Commtouch Software Ltd. (Nasdaq: CTCH) has yielded a 36.5% return for investors since the beginning of the year. 2006 was clearly the start of a positive turning point for this company. Very seldom does one encounter management teams that can make the turnaround in their business and pull their companies out of a crisis.
This is not to say that Commtouch is now a phenomenal business success, but the company has been managed wisely and efficiently and time is on its side. Its quarterly report on trends in spamming has long since become a global accepted source of information on this, and I will not be surprised at all if sooner or later Commtouch's reports become the standard monitoring tool worldwide. They won't make any money on it, but it will bring the company recognition from all corners of the globe, and every such report draws yet more visitors to its site and more investors on the hunt for opportunities.
Commtouch's founder and CEO, Gideon Mantel has shown himself to be a good marketing executive and good manager. The company's latest report indicates that in the war waged by companies against spammers, the latter are gaining the upper hand. Between 85% to 95% of all email traffic circulating the web in the first quarter of 2007 was spam. Zombies have been spreading throughout the world rapidly, and have now been found in more than 100 countries.
The term zombie - which is defined in the dictionary as the 'living dead' - refers to a group of computers that is connected to the net, but whose owners are unaware that they are being used by spammers. These computers are used by spammers and distributors of viruses to run what are known in web slang as 'bots' which refers to computer programs that run automatically. These programs, when run on various networks, are known as botnets, and their proliferation poses a real danger to users, since they cause considerable disruption and the infections they cause are difficult to trace. Incidentally, the two most common categories that are most likely to carry infections are sex sites, followed in second place by spam links to sites with stock picks, an interesting and deadly combination.
Either way, I expect to see the revival continue both for the company itself and the stock of course. I have been receiving a good many queries from investors worldwide about this company from investors, which was once worth $1 billion when no one had heard of it and today, now that everyone has heard of it, is worth $123 million. I must stress here, however, that stocks like Commtouch currently represent a highly speculative investment, in which the economic side is not their strong point.
TAT - strong on value
TAT Technologies Ltd. (Nasdaq:TATTF) is one company that offers economic value, and probably a lot more that is apparent. If TAT had a dividend reinvestment plan, anyone who bought this stock when I did back in 2003 at $4 a share, now has stock worth $23.50 a share, or has recorded a 487% profit within three and a quarter years. It may not be another Silicom Ltd. (Nasdaq:SILC; TASE:SILC), or NDS Group plc (Nasdaq: NNDS; Euronext:NNDS), but just remember how investors looked at TAT before 2003 and compare that with the way they view it today.
My claim about the economic value that the stock represents even after these gains is based on the following assumptions. Earlier this week TAT filed a draft prospectus for the flotation on Nasdaq of its US subsidiary LIMCO Airepair Inc, which will managed by the underwriters Oppenheimer & Co and Stifel Nicolaus, both of which are more than capable of leading an offering like this. TAT wishes to raise $45 million for the Oklahoma-based LIMCO (which wholly owns Piedmont Aviation Component Services) at a value of $100 million before money. Should the flotation be successful, (which, as experience has shown, is not always the case), then TAT, which is now worth a total of $122 million, will have potentially phenomenal value.
The online news site Bellwether Report is fast establishing itself globally as a site that many use as source for investment information. At the end of March it published an extremely complementary review on TAT. "TAT Technologies helps militaries keep their cool; in the Middle East that's no small thing," wrote the site's aviation industry analyst. He was, of course, speaking in a jocular vein, but he really liked what he saw in TAT and rated it "Buy", due to the stock's fall to $20 from $26 on the eve of the publication of the company's report for the fourth quarter of 2006 and the year as a whole which, incidentally, were excellent.
Assuming that the flotation does go ahead (since it's not dreams we're talking about here but a very healthy reality), even at a lower value of $80 million, TAT's current price is most definitely economic. I believe that TAT is operating in a rapidly growing field, and when I say this I refer to its heat and cooling systems as well as its aviation component supply and upgrading business. The company has a competent and experienced management, it is under the constant supervision of First Israel Mezzanine Investors Fund and it is operating in a growing field. So what more could you ask for? It has even paid out a handsome dividend.
BluePhoenix on the rise
Looking at it solely from the technical standpoint, BluePhoenix Solutions Ltd. (Nasdaq: BPHX; TASE: BPHX) is, without doubt, heading north. The company began 2006 at $3.85 and since then it has climbed 76%. While this climb may have taken the form of 'two steps forward and one step backward' the trend is clearly evident.
A member of the Emblaze Ltd. (LSE: BLZ) group, BluePhoenix, which now specializes in the optimization and upgrading of software systems announced yesterday that it had completed an application and platform migration project for a leading financial services firm, including the migration of certain systems to an Oracle/UNIX operating environment.
BluePhoenix has an extremely wide customer base and it is one of those companies that has access to a rapidly expanding market, and which has the know-how it needs to operate in it. I am referring here to a field known as "Network-based operations optimization", which includes a diverse range of sub-niches such as revenue assurance, theft prevention, system-wide security, upgrades of existing systems or adaptation to ERP systems such as digital documentation and others. As I see it, BluePhoenix remains firmly focused on its strategy, and that, apparently, is a good reason for the trend in the stock.
Published by Globes [online], Israel business news - www.globes.co.il - on April 19, 2007
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