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Blog : Three Penny Stocks Bucking the Trend
by John Whitefoot on July 10th, 2009
July 4 may have been Independence Day, but that doesn’t mean the U.S. stock markets were overly patriotic. After eight weeks of correction, many are wondering if we are in a normal time-out or a more serious top out.
Whether the markets are in a phase of correction/consolidation or not, one thing is certain, quality penny stocks have rarely been trading in such excellent ranges. And no one knows how long the window of opportunity will stay open for. The trick is to find those penny stocks that are worth jumping through the window for.
And that’s a trick worth knowing. Whether its solid quarterly results, buy out news, or speculation – penny stocks can see their share prices pop anywhere from 10% to over 100% in one day.
It’s not often that a junk penny stock with zero cash, lots of debt, lousy fundamentals and a boring story is the toast of Wall Street. That’s why, barring tea leaves, a crystal ball, or Jim Kramer – it’s best to “fall back” on fundamentals and look for those companies with growing momentum.
Here are three penny stocks with great fundamentals and excellent long-term growth potential that have been bucking the trend.
A provider of data mining and modeling software for the pharmaceutical and biotech industry, Accelrys Inc. (ACCL – Nasdaq) is a financially solid company with over $61 million in cash, a strong international presence, and no long-term debt.
In early March the company was trading for as low as $3.05 and on June 26, it hit a new 52-week high of $5.26; for a 4 month spread of 72%.
On May 22, ACCL announced that full year revenue increased 2% to $81.0 million; net income slipped to $100,000, or breakeven per share. Net income in the current year included $2.7 million of additional severance expense, as compared to the prior year.
“We are pleased with our year end results from both a financial and operational standpoint particularly in light of the worldwide recession,” said Todd Johnson, Interim President and CEO. “We achieved profitability on both a GAAP and non-GAAP basis for the year and increased our cash balance by $5.4 million.”
Datalink Corp. (DTLK – Nasdaq) is an innovative company with improved operations, a growing customer base, over $29 million in cash, and no long-term debt. The company opened in March trading at $2.89, and on June 18, it hit an intra-day high of $4.46 – for a three month gain of 54%. Since then, DTLK’s share price has been hovering at around $4.35
In mid-April, DTLK announced that first quarter results that were in line with expectations – slipping 16% year-over-year to $39.9 million.
Charlie Westling, Datalink’s President and CEO, commented, “Despite these challenging conditions, we were pleased to be able to come through the quarter with a stronger cash position and deliver results that were in line with revenue expectations and an operating loss that was at the more favorable end of expectations.”
The company ended the first quarter of 2009 with a backlog of approximately $29 million. After a slow period of bookings activity throughout January, February and early March, DTLK did see bookings pick up considerably during the last few weeks of March, and this increased activity has continued through the first two weeks of April.
Strong first quarter results, new products, and agreements have been helping Art Technology Group Inc.’s (ARTG – Nasdaq) share price climb 139% since the beginning of February. The company also has over $66 million in cash, no long-term debt, and a strong outlook for the remainder of the year.
On April 30, ARTG announced that first quarter revenue climbed 15% year-over-year to $41.9 million. Net income increased to $3.0 million, or $0.02 per diluted share compared with a net (loss) of ($842 thousand), or $(0.01) per share, in the first quarter of 2008.
“ATG posted a strong first quarter with very impressive gains in net income,” stated Bob Burke, President and CEO.
Julie Bradley, Senior VP and CFO stated, “We are pleased with our first quarter financial results which met or exceeded our previously stated guidance ranges. Going into the second quarter, we are optimistic about the prospects for our business and expect to achieve growth in revenue and profit for the full-year 2009.”
Even though the bright lights of Wall Street have been dimming of late, there are always penny stocks out there bucking the trend. Granted, most penny stocks are swooning under the summer heat – but not all of them.
There’s no trick to finding excellent penny stocks – it’s all about fine tuning your penny stock ticker.