Market Monitor

In case you missed it, the Iowa caucuses declared Hillary the winner for the Democrats and Ted Cruz upset The Donald on the GOP side. Hillary is pretty much a foregone conclusion for the Democrats, but the GOP race is much more interesting. If our two cents matter, we believe Marco Rubio is the guy for the Republicans, and in our opinion, the only candidate who can beat Clinton. He is young, popular, from the crucial state of Florida and has the chance to swing some of the Hispanic vote back to the GOP, where they were clobbered in 2008 and 2012. There can be no denying this demographic is growing exponentially and will be critical in politics and business far into the future.

Below is the one-year chart for Hemisphere Media Group (NASDAQ – HMTV - $14.18).

For those of you still shoveling out of the snow on the east coast, we will keep our head in the ‘clouds’. This is a tough market for small caps, as we mentioned in the Guide, but now is the time to keep your head up as there are definitely buying opportunities out there both for the long term and to ride the volatility in a short term trade.

Below is the two-year chart for Synchronoss Technologies, Inc. (NASDAQ – SNCR - $30.88) which illustrates one of our favorite technical signals, the head and shoulders pattern at a buying trough.

The market chaos continues, but as we mentioned in the Guide this week, we like technology in the small cap space. Making the right pick is crucial. Below is the 2-year chart for IntraLinks Holdings, Inc. (NYSE– IL - $8.19).

Happy New Year! We started off with a Chinese meltdown on Monday that created a tsunami in Europe and the U.S. for a big sell off. We do not need to tell our readers that we have entered a rough market for small caps, a correction according to optimists and bear market for pessimists. The time to find a stock that got the snot beat out of it last year but offers value is in order.

We looked in our go to sector, biotech. Below is the one year performance chart for CryoLife, Inc. (NYSE – CRY - $10.28) that shows the stock is 16% from its $12.29 high a year ago.

In case you have not heard, Star Wars: The Force Awakens comes out Friday. We mentioned how the movie could ‘dominate’ stocks, but we were speaking more about Hollywood and Disney (NYSE- DIS) in particular. With the market turmoil and imminent Fed announcement we thought we would look for value in the microcapsector, biotech.

The chart below illustrates and approximate head and shoulders pattern that has emerged for Corindus Vascular Robotics, Inc. (NYSE – CVRS - $3.03) over the last six months. Now may be time for a trade.

Our theme for Monday’s Goldman Guide was ‘Opportunity Knocks’. It is impossible to ignore the run that gun manufacturer Smith &Wesson Holding Corporation (NASDAQ – SWHC - $21.390) has had over the past week or so.

We gave you our three winning sectors in Monday’s Guide, which included technology. We decided to take a look at one of our previous picks and stock we have followed over the last few years. This was an attempt by our part to look at one of our big winners from the past, just as some of the Hollywood studios are doing this Holiday season as we also mentioned in the Guide.

In March 2013 we first featured Rambus, Inc. (NASDAQ – RMBS - $11.77) at a price level of $5.39. We wrote about the stock a few more times with the last update coming in April of 2014. The chart below illustrates the performance of RMBS over the last two years. The stock is up a fantastic 118%

RMBS 2-Year Chart

(Source: www.otcmarkets.com)

Rambus’ technology solutions include memory, chip interfaces and architectures, end-to-end security, and advanced LED lighting. The Company focuses on designing, developing, and licensing technology that is related to memory and interfaces; and providing various services, including know-how and technology transfer, product design and development, system integration, and other services. The Company also focuses on the design, development, and licensing of technologies for chip and system security, and anti-counterfeiting, as well as offering semiconductor cores under the CryptoFirewall brand.

The question is what to do from here? The ‘Oracle of Omaha’ would tell us not to get greedy.

First, we will look at the bad. The forward P/E is 20 and the trailing is 7 with consensus estimates for top line revenue to decrease a percentage or two over the next two years from the 2014 level of $297 million. On the technical side, a short float of 16% is also relatively high.

What do we like about RMBS? The deal flow in a rapidly expanding industry continues to remain solid. Earlier this week LG Electronics (LGE), a global technology leader in consumer electronics, home appliances and mobile communications, announced it has licensed the CryptoManager™ security platform from Rambus for its next-gen mobile devices. Another huge winning area for Rambus is margins. The Company has an operating margin of 10x the industry average with 21%. The gross margin of 85% is nearly 2.5x the industry average of 32%. Finally, cash on hand versus debt as of September 30^th was $363 million versus $158 million respectively. This is crucial in demonstrating optimal cash management and capital utilization to keep product development churning at high volume.

In any event it may be time to at least take some profit or lock in some gains with your favorite option strategy. We think RMBS has more room into 2016 and approaches $13 in early 2016.

Have a great day!

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In Monday’s Goldman Guide we opined about the defense sector.  The Paris terrorist attacks unfortunately highlight the scary world we all share.  We feel that governments all over the world will look to enhance counter terrorism efforts with increased spending.  Companies with unique products or services should benefit here.

First and foremost, we want to wish all of our service men and women, past and present, a blessed Veterans Day. We have the freedoms we do because of you, and cannot thank you enough.

In this week’s Goldman Guide we started talking about the end of year dynamics in the market, particularly in small can microcap stocks. Now is the time to look at stocks that have been downtrodden this year that look to be candidates for 2016 accumulation.

Illustrated below is the one year chart for Briggs & Stratton Corporation (NYSE – BGG - $17.55) that indicates the stock has been up and down this year, but overall down 12% from the opening of $20.21 on January 1^st.

One of the reasons to invest or trade small cap stocks in a satellite portfolio is to avoid the hype. Large cap or mega cap stocks draw a lot of attention and noise and it is sometime difficult to filter through all the gobbledygook. Well, today we are going to try and tackle a high profile stock and offer our thoughts.

Fitbit, Inc. (NYSE – FIT - $37.52) has been all the rage since its IPO in June.