Saturday, January 28, 2006

Abelson, Sentiment, and What's the Symbol for NMT?

Alan Abelson comments in Barrons this week on the speculative tone of trading this week. He highlights the froth that surrounds the Chipotle (CMG) IPO and its doubling on the first day of trading.

Nothing characterizes the frothiness better in my view than the reaction to Cramer's Mad Money recommendation of NMT Medical (NMTI) on Friday. Readers bid a muni-bond closed end fund NMT to silly heights in their zeal to be first on the block with Cramer's pick. Wrong stock home gamers!

Mad Money Trading After Hours

The research basis for NMTI's success is based on a theory that some migraine headaches start in the heart, in a defect referred to as the PFO. Sealing of this heart defect, which can appear in 25% of the population, may rid patients of their migraine issues. There has also been some suspected connection between PFO and stroke.

The stock has risen over 200% in the last 52 weeks, and another 34% in the post Cramer rally.

The company flows red ink, has never made a dime, and has negative retained earnings (accumulated deficit) of about $14 million. Cash (courtesy of several rounds of financing) is about $33 million. Total EV is only $180 million.

Competitors exist with similar technologies namely AGA Medical, St. Jude Medical (STJ) and Cierra Inc, and Cardia Inc. Competitive rivalry is intense, needless to say. Only two analysts provide current estimates but I see interest from a number of others who are sniffing investment banking opportunity as this company continues to spend well in excess of its modest revenues (YTD losses of $5.1 million versus last year's $1.9 million.)

Speaking of needing money, it appears that insiders also have had their sell tickets out. In the last three months, insiders have sold a total of $1.4 million of stock.

Shame they hadn't listened to Cramer, or is it a shame that Cramer's not listening to them?

In any event, there does appear to be some pretty strong evidence of investors going into heat once again.


At 8:51 AM, Blogger NO DooDahs said...

Could this create a wonderful short opportunity?


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