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Msg  5 of 7  at  4/18/2007 4:09:44 PM  by


UTK recommended by Forbes

6 to 12 month target $31.00


"Maltbie's Mix
Long: Utek, Credo And Maxwell
Robert Maltbie 04.18.07, 12:00 PM ET

More From Robert Maltbie

Robert Maltbie, money manager and chief executive of Stockjock.com, selects three stocks he recommends investors go long on:

UTEK (amex: UTK - news - people )

Recent Price: $14

Six- to 12-month target: $31

UTEK is a specialty finance company focused on technology transfer enabling companies of all sizes to acquire innovative technologies from universities and research laboratories. It also provides tools to search, analyze and manage university intellectual properties.

UTEK is now trading 40% below its 52-week high. Due to the nature of its business model, realized gains and losses and unrealized appreciation and depreciation of investments can cause wide swing in its earnings. Therefore, valuation using traditional benchmarks and P/E multiples of peers operating under different business models may not be ideal.

But if we look at current valuation and base our assumptions using its growth metrics, we believe that there is significant upside. UTEK currently trades at 5.4 times our 2007 earnings per share estimate of $2.20 and at 1.5 times book value. Its strong relationships with universities and its proprietary database of over 35,000 technologies available for immediate licensing provide a compelling sales story for new clients.

In addition to its new Master Strategic Alliances with two investment banks, we expect that UTEK will continue to add more investment banking relationships and leverage its existing technologies to drive revenue, improve cash flow, decrease earnings volatility and improve the risk profile of its business model. Based on conservative assumptions, using a discounted cash flow model, even if 2007 earnings fall below our expectations, it appears the stock remains compelling at $31 per share or P/E of 14 times 2007 earnings estimates.

CREDO Petroleum (nasdaq: CRED - news - people )

Recent Price: $13

Six- to 12-month target: $22

Credo Petroleum is an independent oil and gas exploration and development company that operates primarily in the Mid-Continent and Rocky Mountain regions of the U.S. Its patented Calliope Gas Recovery System helps extract hard to reach remnants of older wells. Recently, the company has expanded its 3-D seismic operations into South Texas and North Central Kansas.

Credo's stock has experienced a sharp decline in the past six months because of general decline in energy prices and overall business uncertainty due to its recent sale of a South Texas project to reduce high costs and risks associated with exploration and drilling in the area. We believe that the stock is undervalued and that the market will come to appreciate Credo's performance as it reduces expenses and improves production opportunities and operating margins in 2007. Lower gas prices have caused a shortfall in our 2006 revenue model.

However, the recent improvement in energy prices coupled with improved operating margins shown by the company's most recent quarter reiterate our overall projection and confirm our confidence that Credo will produce more oil and gas in 2007 after the company shifts its resources to other exploration and drilling activities with lower costs and less risks. Our latest channel check indicates that the company's two complementary business segments, oil and gas exploration and Calliope, are expanding significantly in the Northern Anadarko Basin and in North Central Kansas.

Current and planned increases in production through drilling of new wells and new Calliope installations hold much promise for further growth. Based on our model, we predict that gas production will increase 25%, and oil 46.2%, in 2007. If future energy prices stay at current levels, we expect Credo to earn 64 cents per share on total revenue of $18.3 million for fiscal year 2007 and 77 cents per share on total revenue of $22.1 million for fiscal year 2008. Assuming volatility in energy prices and normal operating risks, we have a conservative target of $22 per share for the next six to 12 months."

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