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SmallCap Network Members:
We appreciate the opportunity to present
an "Anatomy of a Micro Cap Winner" as part of
today's WEEKEND OUTLOOK EDITION. The
SmallCap Network is committed to providing valuable
insights to our Members with this special look
at one of this year's micro cap success stories.
The Company we will evaluate is NMT Medical,
Shareholders who bought NMTI stock in early
2000 between $2.75-$6.00 per share may NOT consider
it such a "major" success. However, in this
case timing of the purchase proved to be very
Before we get into our analysis, here are some
important facts regarding this issue:
1) At the close of
trading on January 2, 2001, NMTI closed at $0.94.
2) This week's
closing price of $5.30 puts NMTI up 463%
since January 2.
3) NMTI now trades
9.09% above its 13-day EMA*
4) And 37.92% above
its 50-day EMA*.
With this year's impressive performance, investors
who picked up NMTI shares in early January have
experienced a phenomenal performance run through
a very treacherous market. Here's the SmallCap
Network's breakdown on NMT Medical, Inc. Their
business is Medical Equipment and Supplies.
NMT Medical designs, develops, and markets innovative
medical devices that utilize advanced technologies
delivered by minimally invasive procedures.
The Company's products are designed to offer
alternative approaches to existing complex treatments.
This reduces patient trauma, shortens procedure,
hospitalization, and recovery times, and lowers
overall treatment costs.
The Company's cardiovascular business unit provides
the cardiologist, radiologist, and vascular
surgeon with proprietary catheter-based implant
technologies that minimize or prevent the risk
of embolic events. The cardiovascular business
unit also serves the pediatric cardiologist
with a broad range of cardiac septal repair
implants delivered with non-surgical catheter
As seen in the chart below, NMTI gave shareholders
a pretty rough ride in 2000. While the Russell
2000 was trending lower, NMTI fell from over
$6.00 (not shown) per share to the low $2.00
range before bouncing back over $4.00 one last
time in July.
the decline in the stock in the second half
last year was the result of overall market conditions,
senior management turmoil and change, and a
$7.1 million second quarter write-down of assets
related to the Company's Neurosciences Division.
On September 25, 2000, the Company announced
a senior management change. Everyone knows the
mantra for real estate success is "location,
location, location." In small and micro caps,
the success mantra is "management, management,
management." This factor was probably the most
critical to NMTI's turnaround this year.
On September 25,2000, Mr. John E. Ahern was
brought in as President, CEO, and Chairman of
the Board of NMTI. Investors who dug into the
details of this announcement learned Mr. Ahern
was previously VP of Emerging Technologies at
C.R. Bard, Inc. (NYSE: BCR.)
Mr. Ahern was responsible for identifying, investing
in, and managing early-stage emerging technologies
and companies at BCR. He was with them for thirteen
years and held senior marketing and strategic
planning positions in three of the Companies
cardiovascular divisions. However, the immediate
impact of Mr. Ahern's appointment was lost on
The Company's third quarter release on November
8, 2000 contained some very revealing data.
The Company's new CardioSEAL® product produced
a 28% increase in unit sales and a 62% increase
in dollar sales over the same prior year period.
These results were masked by a 20% decrease
in sales of the Company's neurological products.
NMTI shares experienced continued selling pressure
trading down to a year-end low of $0.75. With
11 million shares outstanding, NMTI's total
market capitalization at the end of 2000 was
$8.25 million. On a pro forma basis, the Company
lost $0.88/share on sales of $36.5 million last
year, meaning their market cap stood at just
under 25% of sales.
Fourth quarter pro forma net income exclusive
of charges was $0.02/share. Sales of CardioSEAL®
devices were up 40% over the prior year quarter,
and a solid improvement over third quarter results.
By this time the NMTI turnaround was picking
up momentum. The stock hit a closing high of
$2.00 per share on March 8, 2001.
On May 4, 2001, NMTI announced 2001 first quarter
results posting slightly higher total sales
and $0.02/share in net income up from $0.01/share
from the first quarter of 2000. Micro and small
cap issues were performing quite well during
this period as observed on the left side of
the Russell 2000 chart below.
8, 2001, NMTI announced continued improvement
in second quarter results. The stock staged
another breakout performance, spiking up to
an intra-day high of $4.10 on August 21.
Another breakthrough event occurred on September
12, when the Circulatory Systems Devices Panel
of the FDA recommended the CardioSEAL® Septal
Occluder System be approved for use in patients
with congenital ventricular septal defects not
approachable with surgery. This recommendation
now puts the Company's Premarket Approval Application
back to the FDA for final approval.
When the stock market finally bottomed out on
September 21, NMTI hit a closing low of $3.01.
This provided yet another excellent opportunity
for investors to step up to the plate. Those
that did realized an 80% profit between September
22 and October 4's closing price of $5.44.
We don't know how NMTI will perform in the future,
and the stock has had a tremendous run up this
year. This situation merely serves as an excellent
example of the type of Company we've been talking
about in past issues of the SmallCap Digest.
To recap, here's what made NMTI one of this
year's big success stories:
1) A POSITIVE MANAGEMENT CHANGE--STRONG MANAGEMENT
2) Steady sales increases in PROPRIETARY NEW
3) Consecutive quarterly improvement in FINANCIAL
4) NEW PRODUCTS poised to serve NEW MARKETS
5) LOW MARKET CAP relative to SALES
these five important factors led to a dramatic
rise in shareholder value this year. Certainly
these AREN'T the only factors.
We encourage SmallCap Network Members to seek
Companies with similar attributes when positioning
small or micro cap stocks for their portfolios.
We look forward to providing you with some similar
ideas in the near future, so keep an eye on
* EMA = Exponential Moving Average, a
weighted moving average that gives greater value
to recent prices and lesser value to older prices
in its calculation.
Stocks were weak on the day, with the Dow
Jones Industrial Average ending modestly lower,
while the NASDAQ posted a marginal gain. Final
statistics are posted at the top of today's
issue. September retail sales tumbled 2.4% and
dropped 1.6% excluding automobile sales as consensus
estimates were expecting 0.8% and 0.6% respectively.
The dismal numbers reflect the somber mood of
American consumers following the September 11
terrorist attacks. The October and November
statistics will be widely anticipated as economists
attempt to quantify the effects of events past,
present, and future. Today's big story was the
report of another anthrax incident at NBC offices
in New York that did little to boost investor
On the NASDAQ, a rally in the networking sector
helped boost tech shares, as Juniper Networks
posted a $0.10 third quarter profit. This topped
consensus estimates of $0.07 and led to a 20%
increase in the value of Juniper's stock. Other
tech sectors showed weakness today after rallying
for the better part of the week.
The popular averages have posted a significant
rebound since the lows posted on September 21,
and today's weakness suggests the possibility
the recent rally may be out of steam. We anticipate
weakness ahead next week and encourage Members
to proceed accordingly.
* * * * * * * * * * * * * * * * *
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