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(Best) KFRC, COGT, HOLI (Worst) NTRI, UPL, TSRA from Better Trades

Home > Movers and Shakers > Best and Worst Stocks of January 4, 2010

January 4, 2010

The markets ended the year on a quiet note with all of the major market indices ending the week down slightly. However, the markets did manage to conclude 2009 with its best performance since 2003, as investors speculate that 2010 should bring optimism back to the market place.

The Dow fell 92.05 points, or 0.88%, to close at 10,428, the S&P lost 11.38 points, or 1.0%, ending at 1,115, while the NASDAQ retreated 16 points, or 0.72%, to close at 2,269.

Top 3 Stocks

KFRC – Kforce Inc. ($11.62 to $12.50) +7.6%

With trading volume lagging during the holiday-shortened week leading up to the New Year, one of the few companies posting a solid percentage gain was Kforce Government Solutions Inc. (KFRC). Kforce is a full-service, web-based specialty staffing firm providing flexible and permanent staffing solutions for organizations and career management for individuals.

The company specializes in countless skill areas, including information technology, finance & accounting, human resources, engineering, pharmaceutical, health care, legal, e-solutions consulting, scientific and insurance and investments.

Investors were relieved to hear that restrictions on Kforce, which had been suspended from new or renewed contracts with the government after a conflict surrounding its work with the Bureau of Land Management (BLM), was recently lifted. The original dispute comes from the Department of Interior. The government agency believed that Kforce influenced the BLM on its proposal in which Kforce later received the contract.

Just before the New Year, the Department of Interior confirmed that the suspension was terminated and that Kforce could resume its participation in new and renewed Federal government projects. One stipulation of the renewed activity was that Kforce would return a profit of nearly $79K to the DOI on a Task Order that was issued by the government in 2008.

Larry Grant, President of KGS, remarked, "KGS is a valued supplier of services and solutions to our many Federal clients, and we intend to move forward from this incident with a renewed commitment to service and the highest ethical standards. I'm very proud of the professionalism of the KGS Associates and for the great job they do daily to support our country's decision makers, agencies and particularly our Armed Forces."

David L. Dunkel, Chairman and CEO of Kforce, commented on the recent development, "KGS looks forward to continuing it’s high-level of service and support to the Federal Government. KGS has a proud 38 year history of providing the highest level of service to our valued clients, partners and consultants with a reputation for integrity and professionalism. We are grateful to the Department of Interior and its Office of Inspector General for working with KGS to obtain a prompt resolution of this matter."

Shares of Kforce posted nearly an 8% gain last week, following news of the lifted ban. As the first trading session in 2010 concludes, the company’s stock continued with its upward trend, gaining, nearly 1%, or $0.11, to end the January 4 session at $12.61 per share. During the past 52 weeks, KFRC shares have traded as high as $14.43 per share, while dipping as low as $5.44 per share.

COGT – Cogent Inc. ($9.95 to $10.39) +4.4%

Another company posting modest gains for the week ending December 31 was Cogent Inc. (COGT), which added just over 4% to its market value. Cogent is a leading provider of Automated Fingerprint Identification Systems, or AFIS, and other fingerprint biometric solutions to governments, law enforcement agencies and other organizations worldwide.

These solutions enable customers to capture fingerprint images electronically, encode fingerprints into searchable files and accurately compare a set of fingerprints to a database containing potentially millions of fingerprints in seconds. In the wake of the recent airline bombing attempts, companies such as Cogent could benefit greatly from a potential surge in airport security measures.

In fact, Cogent was recently awarded a contract to replace its AFIS system for the New York State Office of Temporary and Disability Assistance (OTDA). Cogent will supplement the older AFIS system with the newer OTDA unit in order to verify the identity of public benefits recipients through the fingerprint imaging device. The OTDA will be able to centralize and match data of recipients on a statewide basis. There are currently nearly two million records spread out over 200 enrollment stations throughout the state.

The recently awarded contract will be in effect for the next five-and-a-half years with an option to extend the contract for a period of up to two year.

Ming Hsieh, President and CEO of Cogent Systems, commented on the new contract, “Following our success in Texas, New York State OTDA’s contract award confirms Cogent’s dominance in the U.S. civil AFIS market, and is evidence that we are successfully executing our strategy to expand beyond the core law enforcement market segment. The compelling accuracy, flexibility, scalability and ease of implementation of our end-to-end AFIS solution played a critical role in winning this contract to replace the incumbent biometric solution provider.”

Shares of COGT could not sustain its uptrend throughout the January 4 session, falling $0.07, or 0.7%, to end the day at $10.32 per share. During the past year, the company’s stock price has managed to trade as high as $13.59 per share, while falling to an annual low of $7.96 per share.

HOLI – Hollysys Automation Technologies Ltd. ($11.67 to $12.01) +2.9%

Rounding out the list of percentage gainers was Hollysys Automation Technologies Ltd. (HOLI), which managed to record nearly a 3% gain in market share. Hollysys is one of the leading automation systems providers in the People's Republic of China, developing a number of core technologies and completing numerous projects utilizing a wide array of automation products.

The company specializes in the research, development, production, sale and distribution of industrial automation for digital railway signals and information systems, e-government, motor drive transmissions and safety controls for nuclear power reactors.

Investors took heed of news that the company recently signed an agreement to buy the remaining minority interest in Beijing Hollysys Co. Ltd. from a private Chinese conglomerate, Rilin Group. The transaction is valued within a range of $59M to $61M.

Dr. Changli Wang, CEO of Hollysys, stated, "We are very pleased to announce the minority interest buyout in Beijing Hollysys. With Hollysys' leading position in the national high-growth infrastructure sectors of high-speed rail, nuclear, and subway automation, Beijing Hollysys is expected to lead the revenue and earnings growth of the Company with substantial growth in the years to come. The minority interest buyout initiative will enable the Company to fully enjoy the earnings power of its high-growth businesses, and to reduce its management costs through more streamlined decision making processes."

Beijing Hollysys is primarily engaged in the business of high-speed railway, subway and nuclear automation. HOLI will be purchasing the remaining 24.11% of the Beijing unit.

In other related news, HOLI announced that the company has begun shipping its large-scale Distributed Control Systems (DCS) to the Guohua Taishan Power Plant for its 1000 mega-watt thermal power generators. The recent engagement signifies China's first-ever operation of domestic made DCS for thermal power stations in China.

With the sound of the closing bell, shares of HOLI were up nearly 4%, adding $0.47 to conclude at $12.48 per share. Over the course of a year, the company’s stock has traded within a relatively broad range, reaching a high of $13.48 per share and slipping to a yearly low of $2.12 per share.

Worst 3 Stocks

NTRI – NutriSystem Inc. ($33.24 to $31.17) -6.2%

Looking on the downside of trading, NutriSystem Inc. (NTRI) was a leading percentage loser for the week ending December 31, as the company announced that it would be taking a hefty charge related to the recent purchase of Nu-Kitchen food delivery service. NutriSystem is a leading provider of weight management products and services, which offer an at-home weight loss program based on portion-controlled prepared meals, weight loss plans, along with private telephone and online support.

The company announced that there would be a $5M impairment charge, before taxes, in the 4Q related to Nu-Kitchen, which provides freshly prepared meals designed to promote weight management and healthy living throughout the New York area. NutriSystem purchased Nu-Kitchen in July 2008, with the intention of expanding the company’s delivery territory, first in the Northeast, and then throughout the country.

Although reliable figures about the purchase of Nu-Kitchen were never released, a subsequent filing with the SEC stated that NutriSystem initially paid $4M for Nu-Kitchen.

NutriSystem has stated that the company has plans to finalize the impairment charge prior to the company’s release of its fiscal 2009 earnings. Following the company’s recent 3Q earnings announcement, NTRI projected annual earnings to come in between $0.99 and $1.01 per share.

Analysts, who typically exclude one-time charges, are looking for the weight-management product supplier to post annual earnings of $1.01 per share.

During the 3Q, NTRI posted a net profit of $8.45M, or $0.27 per share, compared to the prior year’s 3Q net earnings of $13.53M, or $0.43 per share, a decrease in net income of nearly 38% year-over-year. Revenues during the quarter slipped as well, falling from $162.7M to $127M, a drop in sales of almost 22%.

Investors remain taken back from the impairment charge that NutriSystem announced on December 29, as the stock slipped nearly 5% during the first trading session of 2010, losing $1.38 to end the day at $29.79 per share. Throughout the past year, the stock has traded in a broad range, reaching a high of $33.54 per share and a low of $10.28 per share.

UPL – Ultra Petroleum Corp. ($52.80 to $49.86) -5.6%

Giving up more than 5% of its market value last week was Ultra Petroleum Corp. (UPL), an independent, exploration and production company focused on developing its long life natural gas reserves in the Green River Basin of Wyoming, and its oil reserves in Bohai Bay, in the coastal waters off China.

The most recent news regarding Ultra Petroleum was an agreement with thirteen institutional investors for the private placement of $500M worth of senior notes. The offering is expected to occur sometime in mid-February. The net proceeds from the offering are expected to be used to pay down existing bank debt, general corporate purposes and for the funding of a recent acreage purchase in the Pennsylvania Marcellus Shale region.

The notes will be issued in a series of tranches. The first will be $116M worth of 7-year notes due in 2017 with a coupon rate of 4.98%. The next will be $207M worth of 10-year notes due in 2020 at 5.5%, along with $87M in 12-year notes due in 2022 at 5.6%. The final issuance will be $90M worth of 15-year notes due in 2025 at 5.85%.

Michael D. Watford, Chairman, President and CEO at Ultra Petroleum, commented, "The positive response from the debt market is evident in the terms and duration of the senior notes and affirms the low-risk nature of Ultra's oil and gas portfolio."

After investors contemplated the recent securities offering, the stock posted a solid increase by the end of the January 4 session, adding $3.29, or 6.6%, to finish at $53.15 per share. Ultra Petroleum’s stock has been trading in a relatively broad range throughout the past 52 weeks, reaching a high of $57.21 per share, while sliding as low as $30.02 per share.

TSRA – Tessera Technologies Inc. ($24.45 to $23.27) -4.8%

Finally, the last company on the list of percentage losers for the week ending December 31 was Tessera Technologies Inc. (TSRA), which develops semiconductor packaging technology that meets the demand for miniaturization and increased performance of electronic products. Tessera licenses its technology to its customers, enabling them to produce semiconductors that are smaller and faster, and incorporate more features. These semiconductors are utilized in a broad range of communications, computing and consumer electronic products.

The recent decline in stock price was attributed to the International Trade Commission’s (ITC) refusal of Tessera’s claim of patent infringement by certain DRAM manufacturers, which included Acer Inc. and Smart Modular Technologies Inc. (SMOD). Dynamic random access memory (DRAM) is the most common kind of random access memory (RAM) for personal computers and workstations.

In the ITC’s final determination in the patent claims, the government agency confirmed that Teserra’s three patents are valid, and that no other company has violated them.

Responding to the ITC’s decision was Henry Nothhaft, President and CEO of Tessera, “Once again, the ITC affirmed the validity of our asserted patents. We are disappointed, however, with the determinations regarding our infringement methodology and patent exhaustion."

Nothhaft later added, "We will have an opportunity to appeal this ruling and are already reviewing other avenues open to us to ensure we are fully compensated for use of our technology. We continue to work closely with our licensed customers who are benefitting from their use of our patent portfolio, valuable know-how and trade secrets."

With a holiday-shortened trading week, along with light volume and news of the ITC’s ruling, shares of Tessera slipped nearly 5% by the close of the December 31 trading session. However, heading into the New Year, the stock rebounded nicely, and added $0.54, or 2.3%, to finish the first session in 2010 at $23.81 per share.

During the past year, the stock has traded as high as $32.17 per share, while slipping to an annual low of $10.13 per share.

2010 Better Trades Article

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