Casino Capitalism

Network Engines (NENG) Update

Well Network Engines (NENG) closed up nicely today giving us an over 45% gain from our initial recommendation.What´s driving this move in NENG? Probably the almost daily press releases touting one or more new partnerships for the company´s NS Series of Network Security Appliances based on Microsoft´s ISA Server platform.

Broadband and another Interesting Investment Blog

We´ve come across another interesting investing blog. Check it out at http://rationalinvesting.blogspot.com/. We liked the blog,  particularly since the guy writing it has a long-term, non-trader, outlook and we never thought we would find someone who was more bullish than we were on broadband over the coming years.

T-3 Energy Services (TTES) Earnings Update

T-3 Energy Services (TTES) just reported excellent fourth quarter earnings. It´s hard to know how to value this company, given its exposure to the cyclical Oil and Gas industry, but the numbers sure make us optimistic about the coming year. Given the extremely low float in this stock, a modest valuation  upgrade for the shares (they currently trade at less than 12X forward estimates, even though the company is growing at triple digit rates) could send the stock up 45%. At the same time, the downside appears quite limited because of the much improved balance sheet, solid business outlook, strong earnings growth expected during 2006, and the current low valuation.

When to Sell a Stock?

I´ve received several emails regarding price and sell targets since several of the picks on this site have appreciated significantly (particularly IIP since the company´s recent earnings report just last week). This post summarizes our sell discipline.

Seitel (SELA) Big News

In a short break from Internet investments, one of our top seismic investment picks (our other is PGS, which keeps hitting new highs every day), Seitel (SELA) came out with big news this morning. ValueAct Capital has purchased 21,499,983 shares and warrants to purchase 15,037,568 shares of Seitel stock from Mellon HBV.

Stanford´s View on Internap (IIP)

For those investors without access to Wall Street research reports, this post provides some notes from Stanford Financial Group´s March 1st, 2006 research report on IIP. The analyst´s target price is a bit higher than mine, primarily because I am applying a larger discount to the EV/EBITDA multiple for IIP.

Note: If you plan to link to this post or copy it in any manner, please be sure to credit:              Stanford Financial Group (Rod Ratliff)

Internap (IIP) Earnings Review

Internap reported decent earnings results last evening. There were several positives, and a few negatives. Overall, there is clearly enough improvement in Internap´s financials to warrant holding onto to the stock, and the stock still appears undervalued primarily because the business is solid, EBITDA growth in 2006 will be excellent, and  management at IIP is still underperforming basic industry financial metrics leaving room for additional stellar financial improvements.

I´m putting a conservative $0.60 per share target on the stock, which represents about 12X estimated 2006 EBITDA. The value disconnect in the stock reflects an inept management team, but therein of course lies the opportunity for potential acquirers and current investors (i.e. fire 5% of the upper executives at IIP and EBITDA goes up dramatically). In theory, the dramatic EBITDA growth in 2006 warrants a much higher multiple, but I´m not yet completely comfortable with the current new CEO´s ability to manage the financials here, so I´d rather be conservative and wait a quarter or two before assigning a higher multiple. As an aside, if the company seems capable of meeting the high end of EBITDA projections, as the year progresses, there is no reason not to assign a value of at least $0.90 per share to IIP.