Stock Pickers Digest Hotline – Friday, September 23, 2011

ADOBE SYSTEMS INC., $24.88, symbol ADBE on Nasdaq, makes software that lets computer users create, edit and share documents in the popular PDF format. As well, graphic designers use Adobe’s software to create print publications and web pages. The company also makes Adobe Flash, which lets web site developers make web pages more interactive by adding animation and video.

In its third quarter, which ended September 2, 2011, Adobe’s earnings fell 15.2% to $195.1 million, or $0.39 a share. A year earlier, it earned $230.1 million, or $0.44 a share. Without one-time items, earnings per share would have risen 1.9%, to $0.55 from $0.54. That beat the consensus estimate of $0.54 a share.

Revenue rose 2.3%, to $1.01 billion from $990.3 million. That missed the consensus revenue estimate of $1.03 billion.

The company spent $181.0 million (or 17.9% of its revenue) on research in the latest quarter. That’s up 7.6% from $168.3 million (or 17.0% of revenue) a year earlier. The higher research spending should help Adobe better adapt its Flash technology to mobile devices, like smartphones and tablet computers. Right now, Apple and other mobile device makers prefer competing software that uses less power.

Adobe holds cash and investments of $2.7 billion, or $5.50 a share. Its long-term debt of $1.5 billion is 12% of its market cap.

Adobe is still a hold.

Adobe was recently covered in the August 2011 issue of Stock Pickers Digest. Click here to access it.

Adobe was recently covered in the Stock Pickers Digest Hotline for June 24, 2011. Click here to access it.

HECLA MINING CO., $5.69, symbol HL on New York, explores for, mines and processes silver and gold in the U.S. and Mexico. Most of its production comes from its Greens Creek mine in Alaska and its Lucky Friday mine in Idaho.

The company plans to start paying dividends linked to the price of silver; it will raise (or cut) its quarterly payout by $0.01 a share for each $5.00 per ounce increase (or decrease) in its average selling price for silver in the preceding quarter.

Hecla expects to pay an initial dividend of $0.03 a share in the fourth quarter of 2011. The implied annual rate of $0.12 yields 2.1%.

Hecla is still a hold.

Hecla Mining was recently covered in the May 2011 issue of Stock Pickers Digest. Click here to access it.

NEW GOLD INC., $12.04, symbol NGD on Toronto, recently bought Richfield Ventures, which owns the Blackwater gold property in central B.C.

This week, the company announced new drilling results that indicate Blackwater holds as much as 5.8 million ounces of gold. That’s up 52.6% from its previous estimate of 3.8 million ounces.

The company plans to develop its New Afton gold/copper project in B.C. before bringing Blackwater into production. New Afton should begin operating in mid-2012.

New Gold is a buy.

New Gold was recently covered in the September 2011 issue of Stock Pickers Digest. Click here to access it.

New Gold was recently covered in the Stock Pickers Digest Hotline for April 7, 2011. Click here to access it.

CANALASKA URANIUM LTD., $0.48, symbol CVV on Toronto, has agreed to sell up to 3,150,000 units for $0.69 each. Each unit consists of one common share and one half of a warrant. One whole warrant will let the holder buy an additional common share for $0.83.

CanAlaska will receive roughly $2.2 million from the unit sale. That’s equal to 22% of the company’s $10.1 million market cap. It will use the cash to further explore and develop its 21 uranium projects in Saskatchewan’s Athabasca Basin region.

Since September 2004, the company has acquired one of the largest land positions in this area, totalling over 2.5 million acres.

It’s a long way between the exploration phase, which is now underway, and the commercial production phase, when the company starts making money. But we think CanAlaska has a better-than-average chance of success.

CanAlaska is a buy, but for highly aggressive investors only.

This is the first coverage of CanAlaska in a Hotline or New Issue this year.

AEROPOSTALE INC., $9.61, symbol ARO on New York, is a mall-based retailer of casual clothing and accessories. The company has 916 Aeropostale stores in the U.S., Canada and Puerto Rico. It mainly sells its clothing to 14- to 17-year-olds. Aeropostale’s 65 “P.S. from Aeropostale” stores in the U.S. are aimed at seven- to 12-year-old elementary-school children.

The company now aims to expand its international presence. This week, it began shipping goods ordered on its web site to over 90 countries outside the U.S.

U.S. retailers have had an easier time selling to overseas customers in the past few years. That’s because modern credit-card systems now make it easier to process payments in many currencies and pay local taxes and duties. Moreover, large international courier firms continue to speed up deliveries, so customers are getting their goods more quickly.

However, strong price competition and rising costs will hold back Aeropostale’s earnings growth.

Aeropostale is still a hold.

Aeropostale was recently covered in the September 2011 issue of Stock Pickers Digest. Click here to access it.

Aeropostale was recently covered in the Stock Pickers Digest Hotline for May 27, 2011. Click here to access it.

Our next Hotline will go out on Friday, September 30, 2011.