Hot technology stock Rakon has soared faster than a satellite-guided rocket this year. It made another big leap in late September trading up to $3.40, where it has plateaued for the past couple of weeks.
That represents a rather stellar return of about 111 per cent in just five months for those savvy punters who managed to get in on the IPO at $1.60.
Shares in the company - which makes quartz components for GPS systems - surged from $3 on August 18 to $3.40 by September 23.
One of the main drivers for the rise was no doubt renewed buying by Fisher Funds Management. A substantial shareholder notice on September 20 revealed that Carmel Fisher's team had increased its stake from 7.77 to 8.78.
Mark Lister at ABN Amro Craigs has been following the Rakon story closely since it listed. He is comfortable with the company's performance but argues the stock is starting to look a little overvalued - at least as a short-term investment. That said, Lister is definitely not a seller. Looking at its future growth profile, current prices might still represent reasonable buying for those prepared to take a two- to five-year view, he says.
Also - based on what we have seen with Waste Management, 42 Below et al - it seems reasonable to assume that Rakon is also likely to get on to the takeover radars of the world's big technology companies once it reaches a certain scale. Rakon shares closed down 2c at $3.38 last night.
More fire power
Fisher Funds has also been buying another of the year's hottest stocks: Pumpkin Patch. Last month the fund upped its stake in the kids' clothing retailer from 7.6 to 9.94 per cent. Fisher Funds is now getting close to the magic 10 per cent stake in Rakon and Pumpkin Patch - something which would give it some real bargaining power if either is targeted for takeover. Pumpkin Patch shares closed up 1c at $4.06 yesterday.
Freshly squeezed
Shares in listed juice company Charlie's have been the focus of some renewed investor interest in the past couple of weeks, driven presumably by the company's connection to 42 Below. The vodka maker had a 5 per cent stake in Charlie's, which means Bacardi now holds that stake. Charlie's shares have risen 40 per cent since the Bacardi deal was announced on September 27. They closed at 14.7c yesterday.
So there are investors hoping that, one way or another, Bacardi may take an interest in Charlie's. There's an outside chance they might decide to buy the whole thing. More realistically, they may just add some weight to 42 Below's original plan to increase Charlie's penetration into the bar and cafe market. Of course there is also the risk that Bacardi might decide to sell out altogether.
But regardless, the Charlie's story is slowly starting to come together, at least according to a view taken by Brett Orsler at ABN Amro Craigs.
In a research report, written before the 42 Below sale, he notes that Charlie's is continuing to exploit integration efficiencies with the Phoenix soft drink brand it bought last December for $10 million. These didn't show through in the 2006 result - a $200,000 loss - but are likely to show next year.
Phoenix is a small but profitable brand that has found its niche in the high-margin world of cafe and bar sales. Charlie's, meanwhile, has concentrated on the larger scale supermarket juice market. But the Phoenix distribution network will help Charlie's cross over. This, with a review of manufacturing options, a broader range of products and increased export opportunity suggests the company's lack of profitability is being addressed.
In short, Charlie's has two strong brands, no debt and is growing sales in a growing market, Orsler writes.
End of the line
The idea that a fixed-line telephone will one day be a thing of the past has been ringing distant alarm bells for Telecom for years now. But the Commerce Commission's determination last week - that calls to and from Vodafone mobile customers within a local free calling area will incur no connection fee - is about to make the issue a lot more immediate.
This provides Vodafone with an avenue to compete for Telecom's fixed-line residential base, writes Goldman Sachs JBWere analyst Andrew White in his research note on the ruling.
Vodafone has indicated it will have a package designed to compete with fixed-line rental next year. The international giant is likely to compete aggressively and that presents a two-fold risk for Telecom, White says.
The first is an acceleration of decline in the fixed-line market - people will be offered a new incentive to ditch their home phones. The second risk is the erosion of fixed-line to mobile calling revenue - White has maintained his "sell" recommendation on the stock which he gives a valuation of $4.04. Telecom shares closed steady at $4.27 yesterday.
Vodka sale
There was a hint of buying excitement around 42 Below last week as some traders took a punt on the outside chance of shareholder resistance to Bacardi's 77c a share takeover bid. There are certainly a few shareholders who felt Bacardi could afford to pay a few cents more per share and the share price was stuck right on the offer price.
Basically buyers prepared to pay over the offer price provide a good indication that there is more action to come - The Warehouse being a case in point. With 42 Below there was never quite that level of confidence, but there were a few institutional buyers prepared to take up stock at 77c. Given that the Bacardi deal won't be done until late next month or December, that meant those buyers were prepared to risk losing any returns they could make on the cash elsewhere over the next two months in return for the chance of benefiting if Bacardi had to up its offer.
What little enthusiasm there was for that view seems to have abated. Yesterday's closing price share price of 75c better reflects the gap in value between getting the cash in hand and the offer price.
<i>Stock takes:</i> Rakon's rise
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