Broken Down Trend on EICU?

I was staring EICU all day and finally pulled the trigger at the end of day. With today's jump, I believe the down trend of this stock is broken and it is important that it keeps moving up in the next few days in order to establish a new up trend. While valuation remains expensive, it is important to point out that it has approximately $3.7 cash on its balance sheet, without any debt, and free cash flow positive. If we take the cash out, its valuation become much more reasonable (about 17X of my 07 EPS estimate). Management must continue to deliver its growth and margin improvement in the next few quarters.

My position in NTB.V was stopped out this afternoon.

Positions: Long EICU, Neutral NTB.V

VISICU, Inc. (EICU)

Visicu announced a blowout quarterly report this afternoon after market close. EICU has fallen like a stone ever since its IPO early this year at $18 level. Revenues up by 68% this quarter, and 78% of YTD. Adjusted operating profit margin improved to 30%, EPS for the quarter 7 cents (vs 2 cents consensus). The company raised its whole year guidance with top line growth of 63%-64% (up from 53% - 56%), and GAAP operating margin from 21% - 23% (up from 16% -18%). Backlog currently at $72.4 million, and management is very confidence with its guidance and future earning visibility.

With the increasing revenues and improved operating margin, I believe the company could earned $0.30 - $0.35 for next fiscal year. The company is still in the very early stage of growth and there's really no other competing systems out there. If the company could maintain its top line growth and continue to improve its margin, even taking into consideration of tomorrow's gap up, it remains reasonable PE level of 33X of its 07 EPS. It is still purchasable at this level. However, there might be some short covering tomorrow morning and I might wait until it stabilizes.

Having said that, this is by no means a cheap stock and could be rather choppy, particularly if it fails to deliver its earnings going forward. Be cautious, flexible and not too greedy!

Position: None, watch list

Symantec Corp. (SYMC)

I let SYMC go this morning on its disappointing earning report last night. While disappointed, I got about 10.5% for about three months, not a bad return at all. The earning report is not that bad and I could hold it through next few quarters. However, there are a lot of good companies with very strong earnings and guidance. Why hold this dead money!

Position: NONE (SYMC)

Amedisys Inc. (AMED)

My limited order for AMED just got hit this morning. AMED is on my watch list and the earnings report this morning was very good, in my view. It earned 0.64 (33% vs Q3/05), beating consensus by 3 cents. Revenues up by 22%, with majority from organic growth. It increase its revenues guidance to $530-$540, and EPS to $2.3-$2.35. The company maintained that it will grow its top line by 10%-15% in the next few years, with combination of organic growth and acquisition.

Despite this gap up, valuation remains reasonable. It is traded at about 18X of 06EPS, and about 14X of 07EPS, which I believe has to move up by analysts. I believe it could hit $3.0 by 07, and with a 18X multiple, it should hit $54 by the end of next year, a decent return from current level. More importantly, down side risk is limited as it is in a defensive sector, has not run as much, great earning report and forward guidance, clean balance sheet, and some inside buying. My target is $50.

Position: Long AMED

OMNI-LITE INDUSTRIES CANADA INC (OML.V)

I am putting OML.V on my watch list. This is USA-based, micro-cap company listed on Toronto Venture Exchange. It is a manufacturing company involved in five segments, auto (20%), aerospace (35%), sports (19%), military (18%) and commercial (8%).

The company grew its top line by over 30% in 05 and has grown its revenues in the first three quarters with similar rate sequentially. It has pre-announced its Q3/06 revenues early last week, therefore, eliminating any chance of negative surprise. Margin at 71.5% and improving. It earned 9 cents in 04, 13 cents in 05 and I expect it to earn 19-20 cent this year. It is free cash flow positive and with very little debt. ROE over 21%. Valuation is cheap (14.5X of its 05 EPS and about 10X of its 06 EPS). Insiders own 34% of its shares and it just announced early this month that it intends to purchase 5% of its shares.

Again, it is very illiquid and a bit of cyclical. However, the cyclicality is partially offset by its diversified revenue sources. The company is expecting to continue to grow its revenues in 20%-30% range in the next five years. The stock, despite its micro size, is simply too cheap to ignore. Moreover, I do not believe anyone paid any attention to the revenue announcement and buyback release in early October, both of which are positive catelysts for the stock. I intend to start accumulating a position on this name. My target price for next 12 months is $3.0, representing 15X of its estimated EPS for 06.

Position: None

SAIC INC (SAI)

While I generally do not like IPOs, I did open a small position of SAI this afternoon. (I probably bought it high, as I was out all morning on personal business). This is a large cap, defense procurement play with long history, proven track record, strong sales growth (31% in the past 10 years), strong employees ownership (85%), strong backlog, high level of visibility, and reasonable valuation, in my view. The company is expecting 15% revenue growth for the next three years, both organically and by acquisition. This, combined with a modest margin improvement, could lead to 20%-30% earning growth. The company's EPS in FY06 (proforma) was $1.92 per share and I expect it to generate a EPS for FY07 north of 2.0. With a modest 20X multiple, this could be a $40 stock in the next year or so. I understand there was a lot of pent up demand for this name, however, the pop up is rather modest, in my view. I am happy to pick some anywhere below $20.

Position: Long SAI

COM DEV INTL LTD (CDV.TO)

Trimmed one third of CDV.TO here on this run up. While I continue to believe that the stock has legs to run, again I only added on this position in the mid of September and it has gone up by close to 27% in a month exactly today, on this run up. Disciple dictates that I take some off the table. Moreover, on this name, I tend to sell when there's a large volume institutional purchase (more than 10X of average daily volume) such as today. I still have a 2% of position in this name. I believe we would see a "7" handle before the end of this year.

Position: Long CDV.TO

NEPTUNE TECHNOLOGIES & BIORESSO (NTB.V)

Hugh Cleland of Norther River Capital Management mentioned a couple of interesting stocks. One of them is NTB.V, a small biotech company in Montreal, Canada. I took a look and it appears to have some potential, although a bit of speculative. It went up by about 14% after Hugh's recommendation, and I generally hate to chase. Having said that, there appears some near term catalysts in the next few weeks. I may open a small position for a trade. (Order filled late afternoon).

Position: Long NTB.V

Alphatec Holdings, Inc. (ATEC)

ATEC delivered a press release after market on Friday, which appears to be a warning to me. It was suspicious when company announce something on Friday after market closing. I am very frustrated with this one which I had three chances to sell it with profits, and I did not take it. Now I have to eat the loss on Monday. I will sell it on Monday morning at open.

Position: None

WebTech Wireless Inc. (TSX-V:WEW)

I trimmed a bit of WEW.V this afternoon on this run-up. There were a lot of buying interests in the last two trading sessions as the stock run up with tremendous volume. There might be something up. Nonetheless, I opened this position in the mid of September and it has gone up by more than 60% in less than a month. While I know I should not sell break-outs in general, this is too much profits to hold on. Discipline dictates to take some off the table. The nature of this tiny stock is such that it probably will return to earth at some point, when I could add some back, preferable at $1.5 level.

Position: Long WEW.V

MEMC Electronic Materials Inc.

As planed, I sold some Jan. 40 cover calls on WFR on this run up at $2.65. I do not believe it will run over $40 easily, but if it does, I would be rather happy.

Positioni: Long WFR, Short WFR Calls, Net Long.

Citigroup Inc. (C)

I am considering to add some financial here, and probably C or JPM. While I hate to chase the market here, I have almost no financial exposure in the portfolio and financials are simply too strong to ignore.

Positions: None

MEMC Electronic Materials Inc. (WFR)

I added some WFR here at this sell-off. I have no idea why the stock is on a free fall, on a strong market no less, probably because it is related to alternative energy, and therefore, falling with the energy market. I believe this decline is not warranted and there appears to be some panic. Fundamentals remain very strong and I believe it will deliver a strong quarter. My plan is to wait until it bounces a bit and write some calls on this name, as the premium is very high.

Position: Long WFR

UNILENS VISION INC (UVI.V)

I opened a small position of UVI.V this afternoon, a small Florida-based company (market cap $16 million), engaging in the manufacturing and distribution of specialized contact lens. The company's stock is traded at both OTCBB and Toronto Venture Exchange, with a very small floating (4.4 million shares). You do not see this one traded very often, so when some are offered, I take the opportunity.

The company has been growing its top line by more than 35% so far this year and another 26% of its royalty income. Net income is up by 30% and EPS up from $0.16 to $0.21. (31%). Free cash flow position and growing, with a clean balance sheet. I expect it to earn at least $0.28 for FY06 (June 30, 2006) and $0.35 for FY07, which leads to a 15X of FY06 EPS and 12x of its FY07 EPS. The company has purchased about 244K shares of its own stocks, despite the tiny floating and has paid a one-time special dividend on August 26, 2006. It also announced that it will pay a regular quarterly dividend of $0.075. Based on the currently level, that is a 7.1% dividend yield. Even without any appreciation, the dividend yield is almost sufficient return. The company is also not expected to pay cash tax until 2010 and its final results will likely be boosted due to tax recovery. The company generates a return on equity of 42% and return on capital of 38%. The only drawback is its very low liquidity. It's going to be hard to buy, and probably even harder to sell. Target for 12 months: $6.0.

Position: long UVI.V