"High Risk, High Reward, Gambling Money"
1/12/05 Here are some interesting Atlantic City Ideas from a
Let me know what you think about these three Atlantic City stocks:
Sonus Networks (SONS); Sontra Medical (SONT); and eResearch
First, SONS...its a clear VoIP equipment play that seems to be uniquely
positioned for the transition to VoIP. Given its accounting issues from
a year ago (of which Revenue was UNDER-stated) I think its going to pop
here shortly due to increasing broadband penetration numbers and its
unique market position. Also, recent articles point out that it is
right behind NT in circuits shipped.
Sontra Med is purely speculative but what I like about it is that it has
a FDA approved product in SonoPrep, announced 2 distributors for its
product, a glucose monitoring product in development and a relationship
with a major player Bayer. On top of this, it is wound pretty tight
with only a 30M Market Cap.
ERES also seems to be strategically positioned and is inking deals left
I am extremely interested in hearing your thoughts (if any) regarding
these stocks. Cheers, Jeremy
I believe there's a place in almost all portfolios for some sort of an
Atlantic City type investment. I like your ideas. Here are mine:
- $5.53) - The VOIP market is very exciting and is the next
technology wave. Over the years I have been into so many of these small
technology companies and you never know which ones will succeed. Two
things: First, its net income as of 6/30/04 is a little misleading, SONS
had Net Income of $7.9m while its cash flow from operating activities
came it at only $1.1m. Ultimately if their products sell cash will flow
in, but that has not occurred yet. Second, the company raised $1b and
spent $800m with little profits to show. Spending money is easy, making
it is more difficult. My concern is that with its $1.3b market
capitalization are you making a good investment or bailing out the
original investors. I don't know, but that's why I call it an Atlantic
- $1.98) - SONT has an interesting skin cleaner. Its 9/30/04 quarterly
revenue of $12.2k is very low for a company with a $42m market
capitalization. If the cleaner sells it may make a excellent fit for a
company like BD. The price seems on the high side. I don't know how big
their market is. I would wait to see if sales trends materialize.
- $13.58) - It costs about $800m to develop a new drug. ERES's
technology seems to streamline the process in getting FDA approval. That
is worth money! ERES has a history of making money and "money
makes money". For the nine months ending 9/30/04 ERES generated $47m
cash flow from operating activates. That's excellent for a relatively
new company with a $698 market capitalization.
Jeremy, I believe eReasearch is no longer a Atlantic City play. It's a
real investment and the one that I like the best out of your three
choices. I would follow the cash and the cash is being made at ERES.
Good Luck - I enjoyed your question and you may have found a very
good stock for yourself and my readers. - Joe
Pacific Internet Ltd. (PCNTF
- $7.83) Pac Net, a small cap. company, and a leading independent internet
service provider located in Singapore, seems to be an appealing investment.
For FYE 6/04 Yahoo reported Pacific Internet's revenues at $98m and net
income at $2.8m. PCNTF's balance sheet also seems in order. The company has a tangible net
worth of $28m, of which $24m is in cash, and practically no LT Debt. The
company's cash flow from operations is approximately $9.8m. The price is
also reasonable. Pac Net has a market capitalization of $102m and an
estimated EPS range between .22 to.41 cents. Given a low and declining
dollar, Pac Net is interesting.
P.S. (I would have liked to review their SEC filings, but I was unable to
access them from my computer - Please review their SEC filings before
Name: XO Communications ("XOCM.OB")
Date: May 14, 2004
Name: Global Crossing ("GLBC")
Date: May 14, 2004
XO Communications and Global Crossing are assets plays. These companies
spent billions of dollars building fiber optic net works; in which their
usage projections failed to materialize. They both emerged from bankruptcy
with a fraction of their pre-bankruptcy debt. XO Communications is a
domestic company, while Global Crossing is known for its international
infrastructure. XO spent approximately $10b plus building their
infrastructure, while Global spent approximately $23b plus building their
platform. These assets are now selling for pennies on the dollar.
The strategy is similar to Global Marine in the 1980’s. One is betting
that in 10 to 20 years the voice and data demand for fiber optic cable would
catch-up to capacity, thus these companies will once again be viable.
My concern is that both of these companies, which are still operating at
losses, and have substantial debt, may not have the wherewithal to survive a
few decades. XO communications has approximately $500m of long-term debt,
while Global Crossing has approximately $400m. It’s possible that these
companies can go into bankruptcy again if demand never increases.
If one is going to participate in this game, watch debt, cash and
cash-flow; discount everything else until demand and earnings pick up. A lot
of investors lost money on these companies, so buy low, and be careful.