I wanted to give a couple quick updates on stocks I've written about before the market is enveloped with jobs report hysteria tomorrow morning.
Second Sight Medical Products (EYES) is seeing its shares rallying 20% today after the company announced the following:
"On July 6, 2016, the Centers for Medicare & Medicaid Services (CMS) posted ... a proposed Medicare hospital outpatient rate for calendar year 2017 of approximately $150,000 for Argus II and the associated surgical implantation procedure."
So, in one fell swoop, the CMS reversed its misguided decision to set a calendar 2016 rate for Argus II of $95,000. CMS is re-coding the procedure and, in essence, reversing the bureaucratic snafu that threatened the existence of the sight-restoring Argus II and also the existence of EYES as a going concern.
The naysayers on EYES seemed as blind to the obvious as one of Second Sight's patients. What company could suffer a 37% drop in the price of its only product and not see a decline in sales and earnings? That's what EYES was faced with heading into 2016, but EYES' management steadfastly has maintained that when presented with more recent data, CMS would set a fair rate for 2017.
That happened. As is the case for so many small companies, getting from here to there would require additional capital. EYES hit that mark with a $19.8 million rights offering that was completed May 31. Crucially, EYES's offering included heavy participation from early investors.
So, the story is still intact, and as EYES has Argus II on trial for age-related macular degeneration -- a more common affliction than retinitis pigmentosa, for which Argus II is currently indicated -- the company's addressable market is about to expand dramatically.
EYES is a small stock and was sold off with impunity as the realization of the lower 2016 reimbursement rate took hold. EYES shares always will be subject to high volatility, but with the rights offering complete and a new reimbursement regime less than six months away, I believe the bad news is behind Second Sight.
Navios Maritime (NM) has had no such important news today, but unlike EYES, Navios' pricing benchmarks are set by the market on a daily basis, not a governmental agency on an annual basis.
The Baltic Dry Index (BDI) continues its recent rally, and today's London afternoon fixing put the index at 699. Remember when the BDI hit 290 on Feb. 11 and every dry bulk shipping company was headed for imminent collapse?
It's been a good rally since then, with the BDI rising about 46% year to date. That said, rates are still down about 15% year over year, and the dry bulk shipping market still has not fully recovered from its late-2015/early 2016 malaise.
Dry bulk shipping stocks are the ultimate cyclical plays. You want to buy on weakness as long as you judge that the particular company has the balance sheet strength to survive tough times.
Navios' first-quarter earnings showed the company can produce positive cash flow even in the worst of times, and I am expecting a much better result for the second quarter owing to profit-sharing provisions in many of NM's charter arrangements.
NM common shares rallied about 70% in the days after those first-quarter results were issued in late May, and while the shares have come back a bit, I'm still bullish on Navios and its preferred series G, which remains my Real Money Top Pick.