Casino Capitalism

This section lists all of our updates for our current stock picks. If we decide to sell a stock, we will include the sell report in this section. If you would like to read the initial write-ups for a particular stock pick, please read our Stock Picks section.

Furthermore, all ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.

We know we’ve been a bit lax in updating the CasinoCapitalism.com blog. But, we’re proud to announce that we have launched a new website at: www.envoyglobalresearch.com.

If you’ve been following our picks at CasinoCapitalism.com or at SeekingAlpha.com, we’re sure you have been having an extraordinary year in the market, considering the average return posted by our picks has exceeded 45% over the last year. In particular, we hope you are all benefiting from the more than 300% rise in Internap’s (INAP) stock, since our recommendation last November at $4, when most investors would not touch the shares. Internap's stock hit a high of $17.85 last week, on the back of continued optimism towards the managed Internet services sector.

Based on our track record in the last year, and considering the tremendous amount of time it takes us to research and write our unique stock reports, we have decided to launch the new site  at www.envoyglobalresearch.com.

The new site will be a mixture of free research and a subscription-research product. Not to fear, the introductory fee for the research is only $99 for a year subscription. Subscribers will have full access to in-depth reports, subscriber-only picks,  and several other unique features that we will be launching as the year progresses. Note also that you'll be automatically placed on our Envoy Global Research email list if you are subscribed to CasinoCapitalism.com. Our RSS feed will also remain the same. 

We look forward to you becoming a regular subscriber of www.envoyglobalresearch.com and we thank you for your kind support of CasinoCapitalism.com during the past year.

Click Here to access www.envoyglobalresearch.com 

Our short take on the Internap (INAP) acquisition of VitalStream: This is a risky attempt on the part of Internap to gain a Akamai-type valuation on Wall Street.

However, these types of acquisitions usually only make financial sense when the purchaser has a higher multiple than the target. The exact opposite, though, is the case in the Internap/VitalStream combination. So either Internap management thinks their stock is very undervalued on a relative basis, which the coming quarters may or may not show, or they've entered into a highly overvalued transaction. Which one is it? Only time will tell.

So  overall, despite retaining our shares in Internap, given the very favorable industry environment for managed Internet service, we remain lukewarm on this acquisition, especially since our experience has been that growth thru acquisition, especially when done with no regard to absolute valuation measures, almost never lives up to its hype.

Disclaimer:
We own shares in Internap. This site may include market analysis. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.

As is usually the case with our investments, we were a bit early into STLW, and despite what appears to be a stabilized business, with little downside risk, the market has until now firmly disagreed with our assessment, pushing the stock down  nearly 12% since our initial recommendation. However, the company's latest fiscal first quarter report released last evening confirms our belief that STLW is a low-risk technology play with significant upside over the next few years, and that despite the fact that the earnings statements still are not exciting, the situation looks likely to improve throughout this year and next.

This morning ValueAct Capital offered $3.65 per share for all the outstanding shares of Seitel (SELA.ob). Given that the stock was pretty recently trading at nearly $5 per share, and given the fact that Seitel still has excellent growth opportunities ahead, we believe that the ValueAct offer is ludicrously low, and we encourage investors in Seitel (SELA.ob) to hold onto their shares. We think it is likely that other institutional holders of Seitel will press for a higher price. We can't imagine any long-time investors in Seitel are pleased with this offer. Incidentally, this is the second seismic acquisition this year, and we expect some more as the year progresses. Importantly, the valuation afforded to Seitel in this latest offer shows quite clearly how significantly undervalued Pulse Data (PSD.TO) really is.

Note: We first recommended Seitel (SELA.ob) to our subscribers at about $2.05 per share. We still own shares in the stock. In addition, this report includes market analysis. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets or in any particular stock. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. Yehuda Fruchter maintains no legal responsibility to update this report or his holdings in the stock mentioned in this report.

We recently had a chance to listen to Pulse Data's latest earnings, which can be accessed by clicking here.

As is evident from the presentation, investors are clearly not thrilled with the company's continued investment in the LiDAR business and management spent quite a bit of time outlining the plans and outlook for this subsidiary. As for us, we are equally dumbfounded by management's insistence on retaining this non-core business, whose economics are not all that attractive and take away resources from the core seismic-data business, which is highly profitable and has excellent long-term growth potential.

However, despite investor dissatisfaction with the results, we are not changing our outlook on PSD.to. With a 6% dividend yield and a very  attractive, niche seismic business, we remain bullish on PSD.to and do not believe there is much downside risk at current prices. On the other hand, if management disposes of the LiDAR business, as they have done with other non-performing businesses (e.g. Trango), the stock could move substantially higher as a pure seismic data company. 
Pulse (PSD.to) is clearly ripe for some sort of shareholder activisim, and we are surprised the company's institutional holders have not yet pressed management to unlock the value here. We imagine that shareholders are giving management a bit of more time to stabilize the LiDAR business before pressing for some sort sale.

Finally, investors should be aware that PSD.to and other seismic companies (i.e. SELA.ob) are now in the midst of their "slow" season. So one should not expect any meaningful upward movement in the shares until later this year or early next.

Please Note: We hold a position in Pulse Data, which we first recommended at C$3.10. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.

STLW investors should listen to Stratos's latest earnings conference call, which can be accessed by clicking here.

The call provides a good summary of why we think the stock has low risk at current prices, and significant potential upside should the company report positive earnings sometime over the next 12 months. (Note: The company is already profitable on a cash-flow basis, as can been seen from the recent 10-K).

Notably, the company's backlog, as of April 2006, was up 20% year-over-year, to $13.7 million. This is the highest backlog in quite some time. In addition, management provided an update on various real estate holdings, which they are in the process of selling. It appears that Steel Partners, who has already offered $7.50 per share for STLW, is pressing management to get a move on with these real estate sales, which could bring in a decent amount of cash to STLW.

STLW reports fiscal first quarter earnings later this month. We'll be looking for signs of top-line growth, continued cash generation, and progress on various shareholder-value initiatives, including any recent share buybacks given the dip in the stock price.

Please Note: We first recommended STLW at $6.80, and still hold a position in the stock. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.

We just had a chance to listen to ActivIdentity´s latest conference call. All in all, we are impressed with the company´s focus on minimizing cash burn, and driving the business to profitability via continued costs cuts and new revenue generating initiatives. Management is forecasting decent revenue growth next quarter and expects to reach cash-flow positive by early next year. The company seemingly has excellent opportunities in the government sector as Federal Government departments and agencies look to achieve HSPD-12 compliance later this year.

If ActivIdentity can execute on its revenue growth and cost-cutting initatives, the company will, as per management´s guidance, turn a profit in 2007. We think, as noted in the past, that if these forecasts prove accurate, that the stock can trade at 2.5X to 3X revenue, a still substantial discount to the valuation accorded to RSA (a competitor to ACTI) in the recent EMC acquisition. Assuming a $60 million revenue run rate in 2007, and $135 million in cash (no debt), that implies a price target for ACTI of between $6.25 and and $7 per share over the next 12 months.

Please Note: We first recommended ActivIdentity (ACTI) at $4.37, and still hold a position in the stock. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.

For interested investors in NENG, who might be worried about the company´s reliance on Microsoft security products, we think the following articles, regarding Microsoft´s acquisition of Whale Communications and  the expected release of ISA 2006, will be of interest.

Click Here for a press release from Microsoft.

Click Here for an article from InfoWorld.

Click Here for an additional release issued upon the completion of the Whale Purchase.

Click Here to learn about ISA Server 2006, a key component of the NENG Investment Thesis.

Some things to think about: Will NENG make the appliances based on Whale´s software? Don´t some of the statements in the last press release from Microsoft sound very similar to the planned managed branch offering of Getronics and NENG?

And a final quote from Microsoft: "We are also working with our OEM partners to release an updated Whale and Microsoft ISA Server 2006 appliance, which we plan to bring to market in early 2007. At the same time, we will be integrating Whale technologies into the next release of ISA Server itself (after ISA Server 2006), with the intent to release shortly after Windows Server codename “Longhorn.” This new release will fall under the new Microsoft Forefront brand of security and secure-access solutions."

A note to subscribers: We will have an update on Seitel (SELA.ob) and Pulse Data (PSD.TO), once we have had a chance to listen to PSD.TO´s earnings call. In general, investors need to be aware that the 2nd and 3rd quarters are generally seasonally weak quarters for these two companies, so current quarterly results are not really the best indicators of long-term investment merit. That said, we were quite happy to hear Seitel´s very bullish remarks on the long-term growth of the Canadian seismic market. This is bullish longer term for PSD.TO, which is down significantly today after reporting, what is at first glance, a weak earnings report. Stay Tuned...

What follows is brief summary of my thoughts on IIP, after reading thru the company´s recently filed 10Q.