wall street nuggets

RASER TECHNOLOGIES INC [RZ] dropped another 28.2% on top of yesterday’s 25.4% loss, closing at $3.70, as the market continues to react to the AMP debacle.  Until the company successfully licenses its technology, we will remain skeptical and view the stock as highly speculative.

VA SOFTWARE CORP [LNUX] slid 16.6% closing at $3.78 after announcing its third consecutive quarter of profitability (earnings of $0.01 per share, which matched the consensus estimate) and first fiscal year of profitability.  Revenues of $10.5 million were up 35% over the fourth quarter of last year and up 43% for the full year, but fell a bit short of the consensus estimate of $10.74 million.  The Online Media segment which derives revenues from sponsors and advertisers on a very impressive array of web properties including SourceForge.net, Slashdot.org and Linux.com, claims to reach 19 million unique visitors (UV’s) and serves more than 290 million page views (PV’s) per month.  While the 19 million UV’s is undoubtedly biased high because the typical open source addict probably has at least 4 different IP addresses or email addresses, the PV count is certainly impressive and resulted in 78% growth in Online Media revenues for the fourth quarter over the same period last year.  The Online Media segment is now the largest in revenues and it appears this bodes well for the future.

Downstream petrochemical player HOLLY CORP [HOC] tumbled down 7.4% closing at $44.77 thanks to a somewhat general bearish sentiment in the Oil & Gas Production sector on Wednesday (the sector was down 1.26% on average) and apparently due to insider selling (about 21% of the HOC insider holdings have been sold in the past 6 months).  While HOC has been steadily climbing since January 2004, its P/E ratio is still an attractive 11.2.  Before jumping in, it would be prudent to have more insight into the motivation behind insider selling.

ADC TELECOMMUNICATIONS INC [ADCT] slipped 7.3% closing at $13.68 with a rather disappointing third quarter performance.  Earnings came in at $0.10 per share for the quarter ended July 28^th compared with $0.20 for the same period last year.  The consensus estimate had been for earnings of $0.26 per share.  Ouch!  While net sales were up about 12%, the gross margin dropped from 38.3% to 32.7%.  Ouch again!  Credit Suisse downgraded the stock from “Outperform” to “Neutral.”

MICROS SYSTEMS INC [MCRS] a leading supplier of information systems to hotels and restaurants, rocketed up 20.7% closing at $46.41 after reporting fourth quarter revenues of $191.8 million, an 11.5% increase over the same period last year and well above the consensus estimate of $184.56.  Annual revenues came in at $679 million, an increase of 13.7% over the 2005.  Earnings were $0.53 per share for the quarter compared with $0.45 per share for the same period last year and $0.02 more that the consensus estimate.

While crude oil was back up over $70 per barrel, declining gasoline prices put downward pressure on the Oil & Gas Production Sector but otherwise there were positive returns in most sectors except Energy, Metals, Mining and Retail (COSTCO WHOLESALE CORP [COST] down 4.2% closing at $47.18).

It is interesting to examine the distribution of the lags between the end of the reporting period and the actual SEC filing date for publicly traded companies. As mandated by Sarbanes-Oxley, many large companies, defined as “accelerated filers” (those with a public float greater than $75 million, at least one previous 10-K filing and who have been subject to the Exchange Act’s reporting requirements for at least one year), currently have 40 days following the end of the quarter and 75 days following the end of the fiscal year to file their 10Q’s and 10K’s with the SEC. Non-accelerated filers have 45 days following the end of the quarter to file their 10-Q’s and 90 days following the end of the fiscal year to file their 10-K’s.

In December of 2005, the SEC adopted amendments that defined a new category of “large accelerated filers” which is defined as those publicly traded companies with a public float of $700 million or more. As of December 15, 2006, “large accelerated filers” will be required to file their 10-K’s within 60 days of the end of the fiscal year. There will be no change in the deadline for 10-Q’s for “large accelerated filers.”

One might assume that the 40 day grace period would be fully taken advantage of by most companies, especially in view of the penalties associated with errors in reporting financial results. So it is no surprise that as of August 29, 2006, about 35% (or about 1,264) of the top 3,589 publicly traded U.S. companies in market capitalization[1], had exactly a 40 day gap between the end of most recent reporting period date and the filing date with the SEC. So we might ask how the other 65% of the publicly traded companies are distributed.

The actual distribution of gaps between the end of the most recent reporting period and the filing date for a sample of the top 3,589 U.S. companies in market capitalization can be seen in the following chart. Several observations regarding this empirical distribution can be made.

First we observe that there is relatively little early reporting until about three weeks before the deadline. Then there is a very gradual pickup in reporting with obvious gaps for the weekends until we reach 570 filings on the day before the deadline and 1264 on the deadline itself. We should also note that there are non-accelerated filers in the sample which explains the peak at 45 days and presumably a distribution similar to that of the accelerated filer gaps, albeit much smaller.

About 98.1% of the companies in our sample have filed their 10-Q’s within 50 days of the end of the quarter. We publish a list of the really delinquent filers about once per month (the “White Rabbits”). It should also be noted that about 0.5% of the companies in our sample incorrectly specify the end date of the period for which they are reporting (confusing it with the filing date) and these errors had to be cleaned up manually.

The actual shape of the distribution leading up to the deadline is interesting. Since the log of the frequency counts is approximately linear in each of the two weeks preceding the deadline, we are inclined to label the pre-deadline distribution as being exponential and this would be consistent with the assumption that the pressure to complete the filing is inversely proportional to the number of days to the deadline.

Does size matter?

Of course the answer here is yes since non-accelerated filers are allowed 5 more days to file. However, without this effect, companies with a larger market capitalization generally have a tendency to file closer to the 40 day limit. This can be seen in the following scatter diagram of gaps versus market capitalization.

Notice that we use a logarithmic scale for market cap which reveals some rather striking behavior in the distribution. As we have observed above, companies with larger market caps tend to file closer to the deadline.

The Press Release Gap

Regulation FD also has an interesting impact on the distribution of Current Report (8-K) filings that announce quarterly earnings and provide early access to financial statements. Approximately 85% of the companies in our sample, have filed such reports between the end of the reporting period and the most recent 10-Q filing date. This is the same frequency we observed last year as well. The distribution of the gaps between the end of the reporting period and the press release date can be seen in the following chart.

What is striking about this distribution is a clear superposition of a weekly pattern that favors press releases on Tuesday, Wednesday or Thursday, over the course of the three to four weeks leading up to the Sarbanes-Oxley deadline for the quarterly filing.

What about Annual Reports?

The pre-deadline distribution for the gap between the end of the fiscal year and the current 10-K deadline for “accelerated filer” companies is quite similar to the distribution in the quarterly reports.

As in the case of the quarterly reports we see a gradual build-up for 3-4 weeks before the deadline.

We should also note the interesting spike at 90 days (the deadline for non-accelerated filers). Obviously, this spike, numbering 143 companies in our sample of 3,589 companies, corresponds to companies filing their first 10-K or those who have not been subject to filing requirements for a full year and therefore are not defined as “accelerated filers” or those with public floats below $75 million.

ARENA PHARMACEUTICALS INC [ARNA] climbed steadily on Tuesday gaining 13.4% to close at $12 with no specific news that we could locate, but certainly riding a wave that seemed to favor the battered down Biotech sector. Several other biotech stocks seemed to ride the same wave. COTHERIX INC [CTRX] was up 9.1% closing at $7.33 with no specific news. Check out CTRX webcast presentations scheduled for September 11^th and September 26^th. CV THERAPEUTICS INC [CVTX] gained 7.8% closing at $11.90.

VIROPHARMA INC [VPHM] vaulted 12.9% closing at $12.61 with the announcement of very positive results from a Phase 1b study of HCV-796, a hepatitis C virus inhibitor, which it is co-developing with WYETH PHARMACEUTICALS [WYE].

STEMCELLS INC [STEM] stepped up 7.1% closing at $2.41 with a press release announcing it had granted a license to STEM CELL THERAPEUTICS CORP, a Canadian biotech company involved in treating CNS disorders by stimulating endogenous neural stem cells. STEM will be paid up-front license and maintenance fees, as well as milestone and royalty payments.

RESTORATION HARDWARE INC [RSTO] rose 16.9% closing at $7.18 as it announced that it had achieved profitability outside of the fourth quarter for the first time in its history. Earnings were $0.01 per diluted share compared with a loss of $0.07 per share for the same period last year. The consensus estimate had been for a loss of $0.05 per share.

PARLUX FRAGRANCES INC [PARL] popped up 15.2% with most of the gain coming in the last half hour, closing at $6.76. Yesterday’s release of the first quarter ended June 30^th results finally cleared some of the mist. The loss of $0.78 per share was “solely attributable to a non-cash, share-based compensation charge in the amount of $16,201,950, relating to the modification of outstanding warrants to effect the Company’s June 16, 2006 stock split.” The warrants were issued between 1999 and 2002. Note also some significant insider selling by the Chairman/CEO Ilia Lekach over the course of the past week. Our sense remains that there is still some additional recovery possible in the price of this battered down stock, with a very attractive P/E ratio.

SANDERSON FARMS INC [SAFM] gapped up about $2.50 per share at the open and closed the day up 13.1% at $29.53 after announcing third quarter profits that had fallen 86% over the same period last year, but were well ahead of analysts’ expectations. Earnings were down from $1.19 per share last year to $0.16 per share, reflecting lower packaged chicken prices and increases in feed costs. However, the consensus estimate had been a loss of $.05 per share.

OCWEN FINANCIAL CORP [OCN] dropped 10.2% closing at $14.51 after a downgrade by Piper Jaffray from “Outperform” to “Market Perform,” despite being included in a list of “Five Price Momentum Plays” on www.forbes.com. OCN has had a very nice run up since September 2005 and appears to remain a relative bargain with an extremely low P/E ratio of 5.27, probably due to its exposure to a total collapse in the residential mortgage market, which seems unlikely.

Technology licensing company, RASER TECHNOLOGIES INC [RZ], plummeted 25.4% closing at $5.15 with only about 350,000 shares traded. This followed the announcement that the RASER would be filing a complaint against AMP RESOURCES LLC relevant to the merger/acquisition of AMP agreed to back on January 19^th, which came unraveled in June. Apparently, AMP obtained about $5.548 million in loans from RASER and then allegedly “interfered with the merger through various breaches that prevented RASER from obtaining financing” necessary to consummate the acquisition. RASER also alleges that AMP “fraudulently induced RASER into the Acquisition Agreement with false representations about the status of AMP RESOURCES’ geothermal power generation facilities.” AMP denies the claims and is likely to file counterclaims. At this point, it appears that the legal dispute will prove to be a huge distraction for both companies. Given the likely importance of RASER technology in the success of hybrid electric vehicles (significant improvements in efficiency for motors and alternators), coupled with the fact that they have not yet commercially licensed their technology, and the rather extreme volatility of this stock, one should view this as extremely speculative. However, Tuesday’s drop still appears to be an overreaction since the unraveling of the acquisition should have been recognized in the big drop in mid-June.

The Daily Sector Performance Chart shows continued strength across a broad range of sectors with only Tobacco and Brokers in negative territory. The average return in the SigmaInverse Universe for the day was 0.89%, with 69.4% of the members posting positive returns. Gains were generally concentrated in the small and microcap segments, as can be seen in the “Average Return by Market Capitalization Bin” chart.  While the top 500 members in market capitalization gained only .326% on average, those with market cap ranking in the 2000 to 3000 range, had an average gain of a little more than 1.4% for the day.

EPIX PHARMACEUTICALS INC [EPIXD], which completed its acquisition of Predix Pharmaceuticals Holdings, Inc., on August 16^th, was down 12.9% on Monday with the announcement that the FDA had rejected its appeal for approval for its injectable, blood imaging agent Vasovist, suggesting that the company conduct new clinical trials to support the application.  Shares closed at $6.28.

INTERVIDEO INC [IVII] rocketed up 31.8% closing at $12.65 with the announcement that COREL CORP [CREL], a Canadian company, had entered into a definitive agreement to acquire INTERVIDEO INC for $196 million ($13 per share).  INTERVIDEO provides software (WinDVD Creator and WinProducer 2) that allows users to record, edit and play digital audio and video content.  However, the field is quite crowded with strong players like Adobe Premiere, Pinnacle Studio, etc.  It appears to this casual observer that selling out to Corel is almost equivalent to hoisting the white flag.  Remember poor Borland.

ENERGY PARTNERS LTD [EPL] soared 31.2% closing at $24.14 following the announcement of an $883 million hostile offer from Woodside Petroleum, Australia’s largest public oil and gas company.  The offer amounts to $23 per share in cash, along with the assumption of $257 million in EPL debt.  The terms of the offer would require EPL not to go forward with the previously announce acquisition of STONE ENERGY CORP [SGY] which dropped 6.8% closing at $44.35.

A leading supplier of wireless and broadband solutions, ANADIGICS INC [ANAD] rose a dramatic 17% on Monday, closing at $7.02 probably due to a report in Barron’s newspaper that said the company would be profitable in the third quarter.  ANAD provides power amplifiers to LG Electronics for its trendy, ultra-thin Chocolate phone.

CHARMING SHOPPES INC [CHRS] charged ahead 10.3%, closing at $13.06 on the news that it would be replacing GTECH HOLDINGS [GTK], which is being acquired by LOTTOMATICA SpA [LTOMF], in the S&P 400 Midcaps.  Some studies have shown that admission to the S&P 400 is a medium term positive signal.

DISCOVERY PARTNERS INTERNATIONAL INC [DPII] rose 9.3% closing at $3.52 with the announcement that INFINITY PHARMACEUTICALS, with whom it will soon be merging, had signed a deal with MEDIMMUNE INC [MEDI] to share equally in all costs and profits resulting from future cancer drug development targeting Heat Shock Protein 90 and the Hedgehog cell-signaling pathway.  The deal involves an upfront payment of $70 million to INFINITY PHARMACEUTICALS and the possibility of an additional $430 million in milestone payments involving late-stage clinical development and sales targets for products resulting from the collaboration.  MEDIMMUNE INC [MEDI] was up 0.95% for the day, slightly above the average return for the SigmaInverse Universe.

RACKABLE SYSTEMS INC [RACK], which had been rather erratic of late, shot up 7.7% closing at $26.45 with bullish comments by WR Hambrecht as it initiated coverage with a “Buy” recommendation.

Crude Oil Prices dropped as the threat from hurricane Ernesto to the oil rigs in the Gulf seemed to moderate.  Only three sectors posted negative returns for the day:  Mining (down 1.88%), Oil & Gas Production (down 0.94%) and Tobacco (down 0.09%).  The average return for the day was 0.85% for the SigmaInverse Universe, with 71.2% of the members posting positive returns for the day.

ISLE OF CAPRI CASINOS INC [ISLE] plunged 12% closing at $19.30 after reporting net revenues of $274 million, which were up 13% over the same period last year, but well short of the consensus estimate of $294.36 million.  Net income for the first quarter ended July 30^th increased 132% to $9.2 million or $0.29 per diluted share, compared to $4.0 million or $0.13 per diluted share for the same period last year.  The consensus estimate, however, was $0.37 per diluted share.  The current P/E ratio of 31.7 is high but with the price anywhere under $20, we believe this should be a solid buy opportunity, although it would probably be prudent to wait until after the hurricane season (early November) to avoid seasonal risk.  The CNBC and Bloomberg appearances by COO Tim Hinkley on Monday might also have a big impact.

H & R BLOCK INC [HRB] dropped 8.7% closing at $20.81 after announcing the it expected to record a provision for losses of $102.1 million or $.19 per share after taxes (but before tax season J), reflecting an increase in loan repurchases and defaults by its Option One Mortgage Corporation which targets the subprime loan market.  HRB was downgraded by UBS from “Buy” to “Neutral.”

Multiline healthcare provider, CENTENE CORP [CNC], lost 7.7%  in the last half hour of trading closing at $16.51 following a press release in which it announced that FirstGuard Health Plan Kansas, its wholly owned subsidiary, had received notice from the Kansas Health Policy Authority that its Medicaid contract with the state was being terminated as of December 31, 2006.  CENTENE shares had sunk to a three year low last month, after the company announced very disappointing second-quarter earnings that fell well below analysts’ expectations.  It is likely that the we haven’t seen the bottom yet, given the relatively light market volume for the day and the lateness in the day when the news broke (3:43 pm).

The Dublin, Calif., pharmaceutical company, SUPERGEN INC [SUPG], surged up 18.2% closing at $3.96 following the news that it had closed the sale of North American rights to Nipent® with Mayne Pharma for $34 million.  However, it seems odd that there was no reaction at all when this deal was first announced on June 21^st.  In the meantime, the prospects for Dacogen, given recent FDA approval, and the switch to profitability in the recent 10-Q (July 27^th), coupled with new data from Wolters Kluwers Health that indicates increasing market share for Dacogen over Vidaza probably has much more to do with the pop.  SUPG will be receiving 20% to 30% royalties from MGI PHARMA for Dacogen sales.  European approval for Dacogen might be near as well, given the fact that it was applied for in October, 2004.

Electronic Design Automation software developer, ANSOFT CORP [ANST], shot up 15.3% closing at $23.38 after reporting earnings of $0.09 per share, which was $0.01 more than consensus expectations.  The sensitivity to beating or missing consensus by $0.01 is incredible these days – at least conditional on high P/E ratios.

Advanced healthcare diagnostics provider NANOGEN INC [NGEN] jumped 13.2% closing at $2.21 following a press release announcing that it had been awarded six patents for the use of biomarkers related to diabetes and Alzheimers disease.

VERTEX PHARMACEUTICALS INC [VRTX] vaulted up 9.8% closing at $35.43 following an upgrade by UBS from “Neutral” to “Buy.”

The specialty retailer or home appliances and consumer electronics, CONNS INC [CONN] surged 7.2% closing at $19.46 after announcing strong earnings for the quarter ended July 31^st, would be in the range of $.35 to $.36 per share versus analysts’ expectations of $.34 per share.  This was also followed by an upgrade by Morgan Keegan from “Market Perform” to “Outperform.”

The week ended with no really big moves at the sector level.  The average return for the SigmaInverse Universe was slightly positive at 0.14%, with 49.7% of the members posting positive returns for the day.  The big sector winners for the day were Alternative Energy (up 1.1%), Oil & Gas Production (up 1.4%) and Railroads (up 1.5%).

CHICOS FAS INC [CHS] plummeted 25.5% closing at $17.95 after reporting a record second quarter net income of $54 million or $.30 per diluted share, which matched the consensus estimate, but due to slumping comparable store sales for the Chico’s brand, the company reset guidance for the next four quarters, suggesting earnings of $0.26 to $0.28 for the third quarter and $0.25 to $0.27 for the fourth quarter. Based on this guidance, one might have expected a 16% drop in the price, but certainly not 25.5%. The second quarter marketing problems appear fixable and it appears that this is a solid buy opportunity at the current price.

Another specialty retailer of women’s apparel is COLDWATER CREEK INC [CWTR], which was sizzling on Thursday, climbing 7.7% to close at $27.07 following its report that net income for the quarter was $12 million or $0.13 per diluted share, which beat the consensus estimate of $0.10 per share. Comparable store sales for the quarter ended July 29^th were up 13.3%.

ESCALA GROUP INC [ESCL] jumped 17.6% with very heavy volume starting about 2:30 p.m. EST, closing at $6.14. It appears due to a decision of the European Commission not to investigate Afinsa, the major stakeholder in ESCL, leaving the Spanish authorities to prosecute the Afinsa fraud.

It seemed rather odd that Construction would bare the brunt of disappointing existing home sales, which were down 4.1% in July, but it appears that the market sees existing home sales as a harbinger of bad news in tomorrow’s new home sales. Especially the increased inventory of homes on the market does not bode well for Construction or for that matter many other sectors of the market. Concerns over Iran’s nuclear aspirations further cooled the markets. The average return for the day in the SigmaInverse Universe was -0.93%. with only 23.1% of the members posting positive returns for the day.

ILLUMINA INC [ILMN] down 12.1% closing at $31.41 following a downgrade by Leerink Swann from “Outperform” to “Market Perform.”

AVI BIOPHARMA INC [AVII] down 10.3% closing at 3.84 indicating that yesterday’s reaction was indeed an overreaction and that the net impact of the upgrade by Dutton Associates was probably $.20 per share after the dust has settled.

ESCO TECHNOLOGIES INC [ESE] sank 8.9% closing at $52.50 following a downgrade by AG Edwards from “Buy” to “Hold.”

DRESS BARN INC [DBRN] dropped 8.5% closing at $18.41 following a downgrade by Merriman Curhan Ford from “Buy” to “Neutral.” The downgrade, according to the analyst, was prompted by the negative same-store sales in the fourth quarter reported for the Maurices stores. However, the combined Dress Barn and Maurices same-stores sales were up 7% for the quarter, which we would have to view as a positive signal. With Wednesday’s drop, the P/E ratio of 13.8 looks very attractive and this looks like a buy opportunity at less than $20.

RAMBUS INC [RMBS] rocketed up 17.7% closing at $13.19. This incredibly volatile stock was one of the big losers yesterday, being driven not only by increasing concerns over the delayed filings with the SEC as it continues its investigation into stock option awards (which we noted yesterday), but also by perceived risks in the resolution of the patent infringement case involving Hynix. Check out the following link. However, the terms under which the trial was conditionally stayed suggest that the issuance of a final order by the FTC regarding royalty rates for certain chip types will clear the way for a resolution of the case in favor of RAMBUS, and hence the strong surge today, although the lack of knowledge of the royalty rates seems to indicate the roller coaster ride may not be over yet.

The Palo Alto based, biopharmaceutical company, STEMCELLS INC [STEM] stepped up 10.3% closing at $2.25 in heavy trading that started around 2 p.m. EST. This was apparently because of the announcement by a small Worcester, Mass., company, ADVANCED CELL TECHNOLOGY, that it had discovered a way to create embryonic stem cells without destroying human embryos. This presumably will effectively remove the ethical barriers that are limiting embryonic stem cell research in this country. Other beneficiaries of the discovery are GERON CORPORATION [GERN] which was up 2.4% and AASTROM BIOSCIENCES INC [ASTM] which was up 4.39%, both with the same relatively heavy volume after 2 p.m. EST.

RITE AID CORP [RAD] rose 8% closing at $4.71 on the news that it was close to a deal to acquire the Eckerd and Brooks drugstore chains for approximately $3.4 billion from Canada’s Jean Coutu Group Inc. Apparently the deal would involve $1.8 billion in cash and the remainder in stock, giving the Canadian company a 30% stake in RITE AID.

CUBIST PHARMACEUTICALS INC [CBST] rose 7.5% closing at $23.93 on the news of Phase III results for telavancin, a skin treatment being developed by THERAVANCE INC [THRX] for certain staph infections. Curiously, this press release was generally interpreted by the news media as meaning that one of the current treatments, cubicin, which is produced by CUBIST PHARMACEUTICALS would not be seriously threatened by telavancin. Looking at the risk factors in the latest CBST 10-Q, it would appear that CBST is more at risk because of its dependence on a single product (cubicin) and competition from existing generics like vancomycin, than from one particular NDA.

MILLS CORP [MLS] soared up 15.3% closing at $19.28 on the news that Colony Capital Acquisitions LLC would be providing additional funding for MILLS and partner Kan Am USA Management XXII Ltd. in developing the Meadowlands Xanadu mega shopping and entertainment center just outside New York City. The Xanadu Project was originally priced at $1.3 billion, but the cost has ballooned to $2 billion. Colony Capital is expected to invest $500 million and arrange for construction loan financing. In return, MILLS will issue 4.5 million shares of stock or units of The Mills Limited Partnership redeemable for MLS shares that will be allocated between Kan Am and Colony Capital.

For the original poem by Samuel Taylor Coleridge (whose last line provides our headline), click here.
And of course - the ultimate self reflection - we must provide a link to the original precursor of the amazing HTML that lies behind the entire www experience - Ted Nelson’s original hypertext vaporware project Xanadu.

WELLMAN INC [WLM] mysteriously gained 26.8% closing at $3.78 on Tuesday, with no apparent news event on volume that was about 4 times normal and confined to pretty much the first hour of trading. Looks like a major institutional buy of a relatively inexpensive stock. Given the lack of profitability (albeit the latest quarterly earnings are headed in the right direction and might even reach break-even next quarter) and huge long term debt, this is not one we would recommend.

XM SATELLITE RADIO HOLDINGS INC [XMSR] bounced up 20.3% closing at $13.52 with a two-step upgrade by Bear Stearns from “Underperform” to “Outperform.” The Bear Stearns observation that the company has solved the FM transmitter interference problem raised by the FCC is indeed positive news, and the observation that the XM fan base has remained loyal is encouraging but not surprising. However, the subscriber base forecast of 7.7 to 8.2 million for the year should definitely be achievable, since the company already had 7 million subscribers at the end of July and the new guidance appeared incredibly conservative. Our main fear is that they lower the upper end of the forecast which would still seem to be a major risk. For recent WSN posts on [XMSR], try here and here

AVI BIOPHARMA INC [AVII] up 19.6% closing at $4.28 on the news that Dutton Associates had upgraded the stock to “Strong Speculative Buy.” At the same time, it lowered its 12-month price target to $6.00 which is certainly a lot more reasonable than the consensus price target of $8.50 which appeared absurd. As we have noted before, this does not appear to be a company with any sort of plan to get to profitability in the near-term.

Alternative Energy plays MGP INGREDIENTS INC [MGPI] forged ahead 15.2% closing at $22.99 and PACIFIC ETHANOL INC [PEIX] rose 7.9% closing at $19.70 probably on a combination of oil concerns including the Iranian attack on the Roumanian oil rig, the price of light sweet crude settling above $73 per barrel for October futures, and the recognition of increasing Ethanol penetration in certain U.S. locations like Minnesota.

RAMBUS INC [RMBS] tumbled 9.7% closing at $11.21 probably due to its tardiness in submitting its 10-Q for the second quarter – now 13 days past the due date. The reason for the delay given in the NT 10-Q “Notification of Late Filing” was the need to complete the “internal investigation of past option grants and other potentially related issues.” See our previous post on Rambus as well.

CANDELA CORP [CLZR] crashed 28.7% closing at $10.33 after reporting fourth quarter results that fell well shy of expectations. While annual earnings were reported at $0.62 per diluted share, 94% more than last year’s $0.32 per diluted share, they still fell short of the consensus estimate of $0.76 per share. For the fourth quarter, the exposure was even more extreme. Fourth quarter earnings of $.10 per share fell well below the consensus estimate of $.23 per share and were actually below the earnings reported for the same period last year of $.14 per share. The obvious question is whether the fourth quarter is an exception or a signal of rough times ahead. I view the 31% increase in inventories over the past year as troubling and most likely indicative of a weakness in demand that will persist until some new product hits the market. The R&D expenditure, at 5% of sales in 2005, was probably too low, and apparently has been increased to 7.3% of sales, which hopefully will help turn the situation around. With the current P/E ratio at about 15, today’s price drop appears to be an overreaction and we would assume this is a buying opportunity. The downgrade by Cowen & Co. from “Outperform” to “Neutral” also helped to batter down the price.

The markets were marginally up today with only eleven sectors in negative territory.  The big outlier was Alternative Energy with an average return of 3.8% for the day.  Approximately 56.6% of the members of the SigmaInverse Universe of 3,591 stocks posted positive returns for the day.

One of the country’s largest poultry producers, GOLD KIST INC [GKIS], jumped 47.1% closing at $19.02 as it announced an unsolicited offer from PILGRIM’S PRIDE [PPC] which also jumped an impressive 5.6% closing at $24.97. No Subservient Chickens in this bunch. The combined entity would be the world’s largest if it goes through and is expected to be accretive to earnings within the first year.

HARVEST NATURAL RESOURCES [HNR] erupted up 16.3% closing at $13.85 on the news that its 80% owned Venezuelan affiliate (Harvest Vinccler, C.A.) had reached an agreement with Corporacion Venezolana del Petroleo S.A., the state run oil company in Venezuela, to add three more fields to the mixed company (Empresa Mixta Petrodelta, S.A.) emerging from a Memorandum of Understanding signed at the end of March. Under the terms of the new agreement [HNR] controls 32% (80% of 40% of Petrodelta). In addition to approval by the boards of directors and shareholders, this is also conditional on approval by the Venezuelan Ministry of Energy and the Venezuelan National Assembly. In addition to all the approval hoops to get through, we would view the likelihood of synergy in this venture as pretty remote and cannot see an attractive long position in the mixed entity.

A real-estate investment trust which specializes in high-quality office properties in high-demand locations, GLENBOROUGH REALTY TRUST INC [GLB] shot up 8.1% closing at $25.97 after agreeing to be bought by MORGAN STANLEY for $26 per share. Given the rather modest 8% premium being paid for a REIT specializing in what is probably the most desirable REIT niche, it was interesting to note that MORGAN STANLEY DEAN WITTER & CO [MS] also posted a positive return for the day, which given the toughness of the market overall on Monday, appears to be a very positive signal for [MS].

LA-Z-BOY INC [LZB] demonstrated considerable élan vital on an otherwise dull day surging 6.2% to close at $14.64. It appeared that last week’s hit was indeed an overreaction as observed by Rich Smith of The Motley Fool. For indeed there were substantial Balance Sheet improvements and the stock price eventually recovered from the quarterly disappointments and the Morgan Keegan downgrade. Monday’s upgrade by Raymond James & Associates, suggesting a strong interest rate impact, appears to have had a similar overreaction in the opposite direction. Not that we question the correlation – which is obvious - but that the impact of interest rates is already factored into the price of these stocks seems clear.

MERGE TECHNOLOGIES INC [MRGE] faded 6.9% closing at $7.15 as the medical imaging and software company’s co-CEO and co-President, Brian Pedlar, rather abruptly resigned from his position with the company. The press release did not provide any insights into the reason for the departure.

VISTEON CORP [VC] tumbled down 8.7% closing at $8.27 as part of the collateral damage from Ford’s announcement of a 21% production cut in the fourth quarter. In response to this, Standard & Poor’s has put 8 auto parts suppliers on its CreditWatch list with negative implications – meaning that it will be reviewing these companies to determine whether their credit ratings should be lowered. VISTEON currently has a “B+” rating.

DOLLAR GENERAL CORP [DG] lost 9.6% closing at $12.74 on the heels of its lowered guidance for the quarter ended August 4^th. The new guidance is for earnings in the range of $0.14-$0.15 per share, substantially lower than the guidance of $0.18-$0.22 which is provided in June. In addition to shrinking margins due to an unfavorable brand mix, the company also indicated lower than expected back-to-school sales.

Medical Technology company, KENSEY NASH CORP [KNSY] plummeted 9.7% closing at $26.72 as it lowered its guidance. For the quarter ended June 30^th, earnings of $0.26 per share were reported, which were 22% less than those of the same period last year, but $0.01 better than the consensus estimate. The company’s new guidance for earnings next quarter are in the range of $0.14 to $0.15 per share, which is substantially below the previous estimate of $0.24. It appears that investor patience is finally wearing very thin given the absurdly high P/E ratio.

The bulls apparently took an extra long weekend with an average return of -0.69% for the SigmaInverse Universe. Only 28.1% of the members posted a positive return for the day. Unusual sector performance was noted for Food (up 1.49%), Mining (up 1.15%) and Railroads (down 2.72%).

GASCO ENERGY [GSX] surged 22.9% closing at $2.95 on the news that it had acquired significant new natural gas pipeline assets and producing properties in Utah for $4.9 million. The very volatile and bullish natural gas prices on Friday undoubtedly contributed to the surge.

BEBE STORES INC [BEBE] bounced up 20.4% closing at $22.21 after posting a very strong quarter with earnings of $.24 per share compared with $.21 per share for the same period last year and 3 cents more per share than the consensus estimate for the period. Friedman Billings upgraded the apparel retailer from “Market Perform” to “Outperform.”

TIVO INC [TIVO] rose 8.2% closing at $7.02 as it won the latest round in its battle with Echostar. Given the long term prospects here, we would consider this a good point sell any long positions.

Another beneficiary of a legal decision was ILLUMINA INC [ILMN] in defending itself in 6 separate patent infringement accusations being claimed by Affymetrix. The court’s decision to adopt ILLUMINA’s position in the interpretation of certain disputed terms apparently increases the likelihood that ILLUMINA will prevail and as a result its stock was up 7.5% closing at $34.18.

LONE STAR STEAKHOUSE & SALOON INC [STAR] shot up 15.1% closing at $27.10 as it agreed to be acquired by a private equity firm, Lone Star Funds, for $27.10 per share.

Despite a sharp drop in profits for the quarter and lowered guidance for the year reported yesterday, FOOT LOCKER INC [FL] was up 8.7% closing at $24.78 on the news that it had hired Evercore Partners to work the company, probably fueling once again the speculation of a buyout by KKR.

COST PLUS MINUS INC [CPWM] was down 21.3% closing at $10.37 after announcing a really ugly second quarter, in which it not only swung from earnings of $.07 per share last year to a loss of $.51 per share this year, but also badly missed the consensus estimate of a loss of $.37 per share. It was downgraded by Wedbush Morgan from “Buy” to “Hold” and by DA Davidson from “Neutral” to “Underperform.”

DEVRY INC [DV] dove 11.4% closing at $20.65 after posting fourth quarter results that were slightly below expectations. The earnings of $.17 per share for the quarter ended June 30^th, were below the consensus estimate of $.19 per share, albeit well above the $0.00 posted last year. We suspect that some of the valuation of DEVRY was due to speculation that it might be acquired and perhaps the relatively strong fourth quarter makes this less likely.

SIRVA INC [SIR] continued its slide down another 9.1% on Friday closing at $2.10 following the restatement of fiscal 2005 results which were rather sick. The vulnerability of the company to the housing slow down, relatively low cash situation, enormous long term debt, etc. makes this stock singularly unappealing.

ADAMS RESPIRATORY THERAPEUTICS INC [ARXT] fell 7.4% closing at $41.75 on Friday following the news that another company claims to have filed an abbreviated new drug application with the FDA for a drug that would compete with the company’s Mucinex expectorant. Given the relatively low P/E, we consider this a very attractive long opportunity.

A provider of gadgetry designed to relieve sleep apnea, RESMED INC [RMD], was down 7.3% closing at $43.10 with no apparent news. Still trying to understand this one.

Auto parts supplier LEAR CORP [LEA] sank 6.5% closing at $21.01 on the announcement by FORD [F] that it would be cutting production by about 20%.

MILLS CORP [MLS], which manages the Columbus City Center, jumped 24.9% closing at $16.80 following the termination of Mark Ettenger as president, although he continues to be employed by the company. This is probably related to the termination of employment announced back in April of the COO, Kenneth Parent, and EVP, Nicholas McDonough, followed by a resignation of another EVP, James Napoli. MILLS also announced that it had signed a binding letter to sell properties in Canada, Scotland and Spain for a total of $981 million, before transaction costs which are expected to run about $5 million. MILLS was upgraded by RBC Capital Markets from “Sector Perform” to “Outperform.”

The average return for the SigmaInverse Universe on Friday was a modest 0.21%, with 51.6% of the members posting positive returns for the day. The two sectors with unusually high returns were Alternative Energy (up an average of 2.1%) and Tobacco (up an average of 2.5%) on the news that a U.S. District Court judge had decided not to impose any additional financial penalties associated with the sanctions already imposed on the industry.