In May and June, I wrote a series on what I think could be the top 25 stocks for the NEXT 25 years. It was a fun exercise and a lot of work. Since the series finished in mid-June, we've been knocked down from 25 stocks to 22 stocks: Opsware (NASDAQ: OPSW), Kyphon (NASDAQ: KYPH) and Color Kinetics (NASDAQ: CLRK) are all being acquired for significant premiums by obviously much larger companies.

We have another on our list that, although it's not being acquired, the stock has doubled in value these past 2 1/2 months. Blue Coat Systems (NASDAQ: BCSI) was written up on June 8. The stock was trading at $44, but it's now at $84.80. Blue Coat reported an absolutely explosive July quarter. Revenues came in at $62.4 million versus Street consensus of $58 million, representing a 71% year-over-year increase and a 15% up-sequentially from the April quarter.

The wide-area-network (WAN) optimization product set is gaining mainstream momentum. The even better news for Blue Coat Systems is that it is about to embark on an excellent new product cycle. The company saw bookings, pipeline and deferred revenues all go up substantially this past quarter and provide tremendous visibility going forward.

Continue reading Top 25 Stocks for the NEXT 25 Years: Blue Coat Systems (BCSI) -- update

Top 25 Stocks for the NEXT 25 Years: Blue Coat Systems (BCSI) -- update originally appeared on BloggingStocks on Tue, 28 Aug 2007 11:20:00 EST. Please see our terms for use of feeds.

In my book about Baby Boomer investing I highlight what I feel are the five major growth industries going forward. The industries are health care, alternative energy, technology, communications and lifestyle. I also mention 42 companies within those industries that could be the leaders, the game changers. Since the book has been published, five of the 42 stocks I wrote about are being acquired!

The latest one to go is Checkfree (NASDAQ: CKFR). Fiserve (NASDAQ: FISV) has announced its $4.4 billion bid. Checkfree made our banking-transactional life much easier. The other four that will be part of larger companies are Opsware (NASDAQ: OPSW), Color Kinetics (NASDAQ: CLRK), aQuantive (NASDAQ: AQNT) and Kyphon (NASDAQ: KYPH). Other than aQuantive, the other three were also part of my Top 25 stocks for the NEXT 25 years series.

As the 42 companies are down to 37, it causes some reflection for the future. Great, emerging companies will always be on the radar screen of larger, well-financed suitors. If growth cannot be internally generated through research and development efforts, larger companies will need to acquire growth and next generation products or technology. With interest rates still historically low, the borrowing necessary to buy these young, up-and-comers is not a significant issue. Investors will reward mature companies if they acquire intelligently and strategically.

Continue reading Checkfree, another one of my picks, gets bought out

Checkfree, another one of my picks, gets bought out originally appeared on BloggingStocks on Thu, 02 Aug 2007 15:05:00 EST. Please see our terms for use of feeds.

I wrote the series, Top 25 Stocks for the NEXT 25 Years during the months of May and June. It was a labor of love as I examined more than 300 companies to come up with what I thought would be the best of the best going forward. The series came to me as a result of a USA Today article back in early May detailing the top 25 stocks of the PAST 25 years. So many of the names were surprising, as many were obvious.

Since I finished the series, three of the top 25 are about to be acquired by larger, well-funded companies. Color Kinetics (NASDAQ: CLRK) will be bought by Royal Philips Electronics (NYSE: PHG) for $791 million, or $34 per share. Opsware (NASDAQ: OPSW) will be swallowed by Hewlett-Packard (NYSE: HPQ) for $1.45 billion or $14.25 per share and finally, Medtronic (NYSE: MDT) will acquire Kyphon (NASDAQ: KYPH) for $3.9 billion or $71 per share. All three transactions are for 100% cash -- no stock, which in itself is very interesting. But what happened and why are these three going to melt into larger organizations?

For emerging growth companies to become truly great, several factors need to be in place for shareholders to benefit. 1) Great and talented senior management needs to be committed and feel the passion of its company's direction. 2) A large addressable market, preferably global in nature, and 3) the opportunity to operate under the radar screen of larger, needy companies. Well, two out of three ain't bad!!

Continue reading Top 25 Stocks for the NEXT 25 Years: What happened?

Top 25 Stocks for the NEXT 25 Years: What happened? originally appeared on BloggingStocks on Mon, 30 Jul 2007 15:40:00 EST. Please see our terms for use of feeds.

Well, there goes another one of our top 25 for the NEXT 25 years! This morning it was announced that giant medical device company Medtronic (NYSE: MDT) will acquire Kyphon (NASDAQ: KYPH) for $71 a share in an all cash transaction. Great deal for Medtronic and a great deal for Kyphon shareholders. Unfortunately, that takes our NEXT 25 list down to 22 companies left. Hewlett-Packard is acquiring Opsware and Philips of the Netherlands is acquiring Color Kinetics (NASDAQ:CLRK). Now, I have to find the three replacement companies to complete our list of 25!

Medtronic, I have contended for years, is the premiere medical device company in the world. The company is the franchise player in the cardiac world with a multitude of products. The staple of products ranges from cardiac surgical tools to pacemakers and implantable cardiac defibrillators. Medtronic's spinal franchise has had its share of struggles. The company has been set on working with younger patients with spinal afflictions. Kyphon, on the other hand, is very strong in working with older patients with its products that address osteoporosis. This affliction attacks nearly 700,000 woman annually in the United States alone. Kyphon's minimally invasive surgical devices and patented bone-cement were fast becoming the products of choice by surgeons.

The acquisition by Medtronic puts Kyphon's excellent product suite into the best distribution sales and marketing force the medical device industry has ever seen.

Meanwhile, I will continue my research to provide you with 3 more companies to round out our list of the top25 stocks for the NEXT 25 years.

Georges Yared is the CIO of Yared Investment Research.

Top 25 stocks for the NEXT 25 years: Medtronic to buy Kyphon originally appeared on BloggingStocks on Fri, 27 Jul 2007 12:03:00 EST. Please see our terms for use of feeds.

The first company in my series of the top 25 stocks for the NEXT 25 years is about to be acquired. Color Kinetics (NASDAQ: CLRK) is being pursued by Dutch-based company Philips Lighting for $34 per share. The Dutch company is the world's largest lighting company.

The $34 per share offer represents a $688 million total acquisition price. Color Kinetics management has endorsed the deal and is encouraging shareholders to accept the offer.

Color Kinetics brings a rich portfolio of patents to the marriage. With 64 patents having been granted and another 100+ patents-pending, Color Kinetics brings to Philips the next generation technology of LED lighting products. Color Kinetics had won many high-profile lighting contracts recently, including the dash-board lighting work for Ford Motor Co. (NYSE: F). The new-generation LED-based lighting systems had not yet been economical for residential housing applications, but the market is indeed moving in that direction.

With Philips owning Color Kinetics technology, the residential market will be within its reach in the near future. Color Kinetics is selling to Philips for nearly 7 times revenues, a rich valuation, but certainly not when considering the growth rate of Color Kinetics, 35-40%, and its patent portfolio.

Oh well, we still have 24 companies left on the original list of 25 stocks for the NEXT 25 years...

Georges Yared is the CIO of Yared Investment Research.

Top 25 for NEXT 25 Years: Color Kinetics offered $34 by Philips originally appeared on BloggingStocks on Tue, 19 Jun 2007 11:30:00 EST. Please see our terms for use of feeds.

MOST NOTEWORTHY:

• Goldman downgraded shares of Continental Airlines, Inc (NYSE: CAL) to Neutral from Buy on valuation, higher oil prices and a weak domestic market.

• Goldman also downgraded Molson Coors Brewing Co (NYSE: TAP) to Neutral from Buy based on the increase in analyst estimates, valuation and the potential for margin pressure in the summer.

• BB&T cut Watsco, Inc (NYSE: WSO) to Hold from Buy based on valuation and catalysts that are already reflected in the share price.

• Roth Capital downgraded shares of K-V Pharmaceutical Co (NYSE: KV.A) to Hold from Buy, telling clients they have learned that Par Pharmaceuticals Cos (PRX) has launched generics of 50, 100 and 200mg Toprol-XL. The firm expects a material impact to KV's 100 and 200mg strength generics.

• Stifel expects investor enthusiasm regarding Progressive's Corp (NYSE: PGR) recapitalization plan to fade as underwriting fundamentals deteriorate and cut shares to Sell from Hold.

• Color Kinetics (NASDAQ: CLRK) was downgraded to Hold from Sell at Needham on valuation...

• Citigroup cut The Phoenix Co's (NYSE: PNX) to Hold from Buy.

• KeyBank downgraded Lubrizol Corp (NYSE: LZ) to Hold from Buy.

• Goldcorp Inc (NYSE: GG) and Freeport-McMoRan Copper & Gold Inc (NYSE: FCX) were downgraded to Market Perform from Outperform at BMO Capital.

• Susquehanna downgraded Build-A-Bear Workshop, Inc (NYSE: BBW) to Neutral from Positive.

Analyst downgrades 6-15-07: BBW, CAL, FCX, PGR and TAP originally appeared on BloggingStocks on Fri, 15 Jun 2007 11:10:00 EST. Please see our terms for use of feeds.

An innovator in LED (light emitting diode) lighting and display, Color Kinetics (Nasdaq: CLRK) may, after 10 years in business, begin to gain some momentum if recent earnings are any indication. 1Q 2007 revenue increased 28% to $18.8 million, so this is a small company. The big news, however, is that GAAP net income increased 697%, not a typo, to $1.5 million or diluted EPS of $0.07, up from 1Q 2006 net income of $188,000 or $0.01 diluted EPS. Non-GAAP net income was $2.3 million, from which $814,000 went to stock-based compensation.

Gross margins improved to 55%. More importantly, Color Kinetics signed 12 new licensing agreements, several of them huge customers such as Ford Motor Company. As a result of landing new big clients, licensing revenue was up 88%. Color Kinetics is living up to its reputation as a lighting innovator, receiving 7 patents in 1Q 2007 alone. This stock may catch some momentum, as the company is flexible and innovative enough to respond quickly to market demand, has a demonstrated record of technical expertise in its field, and can offer clients a necessary product, lighting, that is much more energy efficient, longer lasting, lower maintenance than most current products.

2Q 2007 revenues are forecast in the range of $20-$21 million, with GAAP net income between $0.05-$0.07 per share.The stock closed recently at $27.48, down $0.19.

Color Kinetics beginning to light up originally appeared on BloggingStocks on Fri, 25 May 2007 10:30:00 EST. Please see our terms for use of feeds.

The third name in my list of the top 25 stocks for the NEXT 25 years (again, in no particular order) is Color Kinetics (NASDAQ: CLRK). This Boston-based company has the opportunity to redefine the world of lighting -- a massive market. Color Kinetics closed at $21.55 and currently sports a market capitalization of $459 million. Color Kinetics has $100 million of cash on its balance sheet. My estimates for this year call for revenues of $85 million and earnings per share of $.44-.47 and for 2008, revenues of $110-112 million and earnings per share of $.65-.67.

Color Kinetics makes intelligent solid-state lighting systems using light emitting diodes (LED). The company has 68 awarded patents in its portfolio with another 100+ applied for. The intellectual capital that Color Kinetics possesses is becoming extremely valuable. Its business model is to directly sell lighting systems, from architectural design to implementation, to licensing its technology, to third party partners.

The world of lighting is undergoing a revolution and Color Kinetics is emerging as one of the de facto leaders. The traditional incandescent light bulb is going the way of the horse and buggy. The incandescent bulb uses far too much energy to operate efficiently, and the lifespan is limited to normally a couple of thousand hours. LED lighting, not yet economical for mainstream homeowners, is winning in the commercial world. Color Kinetics systems are the choice for casinos, theaters, new commercial building projects, and street lighting. The technology included allows the customer to change the color of the lights from pure white to an array of different colors. The physical beauty of the systems are awe-inspiring.

Continue reading Top 25 for the NEXT 25 Years: Color Kinetics -- lighting the way

Top 25 for the NEXT 25 Years: Color Kinetics -- lighting the way originally appeared on BloggingStocks on Sat, 05 May 2007 15:10:00 EST. Please see our terms for use of feeds.

The sloppy market takes every one down . . . shoot first, ask questions later. So the savvy investor gets to go shopping for good stories at a time like this. The patient investor will look back in a year or two and be thankful for the opportunity -- so many good stocks with discounted valuations.

Color Kinetics Inc. (NASDAQ: CLRK) is such a story. This company sports a market cap of only $340 million and is sitting on $100 million in cash. Thirty percent of market cap in cash is a good start to almost any story. Color Kinetics is a leading provider of intelligent solid-state lighting systems utilizing light emitting diodes (LEDs). Color Kinetics has over 60 patents and another 150 patents pending. It sells its leading technology with a direct sales force and leverages its revenues through several OEM relationships.

TIR Systems (TSX: TIR), a Canadian competitor is being acquired by Philips Lighting of Holland. With the valuation Philips is paying for TIR Systems, comparable metrics would put Color Kinetics at a $24 valuation. That is before growth is factored into its future. Color Kinetics is forecasted to generate revenues of $85 million this year with earnings per share of $.50. The numbers for 2008 are revenues of $105 million and earnings per share of $.75. The 2006 actual results were earnings per share of $.28 on revenues of $65 million.

Continue reading Growth at a reasonable price: Color Kinetics

Growth at a reasonable price: Color Kinetics originally appeared on BloggingStocks on Wed, 21 Mar 2007 10:55:00 EST. Please see our terms for use of feeds.