Isaac update 4:30 8/1

From Dawn (one of the missionaries):

"Isaac was in an ambulance at the hospital prior to being taken to the location for his EEG. The team was gather around praying for the ambulance driver intending to share the gospel with him. Isaac had a seizure. Team prayed for him. Seizure ceased. Gospel was shared. Driver received Christ on the spot!"

I feel like we are walking through the pages of Acts!

Huge Praise! We just got through on the phone to Isaac's room. It was so good to hear his voice. He is exhausted and weak b/c of the seizures and medication, but mind is clear and concern for all of us was expressed along with thankfulness for prayer covering. He had a mild seizure during the EEG and asked Charmaine Landrum if she had been holding his hand through the whole procedure. She had not. Nonetheless he said that there was someone holding his hand through the whole thing.

"When my anxious thoughts mutliply within me, thy consolations delight my soul."Ps 94:19
We hope to hear EEG results this evening. Thank you for praying that we will get word and that God will continue to minister through this brave band of believing young people!

Monica

NVE Corporation (NVEC)

Technology companies often face the prospect of years of negative cash flow while developing new ideas while hoping that one of these epiphanies will carry the company to profitability. Not so with NVE Corporation (NVEC). The company has had a longstanding agreement with the government to do contract research and development. This means the company gets paid for the R&D it performs while at the same time, most of the intellectual property it discovers along the way still belongs to the company.

Spintronics is short for Spin Electronics, and depicts what Craig Hallum has termed a "profound advance in microelectronic technology." The technology uses the electron spin instead of the electron charge to acquire, store or transmit data. Obviously with my financial background I can't dive deep into the ramifications of this technology, but suffice it to say the company is on the verge of revolutionary discoveries that could drastically impact electronics in the future.

Although most of the contract R&D was done for military purposes, the company has introduced its first products in the medical device area. Specifically, NVE has begun selling revolutionary technology relating to hearing aids and pacemakers. As applications from research begin hitting the market, NVE has seen its revenue stream shift from being heavy in government contracts to now being much more driven by sales of products. The expectation is that the company will soon enter the automotive and consumer electronic businesses.

NVE has done a good job of validating their technology by lining up some strong blue chip customers. Companies such as Honeywell, Cypress Semi and Motorola have come on board which strengthens the technology's credibility. One concern when bringing in partners is the protection of the intellectual property. NVE has more than 100 patents worldwide to cover its technology but there still arise questions as to how these patents cover specific uses of the technology.

The company is currently involved in litigation with Motorola as well as Freescale Semiconductor but it looks likely that negotiations will allow the relationship to remain and NVE to be paid a license fee for its technology. In fact, licensing is likely to be a significant revenue driver in the future as more companies want to implement spintronics into their products. International revenue is picking up as well allowing NVE to diversify its revenue base and take advantage of the strong global economy.

I am a bit concerned that the stock is expensive, but it is very unclear how quickly the company will grow its business. There is a strong possibility that sales will ramp as more applications come online. There is a significant amount of short selling in the stock which could provide buying pressure should any unexpected positive announcements happen. The prospects look good and I would look for a good low risk spot to become involved with this name.

FD: Author does not have a position in NVEC

Bare Escentuals (BARE)

I spend a good bit of time leafing through companies that have come public in the last 12 months as it is a wonderful area to find emerging companies with strong growth prospects and possibly overlooked stocks. Such may be the case with Bare Escentuals (BARE). The company markets makeup and other cosmetic products through its boutique shops as well as through wholesale channels that filter down into department stores. One of the differentiating factors for the company is that BARE was one of the first to make mineral based products so popular and this type of product is now becoming the industry standard.

After coming public in September 2006, the stock has been subject to two secondary pricings as major shareholders are cutting back on their positions. The most recent sale, along with a company pre-announcement that wasn't taken too well on the street has brought the price lower in the last month. The large shareholders are still out there which may cause a bit of an overhang in the stock, but they have significantly lightened their positions so it is unlikely they will add too much more pressure to the stock.

Concerns with the pre-announcement center around poor performance in the infomercial portion which accounted for 1/3 of 2006 revenue. A new format was used for the company's infomercial and it wasn't received well by customers. Management was quick to realize the campaign wasn't working and soon after, the program had been changed. Sales picked back up with the new format, but the damage for the quarter had already been done. The stock is obviously pricing in continued weakness in that area.

While that news is definitely negative, there is much to be excited about when viewing the company as a whole. There are three main areas the company is counting on to drive growth and each of these departments appear to be in good health.

First is the boutiques which directly sell BARE's products. There are 33 of these stores nationwide and they generally enjoy margins 10-15% higher than the other distribution channels. The company is planning for 15 new stores each of the next 2 years and some speculate there is a potential for 150 doors long-term.

Second is the wholesale channel which has had some exciting news lately. Sephora which has picked up BARE's products as its top selling brand, will now be included in many JC Penny stores. In addition, there are over 200 doors in France which allow the company good exposure in Europe.

This brings us to the third driver which is International. The company is concentrating on Europe right now as they are able to widen their footprint while relying on marketing efforts to drive sales in multiple countries. Japan is another key opportunity as the demographics and product use statistics are very encouraging.

While not cheap, this stock reflects the tremendous growth potential for the company. It appears we are seeing evidence of institutional buyers stepping in at this level which will likely provide some support for the stock price. I would be careful as the overall industry is not one of the leading groups in this market, but the individual company metrics warrant a close look.

FD: Author does not have a position in BARE

Research in Motion (RIMM)

"No one has ever gone broke taking profits." That is a popular saying in the circles I have been known to traffic in. It makes sense doesn't it? If you take winners off the table when you have a profit, you will always have more money than you did when you started. But there is another uglier side to this coin that few do a good job of covering.

I was on the beach with the family last week when the Research in Motion (RIMM) release came out and my associate called me to let me know that it was up big post-market. In speaking with a family member that is in a similar business, we were lamenting the fact that neither of us had adequate exposure to this name. Our fund has a small position because my associate was wise enough to get us on board, and I was cautious enough to keep the size small enough to ensure we didn't make any serious money on it.

My family member (we'll call him Fred), confessed that he covered his position in his IRA last year as he had already realized a 50% gain in the stock and thought the run was likely over. It reminded me of another more relevant adage that one should "let your winners run, and cut your losses quickly." Its so easy to take a quick profit when it is available and go looking for another great pick while many of us are so stubborn that we stick with positions that do not show an immediate profit because we're confident in our analysis and expect that position to eventually conform to our expectations.

Now this post is not supposed to be a ringing endorsement of RIMM encouraging everyone to go pick up the stock. It is extended here and is really a dangerous place to be initiating a position. However, if I held a position in RIMM (wait! I do! - its just small), I wouldn't be too quick to cover. The company is apparently starting to move into the vibrant Chinese economy, is introducing new products, and is likely to be a formidable competitor to Apple and the new I-phone that is getting so much press.

I guess the point that I am trying to make to those less seasoned investors is that in developing a strategy to successfully traverse these markets, one must be disciplined to stick with names that are conforming to your expectations because if you have done the work and taken the risk, you should stick around to be paid the best possible price for your efforts. Conversely, if a stock isn't behaving as you expected, there must be a pre-determined point at which you are going to ruthlessly cut it so as not to give up your profits from winners on picks that don't turn out.

For me, this means holding on to my long positions in Chipotle, Intercontinental, and FC Stone, as well as shorts in Resmed, Moody's and Las Vegas Sands until they give me a definite reason to close them out. Conversely, I need to be willing to close positions such as Under Armour and Carmax that are simply working against me. On my desk I have two words displayed over my computer monitors. they are "DISCIPLINE" and "FOCUS." I believe these are a traders two best friends and are necessary for success in this business.

Have a great Friday and enjoy the weekend!

FD: Author has a long position in RIMM