|Written by Rob Goldman|
The United Schmucks of America
More than just about anything else in life, I hate being wrong. Coming in at a close second is when people speak to me in a condescending manner. Maybe that is why I have little respect for most politicians. I am convinced they think we are a bunch of morons. They treat us as if our country is really comprised of the United Schmucks of America. Last week, a couple pieces of news hit which, as Peter Griffin would say, really grind my gears. I will address them ad seriatim.
The news that got some excited and others fired up was word that President Obama is going on the offensive to drive down the price of the gasoline we pay at the pump by attacking oil speculators. Frankly, this bothers me on two levels. First, dude, where have you been? Second, what gives you the right to attack a segment of the free markets that represents a secondary issue? I am not so naïve to think that they are not culpable but there are other factors here.
Wabbit Season, Duck Season
We have talked recently about divergence and man was it evident last week. The Dow, S&P 500 Index, and the Russell 2000 Index all eked out positive returns while NASDAQ dropped. Somewhat mixed earnings reports, economic concerns in Europe and slightly negative jobless claims numbers were enough to keep things interesting.A massive number of companies are reporting quarterly financial results this week. That means this week's performance is likely to imitate one of the classic Bugs Bunny/Daffy Duck cartoons.
On the one hand, you have bulls proclaiming wabbit season (positive earnings reporting) and the bears (referring to earnings misses) proclaiming duck season, as more bad news is to come. This will likely go back and forth on Monday and Tuesday as all eyes will be on Apple (NASDAQ—AAPL) which, down 11% from its high, is already in the correction phase. The bigwigs there will have to have a good quarter, positive comments and success rallying support, when they release 2Q12 results after Tuesday's close. If they don't succeed it will likely be duck season. Consensus calls for $36.63 billion in sales and EPS of $10.00 per share. (Hard to fathom.)
Interestingly, the group that showed the greatest strength last week was the health care space and biotech in particular. The group rose 2.6% while technology stocks recorded the worst performance, dropping 0.7%. We should note that year-to-date, the two groups have been neck-and-neck. However, it has been our experience that technology stocks tend to have some weakness beginning mid-2Q. If you follow a sector rotation strategy, we would overweight in health care for the near term.
Our favorite health care stock covered via our Opportunity Research is Nuvilex, Inc. (OTCQB: NVLX—$0.064). The stock is behaving quite well and just received favorable write-ups by The Green Baron and The KonLin Letter. We are considering buying virtual white rice to throw at Nuvilex President Dr. Bob Ryan as we may be getting close to a wedding: the marriage of Nuvilex and SG Austria.
Separately, a month ago, we highlighted 2 stocks that were in a bidding war. One of these battles has now ended. Great Wolf Resorts (NASDAQ—WOLF—$8.06) will be bought by Apollo Mgmt for $7.85 per share, $2.85 more than their original bid and 40% higher than WOLF's price when we highlighted it. A nice 4-week return.
GSCR Select Research: Great Way to Play Real Estate
There are companies providing tools and technology to assist real estate agencies in dramatically enhancing their respective agencies and businesses, which have helped shed those old-school images. One such firm is Market Leader, Inc. (NASDAQ – LEDR—$3.65). Market Leader provides real estate professionals with all of the tools needed to manage and grow their practices. LEDR provides innovative technology and marketing solutions to over 100,000 real estate agents, franchisors, and brokerages. LEDR's end-to-end solutions are sold as a subscription-based software platform. This platform includes contact management software, personalized websites, a marketing suite, lead generation services, and training software that teach users how to convert interested prospects into clients.
Firms of all sizes use the Company's valuable offerings. Last month, Century 21 Real Estate LLC, the franchisor of the world's largest real estate sales organization, announced that LEDR will provide its U.S.-based real estate professionals with new, state-of-the-art marketing that includes a fully integrated customer relationship management (CRM) platform. Market Leader will provide Century 21 with a comprehensive solution to enable sales professionals to design, create, and manage marketing campaigns, to actively engage contacts and clients, and to cultivate relationships from the initial lead through to a successful home sale. The new marketing platform will also empower Century 21 brokers with an integrated office dashboard that will be fully integrated into the company's intranet to create a seamless experience for offices and agents.
In addition to Tier 1 clients, the Company acquired a valuable asset in late 2011, www.realestate.com, which, along with other sites, attracts millions of prospective home buyers and sellers. LEDR also bought the industry's leading online marketing entity and its leading social network for real estate professionals, which boasts 200,000 users.
For 2011, LEDR recorded $34M in revenue and management expects to achieve significant top-line growth in 2012, on the strength of its leading technology offerings in the space, along with meaningful operating leverage, which will enhance EBITDA. If the real estate industry achieves any kind of rebound this year, LEDR is a cheap pure play on the industry. With $29 billion spent annually on marketing and technology services each year, LEDR is in a great position to chip away at this business and eke out strong market share gains.
There is not a great deal of insider ownership here but institutions own well over half of the stock. In fact, Legg Mason, which has a buy and hold strategy, owns nearly 20% of the outstanding shares. While near its 52-week high of $3.72, we believe the stock can zoom through the $5.00 level, if Q1 results, due out on May 1st, are solid. After all, after accounting for the institutional and insider ownership, there are just 6.5 million shares left in the public float.
Until next week…
Analyst: Robert Goldman
Rob Goldman founded Goldman Small Cap Research (GSCR) in 2009. Rob has over 20 years of investment and research experience as a senior research analyst and as a portfolio and mutual fund manager. During his tenure as a sell-side analyst, he was a senior member of Piper Jaffray's Technology team. Prior to joining Piper, Rob led Josephthal & Co.'s Emerging Growth Research Group. Rob has also served as Chief Investment Officer of two boutique investment management firms, where he managed Small Cap Growth and Balanced portfolios and The Blue and White Fund. As an investment manager, Rob's model portfolio was once ranked the 4th best small cap growth performer in the U.S. by Money Manager Review. In addition to his work at GSCR, Rob is the editor of Penny Stock Junction (www.pennystockjunction.com.)
It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company's individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations.
The Firm has not been compensated nor does it expect to be compensated for the any research services for any of the other Select Research companies mentioned in this newsletter. Through its Opportunity Research product, the Company has been compensated $8,000 by Nuvilex, Inc. for research services.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.
This report or newsletter does not take into account the investment objectives, financial situation, or particular needs of any particular person. This report or newsletter does not provide all information material to an investor's decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with the FINRA or with any state securities regulatory authority.
ALL INFORMATION IN THIS REPORT OR NEWSLETTER IS PROVIDED "AS IS" WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com.