Companies featured in this edition of the newsletter: ACTC, GISV, HYTM, IWEB, SVUL, SWYV, URGP, XCR
It was another encouraging week on Wall Street as markets continued to rally following more positive economic indicators and the Treasury department unveiling details of its plan to remove troubled assets from the balance sheets of banks, that sent financials soaring 17.7% on Monday. All of the major indices managed to post sizable gains, as the Dow gained 497 on the week to close at 7776, up 6.8%, paring its YTD losses to 11.4%. The Nasdaq managed to break into positive territory on the year briefly following Thursday’s session, but retreated slightly on Friday to close at 1545 on the week, up 6%, but down 2% on the year. The S&P 500 and Russell 2000 also finished up on the week, posting gains of 6.2% and 7.2% respectively bringing their YTD losses to 9.7% and 14.1%.
The major catalyst of the week was the Treasury’s announcement of its plan regarding toxic assets that spurred the sizable gains in the financial sector on Monday. The Treasury plans to create a series of public-private investment funds to buy $500 billion to $1 trillion in legacy loans and securities that have been weighing on both the minds of investors and the balance sheets of banks. The government plans to take on much of the risk associated with the toxic assets by offering subsidies that it expects will encourage investor participation from the private sector.
Unexpectedly positive economic developments sprung up throughout the week that continued to fuel bullish sentiment, following news that existing home sales rose 5.1% in February, significantly diverging from the 0.9% drop that was widely expected by economists. The surprising data continued later in the week, as new home sales also increased on the month to 4.7%, again topping estimates that called for a 2.9% decline. Other positive economic developments on the week included news that February durable goods orders increased 3.4%, marking the first time in six months that orders increased, and the announcement that GDP had contracted less severely than expected, posting a 6.3% decline versus the 6.6% that was widely expected.
What should investors look for this week? Earnings releases will be minimal, but look for results from agricultural supplier Monsanto (NYSE: MON) and Rite Aid (NYSE: RAD) before the bell on Thursday, followed by Research in Motion (NASDAQ: RIMM) after the close the same day.
Economic indicators for the week begin with Consumer Confidence for March and S&P/Case-Shiller Home Price Index for January, both due out at 9:00 am Tuesday, followed by Chicago PMI for March at 9:45 am. On Wednesday, look for February Construction Spending, ISM Index for March, and Pending Home Sales for February due out at 10:00 am. Weekly Crude Inventories follow at 10:30 am, with Truck and Auto Sales for March due out at 2:00 pm. Thursday, look for Weekly Initial Jobless Claims at 8:30am with February Factory Order data to be released at 10:00 am. On Friday, expect Average Workweek, Hourly Earnings, Nonfarm Payrolls, and the Unemployment rate, all for March, at 8:30am. ISM Services for March will be released at 10:00 am.
Conference schedules will be light as well, but Morgan Stanley will hold its two-7 day Arizona Retail Field Trip in Paradise Valley, AZ, beginning on Tuesday. Tuesday will also see increased activity from the Fed, as governors Stern and Plosser will speak on the economy, with Pianalto speaking Wednesday. Citi will hold their Biotech Day in New York beginning on Wednesday. Federal Reserve Chairman Bernanke will speak at the Richmond Fed’s Credit Markets meeting on Friday.
Volume Alert: Shares of healthcare services company Hythiam, Inc. (NASDAQ: HYTM) surged 79% on 5 times average volume last week, after the company announced the results of two double blind, placebo controlled studies supporting the efficacy of its PROMETA Treatment Program. The first study investigated the program’s effectiveness in treating individuals with greater symptoms of withdrawal and found that subjects maintained statistical significance for endpoints that included percent days abstinent and craving, when compared to placebo controlled subjects. The second study focused on subjects with lower withdrawal symptoms and found that the PROMETA group experienced statistically significant decreases in alcohol craving and alcohol consumption as compared to placebo groups. These results, when taken in conjunction with previous studies that found that PROMETA significantly reduced drinking in subjects experiencing higher levels of alcohol withdrawal symptoms, suggest that given the pressure to reduce health care costs and because of rising alcoholism associated with current economic conditions, the company’s Catasys managed care offering featuring PROMETA could attract a managed care deal from a major health care provider. The ability to attract such a deal could serve as a significant catalyst for the stock, which just this week rebounded from its 52 week low following the announcement of results of the aforementioned studies. Shares gained 15 cents on the week to close at $0.34.
Volume Alert: Shares of medical device developer Xcorporeal (AMEX: XCR) jumped 141% on 10 times average volume last week. While there was no news to explain the outsized gains, the company recently announced plans to implement significant cost cutting measures in response to the global economic slowdown. Shares gained 24 cents on the week to close at $0.41.
Urigen Pharmaceuticals (OTCBB: URGP), a company specializing in the design and implementation of innovative products for patients with urological ailments, announced the results of an epidemiological study conducted by researchers at the Harvard Medical School that supports the company’s focus on developing treatments for Painful Bladder Syndrome (PBS). The study found that PBS is a common condition in women, the prevalence of which increases with age and results in the vast majority of sufferers reporting moderate to severe symptoms. The results support Urigen’s focus on developing treatments for this painful condition which affects a significant portion of the population, representing a strong, commercially viable market. The company’s portfolio of products designed to alleviate frequency and severity of symptoms associated with PBS ably position them to benefit from the large and growing market demonstrated to exist by the results of this research. Shares lost two cents on the week to close at $0.07.
Advanced Cell Technologies (OTC: ACTC), a company engaged in the development of regenerative therapies utilizing stem cells, saw its shares surge last week, perhaps due to an announcement that a UK study investigating the feasibility of synthesizing blood from stem cells has been granted major funding from several investors in the United Kingdom. The study purports to investigate the viability of producing O negative blood- which can be universally accepted for transfusion regardless of a person’s blood type- from stem cells. The study bears significance to ACTC due to the synergies between this research and the company’s own projects to synthesize blood from stem cells. An article detailing the UK operation specifically cited ACTC’s recently announced ability to produce billions of viable red blood cells from stem cells, suggesting that perhaps additional funding possibilities could emerge for ACTC. Shares gained four cents on the week to close at $0.125.
Global Investor Services (OTCBB: GISV), a company that engages in the education of investors through online services, announced last week that officers and directors of the company have agreed to convert approximately $400,000 in past due compensation into restricted common stock at $0.25 per share. Common stock will be issued for all compensation until the company is able to pay for these expenses out of cash flows from operations. Shares remained unchanged at $0.07 on the week.
IceWeb (OTCBB: IWEB), a storage technology company specializing in Geographic Information Systems (GIS) that provides services to bureaucratic and corporate organizations, announced last week that it has delivered additions to its custom-designed GeoBase system for the Air National Guard. The additions include several servers and storage arrays specially designed by the company’s subsidiary INLINE, and mark a continued collaborative effort with the Air National Guard since 2005. INLINE’s complete systems approach allows the Air National Guard to quickly deploy and use GIS throughout their entire US base infrastructure. Shares gained a penny on the week to close at $0.08.
Steel Vault (OTCBB: SVUL) an emerging provider of identity security products and services, announced that it has issued a $190,000 note, convertible into common stock at any time at a price of $0.44 per share, to an investment group led by its Chairman and CEO. The proceeds of the transaction will be used to further expand subscription growth and provide for working capital needs. The investment marks the second $190,000 infusion provided by the group, the first of which was received on March 20, 2009, bringing the total investment to date to $590,000. Steel Vault plans to use the funds to enhance their marketing campaign and expand their subscription base. Shares remained unchanged at $0.40 on the week.
Diversified holding company, Seaway Valley Capital Corporation (OTCBB: SWYV), announced that it has entered into a consulting agreement with a debt consolidation firm. Under the terms of the agreement, the consultant will provide certain debt restructuring services aimed at eliminating or dramatically reducing the company’s junior and senior debts. Since mid 2007, SWYV has managed to acquire assets worth over $35 million, and management now feels that the company’s interests are best served through concentrating efforts on debt restructuring and reduction, which it feels will further unlock value to Seaway Valley’s shareholders. Shares remained unchanged at under a penny on the week.
On the Wires: Hythiam (NASDAQ: HYTM) announced last week that healthcare executive Kelly Ellston has joined the company as Senior Vice President of Operations. Ms. Ellston has over 25 years of healthcare operations experience and will oversee all operational aspects of the delivery of the Catasys managed care offering to healthcare providers.