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HYC – Hypercom

Disclaimer: Do your own research prior to making any investment/trading decisions. You must assume I am biased with every idea presented on this website.

Hypercom Corporation is a provider of electronic payment and transaction solutions and services at the point of transaction. The Company offers electronic transaction solutions through a suite of electronic transaction products and software, and a range of support and maintenance services.

Recent Headlines

HYC is currently trading at a market capitalization of approximately $208mm with 55mm shares outstanding. See the Google Finance description HERE.

I found HYC by running a proprietary screen I developed on the website FinViz. What I was initially looking for was momentum with both insider and institutional buying. According to FinViz, HYC has both with 10%+ insider ownership and 48%+ institutional. Another important factor was to find a stock whose underlying company would experience significant benefit from a continuing recovery in consumerism. HYC’s business is in securely handling financial transactions so that was dead-on.

Once I had completed the screen and received my universe of stocks, I looked through the charts to see where the momentum was. HYC’s six-month daily chart showed up immediately as having solid price action following a recent breakout above $3.50/share. In addition the price has shown a pattern of quiet accumulation over the past week or so as the price has risen 10%+ with barely more than 250k shares traded on the highest two days. From where I sit, the path of least resistance is upward toward $5.00/share (which is also where options and warrants are exercisable – click HERE, see Notes to Consolidated Financial Statements).

Then I dug into the financials a little. As of their most recent 10Q (September 2009), HYC had approximately $51mm in cash with $83mm in accounts receivable. This compares to $127mm in current liabilities. Put this together and in the short term, HYC has sufficient liquidity with a quick ratio in excess of 1.0. One key positive about HYC was their ability to yield net cash from operating activities of $17mm+ for the nine months ended September 2009. This allowed them to increase their cash position by $15mm+ over those nine months.

From a qualitative standpoint, the company serves their customers on an ‘end-to-end’ basis, from the transaction’s initiation device to the data transport and processing. A large draw for customers is the level of security offered. As the internet becomes more relevant in peoples’ everyday lives security is becoming a larger and larger issue. The companies that offer enhanced security options will succeed. Some of HYC’s customers include household names such as McDonalds, Bank of America, Dominos Pizza, CVS, Ikea, and Bose.

Below are two charts. The first is a six-month daily and the second is a two-year weekly. The daily chart is showing solid, upward momentum. On the weekly chart, the $5.00 level is the next real level of resistance. Until then it looks like the path of least resistance is to continue upward.

Date of Idea: January 18, 2010

Price at Idea: $3.79

Target Profit Exit: $5.00

Loss Exit: $3.25

Disclaimer: Do your own research prior to making any investment/trading decisions. You must assume I am biased with every idea presented on this website.

Novelos Therapeutics Inc is a biopharmaceutical company focused on the treatment of cancer. The lead candidate, NOV-002, is currently in Phase III development for lung cancer under a Special Protocol Assessment and Fast Track.

Recent Headlines

NVLT is currently trading at a market capitalization of approximately $114mm with 64mm shares outstanding. See the Google Finance description HERE.

The story with NVLT is strictly a catalyst one. They’re currently in a Phase III clinical trial for a non-small cell lung cancer therapy. The goal of this trial is to increase longevity without increased toxicity. An in-depth overview of the trial can be found HERE. Basically, the primary endpoint in survival is 12.5 months vs 10 months. Full enrollment of 840+ patients was reached in March 2008. While nothing concrete can be extrapolated from this, if we look at the numbers we see the following:

  • 840+ patients enrolled as of March 2008.
  • 725th event (death) just occurred recently
  • Taking the final group of enrollees from March 2008, we fast forward to the 725th event which just happened. The time frame between the two is in excess of 18 months. Again, take with a grain of salt since we have no actual data yet and there could have been an aberration in the data, but this is something I view as being worthy of optimism.
  • Read THIS ARTICLE which discusses Pfizer’s decision to stop their own trial and offers some color on NVLT

I believe the reward/risk is worthwhile here as the odds seem to be pointing in the direction of a favorable outcome.

Below is a 6-month daily and 2-year weekly chart. NVLT ran up significantly on the recent recognition that their trial was still ongoing, which implied the patients were living longer than expected. Since then it has come under pressure and at the moment is in a definitive downtrend. However there is support at the $1.70-$1.75 level. Everything hinges on the data results from the trial.

Date of Idea: January 17, 2010

Price at Idea: $1.77

Target Profit Exit: $5.00+

Loss Exit:$1.00

Disclaimer: Do your own research prior to making any investment/trading decisions. You must assume I am biased with every idea presented on this website.

Implant Sciences Corporation develops and commercializes explosives trace detection (ETD) solutions for transportation, critical infrastructure, and ports and borders security, as well as force protection and emergency response.

Recent Headlines

IMSC is currently trading at a market capitalization of approximately $9.0mm with 15.5mm shares outstanding. See the Google Finance description HERE.

The story behind IMSC is a long term one, in my opinion. While there is the potential for a significant return in the short term my thesis on this name revolves around the company becoming one of two things: an acquisition target or a serious player in the domestic security market. Their technology is a very interesting, useful, and increasingly relevant one on a global scale.

IMSC has a seemingly great product line with multiple advantages over what’s currently available in the explosive detection device industry. Their product offers a lower cost of ownership, a larger and customizable catalog of threatening substances, non-contact and non-radioactive sample collection, and rapid reset once a threat has been detected.

I found a couple notable pieces to IMSC’s story. China’s decision to employ this technology for security at the recent Olympics was a huge positive, in my opinion. China took the Olympics extremely seriously as it was their chance to gain further respect as a true global player. Their use of IMSC’s devices tells me that the technology is indeed of the highest quality as China would have assuredly only used the best product available for the Games. As a follow up China recently ordered $400,000 worth of further devices which is evidence of quality through the action of the ‘repeat customer’. The next notable event is occurring as I type. The domestic legislation mandating that 100% of cargo on passenger flights be scanned beginning in August 2010 will prove to be a huge boon for one of these explosive detection companies (ICXT, OSIS, IMSC). Based on the comparative advantages of IMSC’s product over its competitors, I suspect IMSC will soon see a drastic increase in orders as companies struggle to ensure they are in compliance by August.

My final optimistic point of interest is that all of IMSC’s competitors appear to be in much stronger financial positions. This begs the question of whether it will be less expensive for them to develop their own competing/better technology or to simply acquire IMSC. If the technology has been properly patented and is indeed better (more cost-efficient, simpler to use, better detection capability) than anything else currently on the market I would not be surprised to see acquirers start sniffing around.

My main concern is that their financial position is terrible. They’ve got a negative tangible book value of ~9mm, with DMRJ Group (their primary lender) encompassing ~7mm of their liabilities. DMRJ recently gave notice of IMSC’s default and dissolution, then revoked that notice of default and dissolution shortly thereafter without waiving the actual default. A follow up article is HERE elaborating on the new credit agreement struck with DMRJ as of January 13, 2010.

Even with the potential dilution resulting from a deal between the two companies and/or any other potential financiers, I expect that the future of IMSC and that of its share price will be a bright one as long as the company remains at the forefront of substance detection technology. With a current market capitalization of approximately $9.0mm and some new financing, there should be ample room for growth.

Below is a 6-month daily and 2-year weekly chart. IMSC has obviously seen some significant interest recently, especially with the “underwear bomber” on the airplane over Detroit.

Date of Idea: January 17, 2009

Price at Idea: $0.58

Target Profit Exit: $5.00+

Loss Exit:Time-based…. if this hasn’t broken $1.00 by June, I’ll sell

GNVC – GenVec

Disclaimer: Do your own research prior to making any investment/trading decisions. You must assume I am biased with every idea presented on this website.

GenVec, Inc. is a biopharmaceutical company developing novel therapeutic drugs and vaccines. Their lead candidate (TNFerade) is currently in a pivotal, Phase III clinical study in locally advanced pancreatic cancer.

Recent Headlines

Click HERE to view a recent presentation from the Biotech Showcase 2010 in San Francisco, California. This is well worth your time and provides insight into the first set of interim data as well as the overall direction of the company.

GNVC is trading at a market capitalization of $185mm with 106mm shares outstanding. As of 09/09 the company had a book value of $11.6mm with $13mm in cash. Realistically this information is not very pertinent to the investment story of this particular name, but it is still good to know.

The story with GNVC rests on the success or failure of TNFerade in the short term. If the Phase III trial’s second set of interim results show positive indications for pancreatic cancer, there is immense upside potential. If the trial is a failure, one would easily lose a significant portion of their investment virtually overnight.

GNVC has already seen interim data from the first 1/3 of the Phase III trial which showed results worthy of optimism. However it should be noted that the sample size was small enough not to be necessarily significant. As we receive the second set of interim results over the next 10-12 weeks the picture should become much clearer. However with this first set of data I believe the reward/risk ratio being presented is a solid one.

Below is a 6-month daily and 2-year weekly chart. GNVC recently broke out from the uptrending channel on the daily chart and is now showing very strong support following its recent runup. This is all due to optimism concerning the upcoming interim analysis on the TNFerade trial.

Date of Recommendation: January 17, 2010

Price at Recommendation: $1.74

Target Profit Exit: $5.00+

Loss Exit:$0.95