In
This Edition....
Is
New Leaf Brands Inc. (OTC:NLEF) going to follow in the footsteps of Cadbury
and land a big suitor (at a premium)? Maybe. We'll check out this young
and growing company below.
First
though, let's take a look at this week's 'best' of from the community pages.
The shortened list looks at Hana Biosciences (OTC:HNAB), Netlist, Inc.
(NASDAQ:NLST), and Wilshire Bancorp, Inc. (NASDAQ:WIBC).
We'll
follow that with some quick thoughts on how fast the market turned nasty,
and what may be in store over the next few days. Hint: We're
still not at the likely bottom.
From
the Community
Looking
Forward: WIBC, UWBK, FTBK
Talk
about a turnaround! Wilshire Bancorp, Inc. (NASDAQ:WIBC) - like
so many other small, regional banks of late - posted a solid gain last
quarter after shrinking its loan losses. It beats the heck out of the loss
Wilshire Bancorp took in the same quarter a year earlier. Dennis Askew
serves up the details.
Set
For a Comeback: Hana Biosciences (OTC:HNAB)
M.E.
Garza made no bones about his outlook for Hana Biosciences (OTC:HNAB).
After plunging in November, the stock has been working on a rebound that
started to get solid traction within the last few days. Better still, Hana
Biosciences is actually supporting the technical rebound with encouraging
results from its rALLy drug trial.
Chart
Analysis for NLST, FBP, and PWER
A little
bad news/good news for those of you who own Netlist, Inc. (NASDAQ:NLST),
or were watching it following James Brumley's comments from yesterday.
The good news is for the bears or short-sellers... Netlist fell under that
support line at $4.30, and is proceeding lower. The bad news is, of course,
if you currently win NLST shares. The stock still has plenty of room to
fall; be sure to check out the chart.
Turning
Over a 'New Leaf'
By
the very nature of this business, I have access to a lot of information
about a lot of companies... particularly in the small and micro
cap realm. And - like most of their large cap brethren - the bulk
of these smaller names are ho-hum prospects. When I find that rare one
that actually looks like it's worth researching a little more though, it's
a pleasure to pas it along to you. Such is the case today with New Leaf
Brands Inc. (OTCBB:NLEF).
Some
of you may already be familiar with New Leaf Brands Inc. as a consumer.
It's a young and fast-growing iced tea bottler with a presence in most
of the major U.S. markets, and some outside the United States. The company
boasts 80 distributors/10,000 outlets already, including 7-11, Kroger,
and Albertsons just to name a few, with more on the way.
While
the historic growth has been impressive (a 54% increase in volume from
Q3 of 2008 to Q3 of 2009), the targeted growth between now and the
end of 2011 could be at least as impressive, if not more so. The
company is aiming to cultivate new and full distribution coverage in California,
Texas, Arizona, South Florida, and the Northeast within the next couple
of years. Needless to say, those are huge markets to penetrate, and even
modest growth in those arenas could be a big victory for this small cap
company.
New
Leaf's current market cap is in the $20 million area... about 57 million
shares, no preferred stock, roughly $1 million in long-term debt, and no
convertible debt.
Now,
as for the stuff you can't get or infer from the annual report...
I think
owning a stock - any stock - based on the assumption of a buyout
is a mistake. On the other hand, they can and do happen, and
often at a premium. We don't have to look any further than Kraft's
recent $19 billion purchase of Cadbury to see it; Cadbury shares ended
up being bought at more than 20% above their price before the acquisition
talks started.
And
that's just the one you heard about... the deals get even better (for shareholders)
as you venture into the beverage market, and into the smaller names within
it.
Coca-Cola
bought Fuze Beverages at a price that was 2.6 times bigger than Fuze's
revenue. PepsiCo paid more than 3.0 times revenue to acquire IZZE Beverage
Co. Oh, and did I mention Nestle bought a 35% stake of Sweet Leaf early
last year, at a premium of about 3.5 times revenue? This is the Nestle
we're talking about... and they've already expressed interest (with dollars)
in New Leaf.
Like
I said, banking on an acquisition isn't a reason to own a stock. You own
a stock because of its merits. The ones that have enough merits generally
get acquired by a larger company seeking a high-growth (and usually a niche)
brand name. Does New Leaf have those merits? That's for you to decide
after you do your own digging. As for me, it's a company I think has good
growth prospects for the foreseeable future, and is worth consideration
and further study.
Thoughts
on the Market's Demise
Down
2.2% in a shortened week, and down 3.5% in just the last three days?
Wow, what a reversal of fortune for the market. Of course, I hope it's
one that didn't come as a surprise to any of us - stocks have been rallying
on borrowed time since they became technically overbought in late December.
The
only thing the early-January rally did was set up a bigger pullback.
I'm
going to guess by this point you're hearing one of two messages over and
over again. In one ear, this week's selloff is the 'evidence' that
the perma-bears will be using to prove to you that stocks are incapable
of going anywhere but down, forever. In the other ear, you're
hearing 'buy this dip right now or you'll regret it, forever'.
Allow
me to be a voice of reason.
The
market was technically overbought, and due for a pullback. Since June we've
seen no pullback great than 5.5%, and the 11% rally since between October
and January's peak went completely unchecked. For those of you who
study the market's historical tendencies, you'll know that's very unusual.
So - and for lack of a better way of voicing it - what did you expect?
The
question from here is, where will the market land?
I've
posed two possibilities recently. One is the rising support lines
that all indices seem to have made since August... the one that tags early
November's low. They're all within striking distance as of today. The other
possibility
is a revisit to the early November lows, which in most cases was at or
close to the early October low.
If
you're looking for the specifics on trading instruments, I talked about
how this translates for the SPDR S&P 500 Fund (SPY) on
the 20th, and I followed that up with the same look at the NASDAQ
100 Trust Fund (QQQQ) on
the 21st (which includes a look at breadth and depth).
Now,
I know the thought of retracing our steps all the way back to November's
low points seems horrifying. Let me just remind you that prior to March
of 2009 (and I guess prior to September of 2008), that kind of pullback
was the norm. That's right - 'normal' market corrections are on the
order if 10% to 15%. We were spoiled in 2009.
While
the broad market is not without its problems (like Well Fargo and ALCOA,
for example), so far this earnings season we've seen more net profits than
losses. We saw the same last quarter too. They aren't great, but they're
not disastrous either.
So,
in the bigger picture, this isn't a reason to panic. In fact, even if the
market continues to fall for a few days - and I think it will -
it's still not a reason to panic. I'm quite excited about it actually,
as it will offer a chance to buy some good stocks at lower prices.... which
I will be doing.
Bottom
line: Don't let the hysterics or the media put you into a state of
mind that causes bad decision making. As Warren Buffett says, buy 'em when
nobody else seems to wants 'em.... though we're not even to that stage
yet.