To OTC Journal Members:
 

Comments in the BLOG

Admittedly it has been a tough week. Both BPTR and NWWV disappointed on Q3 numbers and both stocks got whacked. BPTR was a little bit of a surprise, and the NWWV numbers were a major slap in the face. It took me a couple of days to gather my thoughts on each situation. I have posted BLOGS on both for your review, comments, and questions. In addition, new idea TLPE was out with news at the open today. I have posted a BLOG on that idea as well. The company projects it will grow from $22 million in revs in '05 to $55 million in '06. Just deliver baby.

To use the BLOG, simply go to the home page at www.otcjournal.com - the BLOG will scroll down automatically on the right side of your screen. The most current journal entries appear in the middle of your screen. Check back frequently for updates particularly when stocks are moving to overbought or oversold levels or in volatile markets. Your questions and postings do not automatically appear, so don't bother posting the same question multiple times. I personally go through to moderate and respond to every question.
 

BrandPartners (OTC BB: BPTR); The Long Term Look

BPTR's Q3 earnings release was clearly a surprise to the markets. Despite having delivered $11.85 million in revenues, the highest Q3 number in history, BPTR managed to turn last year's $2 million gain into a small $150,000 loss for the quarter.

My initial analysis of the numbers, which was posted in yesterday's BLOG, contained some inaccuracies. Here's an accurate picture of the comparison between Q3 '04 and Q3 '05.

The '04 numbers contained a one time credit of $800,000 related to some legal fees they ended up not having to pay, which takes the operational profit in '04 down to $1.2 million. 

The two new subsidiaries- Grafico and BPTR Europe, cost the company about $400,000 in additional cash overhead they did not have last year, which reduced the apples to apples profit level to about $800,000 from Q3 '04.

The remaining differential related to a minor slippage in margins associated with their product mix of business in Q3. There was more business on the lower end of their margin scale. The business mix changes from quarter to quarter.

CEO Jim Brooks was looking for a higher top line to make up the short fall from the '04 comparison, but it just didn't materialize in time to be booked in the September quarter- hence, the first very small loss since the turn around in Q1 of '04.

The market does not like surprises, and it responded in kind with a knee jerk reaction sell off, taking the stock to an 18 month low of $.45. 

I've taken a couple days to think about the situation, and do some extensive fundamental and technical analysis. Let's start with the fundamental side.

BPTR has 34.2 million shares I&O. At $.50, the market is assigning a value to the company of $17.1 million. The company has over $39 million in shareholders equity, which equates to $1.14 per share in core value. BPTR generates over $50 million in annual revenues, and has been profitable for 5 of the last 6 quarters.

Clearly, this is still an absurdly undervalued stock. However, it has been undervalued for the last 18 months, and doesn't seem to want to become either fairly valued or fully valued.

On the technical side I have worked up a couple of different looks. Both are extremely long term, as the short term picture is nothing but negative. Therefore, I'm not betting on a short term bounce, but you never know.

The first chart on your left is a weekly chart, so you have to think week to week, not day to day. Since early '04, every retracement to the 61.8% level has resulted in a rebound. You can see from the chart there are five instances where this has come to pass. On a weekly chart, the stock appears to be a buy.

On to the really big picture on your right- the monthly chart. You have to think month to month for this chart to be valuable. This chart goes all the way back to the company's collapse in 2001 and subsequent recovery. 

As you can see, the stock really got hammered for two years as it lived below its 3x3 moving average. In the last few years it has broken above the 3x3 several times, each time rewarding investors with fairly handsome gains.

The stock has lived below the 3x3 for the past 8 months. If history repeats itself, the stock is now due for it's next move to be to the upside. Remember- we are viewing this on a monthly basis. It could take several months for the break.

In technical analysis, the longer term view, the more powerful the result.

Breaking this all down to a conclusion- here are the thoughts of one excellent technician who's help I enlisted: "Enter at current price levels with a stop of 39 cents and a profit objective of $1.15 in the short-term or $2 - $2.50, which is the first line of significant long-term resistance. If you get stopped out, you will likely not want to own it anymore, as all of the above analysis would negate the long-term buy signal, a.k.a. a pattern failure. If it happens. Nothing is guaranteed in the market, but the risk/reward here appears way to good to pass up."

Remember, since these conclusions are based on both monthly and weekly charts, you have to have weekly and monthly perspective- not a daily perspective.

To wrap it all up, here are a couple of key issues which will help determine the fate of this stock:

• Despite the lackluster showing in Q3, BPTR's backlog at the end of the quarter was 20% higher than the backlog a year ago. Those sales now probably fall into Q4.
• In the last several weeks, the company has signed over $8 million in new contracts, including $3.1 million announced just this morning.
• BPTR's core business is capable is generating over $50 million in annual revenues and consistent profitability. It can continue on that path for the foreseeable future, or it can grow. Management wants to return the company to its former 50% year over year growth rate. To the end, they are investing $400,000 per quarter in the roll out of two new subsidiaries: Grafico, which is going after the sub prime lending business, and BrandPartners Europe, which represents geographic expansion of their core business. For now, they are a drain on profits. Once they start generating revenues, they could restore the company to its previous 50% growth rate.
• A market year without "Energy Shock" could restore many undervalued situations to more traditional valuations. 2006 is setting up to be just that.

Look for a much better December quarter to get the stock headed back up. The real key is Grafico and BPTR Europe. When they start getting traction and justifying their existence the numbers will look great. You will note in the press release below the Grafico is starting to deliver its first business.

Here's some food for thought. CEO Jim Brooks tells me their pipeline of potential new business is stuffed and the highest in company history. 

Here is today's news for your review:
 

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