To OTC Journal Members:
 

Our Apologies

Many of you may have received this past weekend's edition three or four times. This was due to technical problems related to a recent software upgrade. During the deployment, our mail server crashed four times. When restarted, it began re-mailing the weekend newsletter from the beginning of the list. We have ordered new hardware to eliminate the problem which will take about two weeks to receive and install. In the interim, we believe we have stabilized the system. However, if you receive multiple copies of the newsletter in the future, we apologize in advance. The growth of our membership has stressed the system, and we need to upgrade to prevent this from happening in the future.
 

Another Apology: Cross Media's (AMEX: XMM) Hiccup Last Week Was A Buying Opportunity, and We Weren't Around To Report the Facts

It seems that every year the OTC Journal has one super star. In 2001 it was Energy Power. In 2000 it was Netsol International. So far, in 2002 it has been Cross Media Marketing (AMEX: XMM).

We launched our coverage on November 5th, 2001 at $6.70. The stock closed at $9.14 on the first trading day of 2002. In our January 2nd edition we predicted Cross Media would end up being our most attractive risk/reward stock of 2002. Since November 5th the stock has traded as high as $14.89 (April 8th), up 122% in five months.

Our current price target for the stock is $20 based solely on the company's forecast for $200 million in revenues this year (up from $100 million in 2001), and earnings projections of $1.25 per share. Even at $20 the stock would only be trading at a PE ratio of 16, a very conservative multiple for a company with this extraordinary growth rate. Other analysts have price targets of $25 this year. 

Last Wednesday, just prior to the open of the market, Cross Media announced that the Federal Trade Commission had filed a complaint against the company, alleging telephone magazine sales practices had violated legal requirements. Naturally, the event was taken seriously by the market, as Cross Media anticipates 55% of its 2002 revenues will be derived from telephone magazine subscription sales, down from 80% of its 2001 sales.

The stock was halted for trading while the company held a conference call to describe the event, and it reopened at about 11:00. The stock opened at $10.50, down from the previous nights close of $13.85, and $10.50 would prove to be the low. Since then the stock has rebounded, regaining most of the 20% loss, and is currently trading at about $13.

Once all the facts were disclosed, the market seemed to be treat this potential bomb shell as a non-event. In fact, the FTC actions were based on 80 complaints occurring between 1996 and 2000, prior to Cross Media's acquisition of the offending company. Since that time, new policies have been implemented which fully comply with all telemarketing regulations.

Furthermore, Cross Media has recordings of all the alleged sales violations, is not even sure they were improper, or that Cross Media is responsible as it was not their company at the time.

Cross Media's telemarketing subsidiary has 20 million conversations with potential customers monthly. Fully one half their magazine sales are generated from incoming calls. No one expects 80 complaints from several years ago to derail the companies current momentum or to affect future business in any significant way. 

The market's knee jerk reaction to the FTC's complaint ended up being an outstanding buying opportunity. Unfortunately, all of our editors were traveling at the time, and we were unavailable to bring you the facts as the news broke. Had we been around, we would have issued a trading alert for last Wednesday morning.
 

Cross Media Featured in Last Friday's Edition of Investor's Business Daily

Another factor which could be adding to the rebound in Cross Media shares is the favorable article which was published in last Friday's edition of Investor's Business Daily.

Entitled "It's A Day at the Beach For Marketing Outfit", the author confirms that First Call has earnings estimates for Cross Media at $1.25 EPS in 2002, and $1.70 EPS in 2003.

Of course, we have the article for you. Here is the link to the Investor's Business Daily article in PDF form. This is a must read for any current shareholders or those thinking of becoming shareholders.

Conclusion

At $13 Cross Media still offers upside potential of 53% this year if the stock achieves the $20 level we are projecting. If the stock attains the $25 level projected by Louis Martins of Wall Street boutique firm Taglich Brothers, you will get a 92% return on your investment.

Risk oriented investors should be accumulating this stock right now. The Russell 2000 made a new 52 week high yesterday, and small cap stocks are dramatically outperforming their large cap brothers.

Of course, as proven by last week's unexpected events, there is always risk, and you never know where it will come from. However, sometimes negative events can prove to be opportunities for level headed investors.

SwingWire.com also has a lucrative incentive model for experienced investors and traders who consistently outperform the market. Share market ideas with other like-minded investors, establish a proven track record, provide insightful commentary, attract followers and ultimately become one of the Internet's highest paid and most sought after CyberAnalysts! 

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All statements and expressions are the sole  opinions of the editors and are subject to change without notice. A profile, description, or other mention of a company in the newsletter is neither an offer nor solicitation to buy or sell any securities  mentioned. While we believe all sources of information to be factual and reliable, in no way do we represent or guarantee the accuracy thereof, nor the statements made herein.

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