See this press release ("Hemisphere GPS Awarded Four New Patents for Positioning and Automated Steering") for the Physics 903.
Hemisphere GPS (HEM.TO) is one of three positions I currently have that are Aaron Edelheit picks. Again, it's worth signing up for guest access to the Value Investors Club to read Edelheit's initial write-up, under his pseudonym "Issambres839". Hemisphere is also a holding of Daniel Wahl and Ravinsu (who doesn't have a blog yet, as far as I know, but occasionally graces us with his comments here). I've mentioned Hemisphere here before a few times, but I don't think I've explained what the company's business is. Here is a layman's description, in a nutshell:
If you've ever mowed a lawn or spread fertilizer or seeds on a lawn, you've probably overlapped your rows slightly, to make sure you covered the whole area of your lawn. Commercial farmers have long done essentially the same thing. When a commercial farmer is working with tens of thousands of acres, all that overlap can lead to the waste of a lot of (increasingly expensive) fuel, fertilizer, and seeds. Hemisphere is a "precision agriculture" company. By using satellite guidance systems, Hemisphere's equipment precisely steers tractors and other agricultural equipment, obviating the need for overlap, and saving farmers a lot fuel, fertilizer, and seeds -- and, consequently, a lot of money.
In a sense, Hemisphere GPS is to the agriculture industry what Alloy Steel International is to the mining industry. Both companies' products enable operators in their respective industries to operate more efficiently.
Showing posts with label Value Investors Club. Show all posts
Showing posts with label Value Investors Club. Show all posts
Tuesday, July 15, 2008
Monday, July 14, 2008
A Conversation with the CFO of Destiny Media Technologies (DSNY.OB)
After reading Destiny Media Technology's Q3 release, I spoke with Fred Vandenberg, the company's CFO, earlier today. I asked him about the decline in revenues y-o-y from its Clipstream product. He said that Destiny's focus had been on the MPE service (in terms of development, sales, etc.), so Clipstream suffered somewhat from that neglect, but he reiterated its advantages over Flash (e.g., that it uses 90% less bandwith, that it requires less processing power, etc.), and also reiterated his company's prediction in today's release that Clipstream revenues would increase significantly in the company's fiscal Q1 (since Destiny's fiscal year begins on September 1st, Q1 will be the Sep-Nov quarter).
I asked Vandenberg if he was familiar with Aaron Edelheit's VIC write-up of his company, and he said that he was. In light of today's announcement that Destiny expects to be profitable in its Q1 quarter, I asked him if he thought Edelheit's estimate of ~10 cents per share in fiscal '09 earnings sounded on target. Unsurprisingly, since Destiny Media didn't provide a specific earnings estimate for Q1, Vandenberg didn't want to get pinned down on a specific estimate for all of '09, citing some variables earnings would depend on (e.g., how many contracts get signed, etc.). He did, however, reiterate his confidence that Destiny Media would be profitable in its fiscal Q1.
In his VIC write-up, Edelheit had predicted that most of the companies that were using Destiny Media's MPE service on a trial basis would become paying clients this year. I asked Vandenberg about this, and he said that had been the case so far this year.
Vandenberg also said that one factor holding back MPE revenues somewhat has been that the pricing system has been complex. In trying to make the pricing flexible, Destiny Media may have gone so far in that direction that they made it too complicated, and that complexity may be inhibiting some clients from using the service as much as they would otherwise. Vandenberg said that Destiny was in the process of simplifying the pricing system and that process of simplifying it should be completed within the next few weeks. He said simplifying that pricing should lead to an increase in MPE service revenues.
I asked Vandenberg if he was familiar with Aaron Edelheit's VIC write-up of his company, and he said that he was. In light of today's announcement that Destiny expects to be profitable in its Q1 quarter, I asked him if he thought Edelheit's estimate of ~10 cents per share in fiscal '09 earnings sounded on target. Unsurprisingly, since Destiny Media didn't provide a specific earnings estimate for Q1, Vandenberg didn't want to get pinned down on a specific estimate for all of '09, citing some variables earnings would depend on (e.g., how many contracts get signed, etc.). He did, however, reiterate his confidence that Destiny Media would be profitable in its fiscal Q1.
In his VIC write-up, Edelheit had predicted that most of the companies that were using Destiny Media's MPE service on a trial basis would become paying clients this year. I asked Vandenberg about this, and he said that had been the case so far this year.
Vandenberg also said that one factor holding back MPE revenues somewhat has been that the pricing system has been complex. In trying to make the pricing flexible, Destiny Media may have gone so far in that direction that they made it too complicated, and that complexity may be inhibiting some clients from using the service as much as they would otherwise. Vandenberg said that Destiny was in the process of simplifying the pricing system and that process of simplifying it should be completed within the next few weeks. He said simplifying that pricing should lead to an increase in MPE service revenues.
Friday, July 11, 2008
New Position: Destiny Media Technologies, Inc. (DSNY.OB)
Today I picked up some shares in Destiny Media Technologies, Inc. DSNY.OB at $.40 per share on margin. I plan to pay off the margin loan next month, when I sell the wreckage of some of the stocks I bought from the Magic Formula Investing list last August. Destiny Media is a pick of "issambres839" on the Value Investors Club. Thanks to Daniel Wahl, I've learned that issambress839 is the professional value investor Aaron Edelheit, of Sabre Value Management in Santa Barbara, CA. Edelheit may be one of the best investors I had never heard of up until last month.
In contrast with many value investors who use trailing metrics such as P/S and P/E to screen for stocks (recall rules-based investor Marc Gerstein's frustration with this approach in "What's Wrong with Today's Value Investing?"), Edelheit often researches small stocks without current earnings that are nevertheless trading at a low multiple to his estimates of their future earnings. When he recommended DSNY.OB on the Value Investors Club in January (when it was trading at $.68 cents per share), Edelheit wrote that it was trading at 7x his estimate for fiscal '09 earnings (at the current quote, it's trading at about 4x his estimate; insiders have been buying on the way down). Destiny Media is the second stock I bought based mainly on Edelheit's write up (and subsequent news that confirmed his thesis); the first was the precision agriculture company Hemisphere GPS (HEM.TO), which I bought around $4.34 per share (Edelheit originally recommended it last summer when it was trading at $2.74 per share). Like Hemisphere, Destiny Media is a Canadian company. Edelheit is willing to consider obscure Canadian companies (including those such as DSNY that trade on the OTC Bulletin Board) in search of undiscovered values.
I recommend signing up for guest access to the Value Investors Club so you can read issambress839/Edelheit's write-up for Destiny Media in detail, but here's my summary in a nutshell. Destiny offers a service (its Play MPE network) that enables record labels to digitally (and securely) transfer songs to radio stations. The service includes security features such as a (recently patented) digital watermarking technology to prevent unauthorized redistribution of the songs. The value proposition here is that Destiny Media can save the record labels a lot of money: Destiny's service costs about 90% less than the old method of sending songs in CD format via courier. Destiny had been offering its service to some labels at no charge last year, but has been signing contracts with them to pay to continue the service this year. As Edelheit pointed out in his write-up, since Destiny's stock is obscure, foreign, and has no analyst coverage, few are aware of the paying customers it is lining up for its Play MPE network.
According to Edelheit, Destiny also offers a product called Clipstream, which is similar to Adobe Flash but uses 90% less bandwith. This product could a source of additional future earnings, but his multiple estimate above was based solely on Destiny's Play MPE service.
One note about risk: Destiny has a collection of conventional wisdom red flags for risk -- it's a microcap, it's foreign, and it trades on the OTC Bulletin Board. So it's not exactly a widows & orphans stock. Then again, in the last year we've seen stocks that some would have considered suitable for widows and orphans -- e.g., Citigroup, Fannie Mae, etc. -- suffer stomach-churning drops. This subject is a subject worthy of its own post, but the conventional wisdom about potential risk versus reward with respect to stocks may be worth revisiting.
In contrast with many value investors who use trailing metrics such as P/S and P/E to screen for stocks (recall rules-based investor Marc Gerstein's frustration with this approach in "What's Wrong with Today's Value Investing?"), Edelheit often researches small stocks without current earnings that are nevertheless trading at a low multiple to his estimates of their future earnings. When he recommended DSNY.OB on the Value Investors Club in January (when it was trading at $.68 cents per share), Edelheit wrote that it was trading at 7x his estimate for fiscal '09 earnings (at the current quote, it's trading at about 4x his estimate; insiders have been buying on the way down). Destiny Media is the second stock I bought based mainly on Edelheit's write up (and subsequent news that confirmed his thesis); the first was the precision agriculture company Hemisphere GPS (HEM.TO), which I bought around $4.34 per share (Edelheit originally recommended it last summer when it was trading at $2.74 per share). Like Hemisphere, Destiny Media is a Canadian company. Edelheit is willing to consider obscure Canadian companies (including those such as DSNY that trade on the OTC Bulletin Board) in search of undiscovered values.
I recommend signing up for guest access to the Value Investors Club so you can read issambress839/Edelheit's write-up for Destiny Media in detail, but here's my summary in a nutshell. Destiny offers a service (its Play MPE network) that enables record labels to digitally (and securely) transfer songs to radio stations. The service includes security features such as a (recently patented) digital watermarking technology to prevent unauthorized redistribution of the songs. The value proposition here is that Destiny Media can save the record labels a lot of money: Destiny's service costs about 90% less than the old method of sending songs in CD format via courier. Destiny had been offering its service to some labels at no charge last year, but has been signing contracts with them to pay to continue the service this year. As Edelheit pointed out in his write-up, since Destiny's stock is obscure, foreign, and has no analyst coverage, few are aware of the paying customers it is lining up for its Play MPE network.
According to Edelheit, Destiny also offers a product called Clipstream, which is similar to Adobe Flash but uses 90% less bandwith. This product could a source of additional future earnings, but his multiple estimate above was based solely on Destiny's Play MPE service.
One note about risk: Destiny has a collection of conventional wisdom red flags for risk -- it's a microcap, it's foreign, and it trades on the OTC Bulletin Board. So it's not exactly a widows & orphans stock. Then again, in the last year we've seen stocks that some would have considered suitable for widows and orphans -- e.g., Citigroup, Fannie Mae, etc. -- suffer stomach-churning drops. This subject is a subject worthy of its own post, but the conventional wisdom about potential risk versus reward with respect to stocks may be worth revisiting.
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