the U.S. housing market after Thursday’s news that single-family home sales increased the most in 14 years in April.

The following were the most actively traded companies in Thursday's trading among those with market capitalizations under $500 million:

U.S. stocks are little changed this morning following news of a smaller-than-expected rise in durable goods orders in March.

At 9:57 a.m. ET the Russell 2000 was up 0.25 points, or 0.03 percent, to 836.79.  Dow Jones Industrial Average was up 27.22 points, or 0.2 percent, to 13,552.87.

Orders for durable goods increased 0.6% in April, the Commerce Department reported before the opening bell.  That’s below economists’ median estimate of a rise of 1%.  The figures for March were revised upward to 5% from a previously reported increase of 3.7%. 

In other economic news, the number of American worker applying for jobless benefits increased last week.  Jobless claims rose 15,000 to a seasonally-adjusted level of 311,000 during the week ended May 19, the Labor Department said before market open.  Economists were expecting an increase of 17,000.

The following are the most actively traded companies in Thursday's trading among those with market capitalizations under $500 million:

The following were the most actively traded companies in Wednesday's trading among those with market capitalizations under $500 million:

The following are the most actively traded companies in Wednesday's trading among those with market capitalizations under $500 million:

The following were the most actively traded companies in Tuesday's trading among those with market capitalizations under $500 million:

The Russell 2000 ended the day with a new record high close, up 6.27 points, or 0.75%, to 839.92, topping the previous record close of 834.77 on May 9.  Meanwhile, the Dow Jones Industrial Average lost 2.93 points, or 0.02%, to 13,539.95.

Shares of Commerce, Calif.-based Innovo Group Inc. (Nasdaq: INNO) are down despite news this morning that the apparel products maker has entered into a three-year, exclusive distribution and non-exclusive license agreement with Itochu Corp. to distribute and license its Joe’s and Joe’s Jeans branded products in the Japanese market.  Itochu will be obligated to purchase a minimum of $20 million of Joe’s and Joe’s Jeans products for distribution, and will pay a license royalty of 6% of net sales of all bottoms and 5% of net sales of all tops for both men's and women's products.  Shares are down $0.02, or 2%, to $1.03.