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To
OTC Journal Members:
I have four more companies to cover
prior to year's end. Since it is a quiet week and there is limited time
before we turn the corner into 2005, I have decided to publish two more
editions. AMW and BPTR are covered in today's edition. Look for AGSI and
FMLY in Wednesday's edition.
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BrandPartners
(OTC BB: BPTR)- Nothing to Think About |
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There isn't much to think about as
far as BrandPartners is concerned. It's a buy, plain and simple.
It's all in the numbers. The company is delivering significant growth and
substantial earnings per share, and I believe it is simply a matter of
time before the market catches on to this one and values it more favorably.
Here's an excerpt from the OTC
Journal's coverage of their September quarterly results:
"BPTR delivered $11.7 million
in revenues for the September quarter, up from $7.7 million in '03 (a whopping
52% increase). Net income was $.06 per share. $.02 of the earnings were
from forgiveness of debt. Therefore, BPTR delivered $1.3 million in net
profits from operations, or $.04 in EPS.
By any metric you choose, BPTR
is absurdly undervalued. The $.04 per share in earnings for the quarter
puts the company at $.12 to date for 2004. At the current clip, the company
will achieve $.16 per share in earnings in 2004. At $.85 the stock is now
trading at a PE Ratio of 5.3 on 2004 earnings. With a 50% growth rate,
the PE should be about 25- this would suggest an upside target of $4.
I am going to stick with my
relatively conservative upside price target of $1.50 for the near term,
but the company is worth a lot more."
Nothing has changed since publishing
that message in the November
10th edition.
If the company continues delivering
strong quarter over quarter comparisons, someone is going to come along
and want this company. Whether the market bids up the stock, or it's becomes
an acquisition target, something is going to change sooner or later.
BPTR had one foot in the grave
last year at this time. It could easily have gone the other way. This is
one of the greatest turnaround stories of all time, and sooner or later
it's going to be picked up more widely.
The stock is up 30% since out October
6th alert at $.65. The chart shows the run up in October, followed by two
months of grinding with three attempts to pierce the $.90 level convincingly.
The blue line is the 50 day moving average, and the red line is the 200
day moving average. These are the short and long term benchmarks of trends.
The stock remains camped above both, suggesting 2004's turn around in the
stock remains intact.
Looking for a strong 2005 from this
company and some long overdue market recognition.
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American
Water Star (AMEX: AMW): 2005 Should Be Turning Point |
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American Water Star presents
a much murkier picture for investors, but I believe the waters should clear
considerably by the end of the 1st quarter of '05.
There are some interesting aspects
to this company that are unlike any I've ever encountered.
Naturally, this company is troublesome
because the stock has traded poorly since our first report. Unfortunately,
the stock made an all time high shortly after our first edition in the
$1.80 range, and it's been downhill ever since.
AMW's initial orders to WalMart
in the spring put the charge in the stock, but the summer was a train wreck.
There were problems with follow through orders over the summer, and sales
dropped significantly from the June qtr to the Sept qtr when the market
had expected a steep rise.
Sales of $1.4 million in Q2 went
to a disappointing $.4 million in Q3- horrific and unacceptable. To paraphrase
Chairman Roger Mohlman: "The good news and bad news is WalMart is
our biggest customer". This is a diplomatic way of saying WalMart's
lack of follow through killed the company's Q3 sales. Over the June to
September time frame the market priced in the sales decline. Several institutional
investors who had participated in a $9 million financing at $.90 per share
liquidated their investment.
On the plus side, as sales of their
branded product to WalMart skidded, the company moved forward with
acquisitions of several bottling facilities across the US. In late August
they completed the refitting of these plants, and were ready to begin bottling
on behalf of other brands.
In early November Roger Mohlman
publicly stated he expected the company to achieve $80 to $100 million
in revenues in 2005, and deliver $.18 to $.32 per share in earnings.
If Mr. Mohlman delivers on his prediction,
the stock should be trading at considerably higher levels.
Past performance would suggest a
little skepticism is in order. However, one unfortunate quarter does not
break the entire company. The September quarter was entirely dependent
on WalMart. As disclosed in November, the company feels WalMart sales of
its internal brand won't amount to more than about 15% of their revenue
base.
This situation is unique because
Mr. Mohlman has already invested $16 to $20 million of his own money in
the company. You rarely see this level of financial commitment in microcap
companies. In addition, the company issued a press release in November
stating Mr. Mohlman had filed his intention to buy up to 4 million shares
of AMW stock in the open market.
I believe we have to give this company
the benefit of the doubt for another six months. Q4 of '04 should show
progress over Q3, but Q1 of '05 is the one I will be looking at with a
sharp eye. If the $80 to $100 million forecast has any basis in reality,
the company should have no trouble delivering at least $10 million in the
first quarter. If they do there is substantial upside here. If they don't,
it will be time to move on.
In the interim, as you can see from
the chart there is good support in the $.50 range. It has been there three
times, and has yet to drop below. If tax selling pushes it down to that
level again, I believe it is a great speculation.
I will continue following this one
at least until Q1 '05 numbers come out. Look for some disclosure early
next year on the progress AMW is making toward achieving its stated '05
goals.
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