The Rayno Report

Status Updates: Feature or Company?

On 02.08.10, In Markets, Technology, By R. Scott Raynovich

There is an old venture-capital saying, “never mistake a technology feature for a company.” Or maybe there’s not, and I just made that up. At either rate, it makes sense.

Okay, then, what happened with Twitter? Twitter has all the hallmarks of a “technology feature.” Really, the company consists of the “Status Update” feature, and that’s about it. This is now a paradigm that has taken root in social networks and is transmitting it self rapidly across all means of Internet software. Case in point? Today’s scoop from the Wall Street Journal that Google is looking at injecting the status update capability into Gmail.

Now, of course, the investors who didn’t invest in Twitter based on the “technology feature” rule are of course hitting themselves: Twitter now has a $1B+ valuation, at least on paper. Of course, there is still time for it to go horribly wrong. But it’s got to get you thinking: Has Twitter turned the technology feature concept on its head? And if so, what is so unique about social networks?

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Top Five Tech Giants to Accumulate

On 02.08.10, In Markets, Technology, By R. Scott Raynovich

The stock market is into a pretty good-sized correction. It’s not clear to me where exactly the correction will stop, but one thing is clear: The earnings of large blue-chip technology companies have been improving, while their stocks are going down. That’s an opportunity.

The stock market is a funny thing, it’s the only “market” where people get disappointed when prices go down. As a shopper, that’s a good thing, especially if you are using good valuation metrics when you do your shopping. Large companies have pared back technology spending for years, but there are signs that it’s starting to bounce back, with capital spending budgets. Given that 2010 is off to a good earnings start for technology companies, I think there’s a high probability that companies continue increasing tech spending.

I have been combing through the stock screens looking for “dream stocks” – large-cap tech with good track records, improving earnings, and cheap valuations. I found lots of candidates. In fact, other than March of 2009, it was hard to find a time when you could buy high-quality tech stocks at such cheap valuations. Many of them are at P/Es under 20, including Apple, which has a 5-year growth rate of more than 40%! I cannot remember the last time a stock with this kind of growth was available at a forward P/E of 19.

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Tagged with: capital spending • cheap valuations • Cisco Systems Inc. • earnings • EMC • Hewlett-Packard • Microsoft Inc. • VMWare

Like Penny Stocks? Microfluidics Might Be Worth a Look

On 02.08.10, In Biotech, By Rod Raynovich

Microfluidics (MFLU.OB) is a leader in advanced nano-material processing for a variety of industriesturn-around play with value characteristics. And it’s cheap! ($0.99)

Raygent Associates and The Rayno Report will be following up with a report on the company’s technology after its earnings report in a couple weeks, but given the company’s decent fundamentals and low price there is the potential for a strong move up. The company sells high-pressure microfluidic processors that are used to create materials on the micro-and nano-scale to achieve unique product characteristics and qualities.

The technology achieves the following functionality:

Particle size reduction
Bottom-up nanoparticle creation
Cell disruption
Nanoencapsulation
Nanoemulsions and dispersions

The applications for creating this microfluidic “features” is development and manufacturing of a variety of products in diverse industries such as biotechnology, pharmaceutical, cosmetics and nutraceuticals. These products allow manufacturing to be scaled up in a uniform and repeatable way.

For example, 17 of the top 20 pharmaceutical companies use microfluidizer processors and are of particular benefit to manufacturers of vaccines who need to create stable microemulsions of vaccines with their adjuvants.

In the company’s third quarter financial results released on November 3, 2009, it reported a net income of $450k on revenue of $4.5M with a backlog of $4.75M. Sales were strong from vaccine developers and manufacturers.The balance Sheet as of September 30 showed $1.7M in Cash with long-term convertible debt of $4.7M. Stockholder equity was $1.15M.

One see this company easily growing beyond it’s current market cap of $10.5M. With 10.5 million shares outstanding that gives you a share price of $1. Assuming revenues of $18M for 2010 the price/sales ratio would be 0.583.

Tagged with: materials • microfluidics • nanotechnology • Raygent Associates

10 Reasons Why Sarah Palin is Unelectable

On 02.08.10, In Government, By R. Scott Raynovich

“Only dead fish go with the flow.” –Sarah Palin, July 3, 2009

What’s all this noise about Sarah Palin? Sarah Palin is a populist kook, and the idea that she could be president is absurd.

I know, it’s not like the American left has their act together either. There are plenty of kooks on the left, as well. In the interest of fairness, let me break down the kookiness on both sides of the equation:

Left-wing kooks: “Those rich people stole everything and they’re holed up in a secret society meeting in West Palm Beach! If we double-tax the rich people and then build government-sponsored eco-projects in every county across America, we’ll be okay!”

Right-wing kooks: “It’s a socialist Armageddon! Gay people can get married! Who gave the government the power to build roads? Quick, grab your militia and meet at our planning session in Northern Idaho!”

Now, I only pick on Sarah Palin because she is currently the front runner for Chief Kook, and it’s making news. But any of you who think she’s got a shot at president are nuts. Let’s enumerate the reasons:

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Tagged with: china • Fannie Mae • foreign policy • Freddie Mac • politics • Sarah Palin • U.S. bonds

Friday News Brew: G-7 Brings an Arctic Chill

On 02.05.10, In Markets, By R. Scott Raynovich

Not the best week in the markets, so we look forward to a relaxing weekend when you don’t have the worry about the CDS spreads on PIIGs, which is not only an unattractive thing to say, but also an unattractive thing to look at.

In technology, we had a good earnings run, but I’ve been noticing the general trend has been to sell off after good news, which is never a good sign of the market’s health. We need to kick that pattern to return to the bull.

Given that it’s Friday let’s get on with it and move the bits:

The G7 is meeting this weekend in the arctic (Globe and Mail). Is it just me or does this send the wrong message about the global economy? The fun bit: World leaders may have to sleep in dorms, drive around in tattered rental cars, and watch out for riflemen on snowmobiles (Wall Street Journal).
The unemployment data stopped getting worse (Bloomberg). But let’s not get too excited, that’s just one month.
Obama as Reagan (Bloomberg). Maybe Obama should get into the movie business?
Remember the part about the CDS spreads on PIIGs blowing out? Well, here it is if you don’t know what I’m talking about (Wall Street Pit).
Why six hour flights are now seven-hours (WSJ). That doesn’t include when you sit down next to a talkative, drunk, insurance salesman.
Toyota president says “sorry.” (L.A. Times). Bummer, dude.
Facebook is redesigning stuff again (Inside Facebook). What’s the deal with the manic changes, did they get bored counting their money?
Another publisher has attacked Amazon’s pricing structure (Gizmodo). Amazing what a little competition will do, eh?
TechCrunch reporter asks for a kickbook! (TechCrunch). They wanted a Mac — a sign of the times!
Can somebody just tell Jeff Zucker to shut up.
Asian online trading platform Tora files for $36.4M stock and option offering (VentureBeat).
Microsoft is working on a 17-year-old bug (BBC).
You can now get a degree in Marijuana cultivation (CNN). I can’t think of a more dangerous project for a college student.

Cheers! Happy weekend!

First Germanium Laser

On 02.04.10, In Technology, Telecom, By R. Scott Raynovich

That’s the first laser made from the element Germanium — not the first German laser. It’s been a while since I was knee-deep in the hard-core optical world, but the endgame has always been optical computing. Today we have the news of what appears to be a signficant innovation, the world’s first Germanium laser, developed at MIT.

A lump of Germanium. Doesn't it look like Kryptonite?

From Physorg.com:

(PhysOrg.com) — MIT researchers have demonstrated the first laser built from germanium that can produce wavelengths of light useful for optical communication. It’s also the first germanium laser to operate at room temperature. Unlike the materials typically used in lasers, germanium is easy to incorporate into existing processes for manufacturing silicon chips. So the result could prove an important step toward computers that move data — and maybe even perform calculations — using light instead of electricity. But more fundamentally, the researchers have shown that, contrary to prior belief, a class of materials called indirect-band-gap semiconductors can yield practical lasers.

Story is here: First germanium laser brings us closer to ‘optical computers’

Tagged with: lasers • MIT • optical • optical computing

Stimulus State-by-State

On 02.04.10, In Markets, By R. Scott Raynovich

I have been doing some research on government stimulus projects and I came across a very cool map hosted on the Mint Website.

The Mint folks used information from ProPublica, a resource for information on the stimulus plan, and broke down the percentage of each state’s unemployment problem that would be hypothetically solved by the total stimulus package.

While it is actually difficult to peg down the effect on the actual unemployment rates, Mint did their best by using government estimates by Congressional District.

Here is the map:

Visit Mint.com for more personal finance images.

Tagged with: government stimulus • Mint • states • unemployement

Marc Faber: The Debt Trap Has Not Been Fixed

On 02.04.10, In Government, Macro, Markets, Precious Metals, By R. Scott Raynovich

Global investor Marc Faber is out with his new monthly Gloom, Boom, and Doom report (subscription — highly advised) in which he analyzes the global debt problem and what it means for markets in the coming years.

Most real financial crises are brought about by debt problems. And the financial system, especially in the United States, has been able to build up more and more debt — as a total percentage of GDP — over the years. Is there any mystery why we have been seeing more frequent and larger financial crises? Not really. It’s because the investment banks, the powers that be, and governments around the world have allowed debt problems to build and spiral out of control.

Marc Faber believes we’re still not out of the woods because really nothing has changed with the creation of global debt and leverage. In fact, it may be getting worse. Even after the financial crisis of 2008, after lots of hand-wringing, government actions, meetings, popular discussions, and media analysis, nobody has done anything to stop the trajectory government debt. That means the financial problems have not been solved, and we’re likely to have even bigger problems in the future. This was also the topic of a recent cover story in Forbes, the Global Debt Bomb.

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Tagged with: debt • gold • inflation • Marc Faber • monetary policy

Chambers Does His Best to Cheer Ecomomy

On 02.04.10, In Mobile, Technology, Telecom, By R. Scott Raynovich

Shares of Cisco Systems Inc. are set to gain on the market open after a strong earnings release and encouraging words about the global economy from CEO John Chambers.

More importantly, investors hope positive comments from Cisco CEO John Chambers can perk things up on a somewhat gloomy morning (European debt worries are weighing on the market). “There was major momentum,” said Chambers of business in the quarter. ” It was quite remarkably balanced across the board, and you would say we are on our way to a reasonably good recovery.”

Chambers is often looked to for economic insight because of Cisco’s large role in the technology market as well as Chambers knack for monitoring and analyzing data to look for turning points in the economy. He was one of the first major technology executives to alert investors about the slowdown, and he correctly called a turn in the economy last year.

Cisco announced Q2 fiscal year 2010 (Q2FY2010) reveue of $98. billion, an 8% increase over the comparable quarter last year. It saw Q2FY income of $1.9 billion in GAAP terms and $0.32 earnings per share (EPS). Including special items, Cisco earned $0.40 per share, beating analysts estimates of $0.35.

More importantly, Chambers said he expected to see economic conditions “accelerate” and upped his forecast for growth for Cisco in the current quarter, which he pegged at 23 to 26 percent.

Cisco continues to generate and stockpile massive amounts of cash — the company reported that cash and cash equivalent and investments for the quarter was $39.6 billion, up about $4.3 billion from last quarter.

Chambers commented specifically on a “robust positive turnaround” in the service provider segment, which he said was the biggest turnarounds he’d seen in his career.

Perhaps most importantly, Chambers said that with the strong recovery, Cisco could start adding employees back to its workforce.Cisco said it hired 2,000 employees in the last quarter and expected to hire 2-3,000 more in this quarter.

In the pre-market, Cisco shares were trading up $0.42, or 1.82%, to 23.49.

Top Five Tech Giants to Accumulate

Like Penny Stocks? Microfluidics Might Be Worth a Look

10 Reasons Why Sarah Palin is Unelectable

Friday News Brew: G-7 Brings an Arctic Chill

First Germanium Laser

Stimulus State-by-State

Marc Faber: The Debt Trap Has Not Been Fixed

Chambers Does His Best to Cheer Ecomomy

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