05/07/2004 12:00 am EST
"Remember when investing in companies that started with ‘e’ was all the rage?" asks Fred Hager. "After the Internet craze many ‘e’ stocks crashed due to dismal business plans. We are pleased, however, to have two successful 'e' stocks in our portfolio–eResearch and eBay.
"eResearch (ERES NASDAQ) has delivered again. The company, through its digital technology, helps the pharmaceutical, biotech, and medical-device industries to collect, interpret, and distribute cardiac safety and clinical data more efficiently. As we anticipated, eResearch reported another outstanding earnings report. The company beat estimates and raised full-year guidance. ERES also announced another 3:2 stock split and a share repurchase plan. This is the second split of the stock since we began coverage less than a year ago. The robust nature of their market growth is apparent in a summary of their quarterly report. The backlog of contract work is up to $107 million, a 143% increase from last year. Cash on hand has also grown significantly. The company reported $62 million cash and short-term investments on hand. That is more than a 500% increase over last year at this time. Joe Esposito, ERES’s CEO commented, ‘We continue to see momentum across all our product and service’ areas.' So do we, as we remain extremely bullish on this stock.
"Many that avoided the post-bubble Internet stocks have shunned the good with the bad. But the business model at eBay (EBAY NYSE) and its domination of the bid merchandise market has placed this company into ‘cash generating machine’ mode. The presence of a vibrant market of buyers and sellers has led to the success. In many respects it’s the ‘it’s better to be first than best’ phenomenon at play. While others could participate in the business model, the enormity of the eBay marketplace dictates that eBay is the de facto marketplace for matching buyers and sellers. They got there first and are executing flawlessly. The company recently delivered another consistent earnings report. Earnings beat Street estimates by 5 full cents. We’d also note that foreign growth has been a significant component of eBay’s growth for several quarters. We see eBay reaching $3 billion in revenue by 2005 a year early. With over $750 million in this recent quarter, listing prices up, and listings up, we think they will. We remain very bullish on the long-term performance of this stock."