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Wake Me Up When
September Ends |
|
as my memory rests
but never forgets what I lost
wake me up when september ends
Greenday from the song
Wake
Me Up When September Ends |
The lyrics from Greenday's hit song
are worth remembering this time of year. Why? - did you know September
is historically the worst month of the year for the stock market?
Here are some eye opening statistics:
Since 1962 the S&P 500 has closed down in the month of September 57%
of the time- 70% of the time at the end of a four year cycle- this is the
4th year. The average loss in a down year is 5.7%. The only other month
that is more down than up is July.
September '05 was not bad. In lieu
of the strong August, my guess is September could be tough this year. I
have a couple of theories about September. Investors have a renewed enthusiasm
for the market after the long, boring summer months come to an end. Not
so fast- fund managers return from their summer haunts loaded for Bear-
why- because seasonally Q3- the quarter that ends at the end of September,
is one of the weakest of the year. Corporate performance mirrors the efforts
of people, and in general people don't put out as much effort in June,
July, and August.
Q3 is followed by Q4- generally the
best time of the year to be positioned in stocks. Why? Holiday shopping
combined with year end effort by the people who work at companies.
The money managers are selling now
out in front of Q3 numbers. They will be back in October and loading up
for the traditional year end run.
I have three new microcap ideas to
introduce for the Q4/Q1 run. The first will come early next week. This
would be a very good time to take a look at some of the current followings.
Perhaps eject one or two losers and get some capital ready for new ideas.
One last thought- if you invest in
microcap stocks, whether they be OTC Journal ideas from other sources,
you are going to have losers. It's part of the process. The most successful
microcap investors accept this, and have the ability to sell the losers
and move on without looking back. Unsuccessful investors sell their winners
when they get up a few percentage points, and then moan and complain about
their losers, blaming everyone but themselves. If you believe you have
a loser in your portfolio, get rid of it and move on. Believe me, you will
feel much better, and you will improve your odds of making money.
Here's a quick review of the current
offerings in order of my view of which have the most upside at the current
time:
Commerce Planet (OTC BB: CPNE)
I am particularly proud of this representation.
I could have dropped it last year and moved on, but I loved their business
model and had a feeling they would turn it around. I first wrote about
this eCommerce company in February of 2004. It was about $.80 at the time.
The stock subsequently traded up to about $2, and then we headed into 2005.
In 2005 the company expanded in some
failed directions. To finance the mistakes, the company took on debt. Those
divisions were shut down near the end of 2005, and a turn around took shape
in 2006.
Early this year the stock was trading
at a low of $.19. Today it is trading five times higher at about $1, and
trades on average upwards of 200,000 shares everyday.
The June numbers were fantastic-
The company netted $1.3 million on $7 million in revenues. Mark my words-
this is just the beginning. Imbedded in the Q2 numbers was a $1 million
charge for paying off their debt early- the company is now debt free and
the majority of that debt was paid out of cash flow.
CPNE could easily net $2 million
in Q3, which would translate to EPS of nearly $.05. That's if they don't
grow. They have grown the top line substantially the last two quarters.
The market is on to this one as demonstrated by the high daily volume.
In my view- $2 to $2.50 by year's end in a decent market environment. Sometimes
the long term perspective pays off.
Advanced Cell (OTC BB: ACTC)
I don't need to review ACTC
as it has been the subject of my last three editions. These guys are on
the forefront of Stem Cell research, and they will continue to make headlines.
I realize there are a lot of microcap
newsletters. Whether you love or hate the OTC Journal, or love or
hate stem cell research; ask yourself this- how many microcap newsletters
have you read that gave you ideas with the White House and the President
of the United States commenting directly on their technology achievements?
This company has developed technology
which requires the attention of the most important single person on planet
earth. Love it or hate it- the choice is yours.
When I first heard the story and
studied their achievements I knew I had to report on this company. Short
term- impossible to call but I'm inclined to believe higher- long term-
look out above.
US Energy (OTC BB: USEI)
Great company- for the time being
bad stock. This company has the kind of story microcap investors dream
about. They invented a system for converting a diesel engine into a hybrid
that burns diesel and natural gas simultaneously. Huge fuel savings. Potential
market for retrofit systems on existing engines and newly manufactured
vehicles.
Despite gaining some traction in
the US, the company has targeted early sales towards the Far East where
diesel fuel is far more expensive and in far greater demand than North
America.
A Thailand based distributor makes
a major commitment and orders 1500 units. A European distributor does likewise.
Then, the holy grail arrives: GM agrees to build their systems into newly
manufactured trucks in the Far East. A microcap investors dream.
However, the stock's performance
is sabotaged by cancer. There is some cancer in the capital structure of
this company. There is a major excess supply of stock. How do you treat
cancer? - cut it out. The market is slowing but surely cutting out the
cancer in this stock. Corporate performance in the oncologist that will
eventually make this company healthy.
Look for bigger and better contracts
down the road. USEI is just getting started. My SSL was $.27- poised
to turn back up in short order.
Bad Toys (OTC BB: BTYH)
I'll be the first to admit. The
Bad Toys saga is wearing me out. Everyone wants to know why the company
is doing so well, but the stock is trading so poorly. Everyone wants to
know when the spin out of Southland is going to happen.
Last quarter Bad Toys, through
its Southland Health Services Division, generated $11.1 million in revs
and $.03 per share in earnings. I have talked to several fund managers
who really love their business, and believe this company is very undervalued.
The whole Southland Dividend
spin out is dragging on endlessly. The company was unable to simply dividend
out the shares as it had planned to do last January. The dividend will
have to wait until Southland is ready to trade on its own, which could
be some time out.
At this point, the future success
of this company hinges on one major event: a debt restructuring. When Bad
Toys bought the Southland division it was a distressed company. The management
was getting rich pocketing money while falling behind on payroll taxes
and defaulting on loans from GE Capital. These are inherited problems,
and the reason the company was even for sale.
Since taking over, Bad Toys
has kept taxes and debt current, but hasn't been able to alleviate the
baggage of the old burdens. They are working hard on a very reasonable
debt financing would put the company out of default and back on sound footing.
If they pull this off, watch for
the stock to trade much better and the Southland spin off and associated
dividend to move forward more rapidly. I can't give you any timing indications,
but I can say they are working hard on it right now.
Today, Bad Toys traded up
nearly 30% on 1/2 million shares out of nowhere. I have no idea
why, and CEO Larry Lunan doesn't know either.
Callisto Pharmaceuticals (AMEX: KAL)
KAL has a number of very exciting
new cancer drugs under development. Since first covering the stock at about
$1.20, we have seen a high of $1.80, and a low of about $.75. The stock
took a pretty nasty beating in the May/June sell off and has yet to recover.
I set my summer SSL at $1.20, so
if you are still in this one you have to think long term. From this price,
the stock could be a candidate for an easy money rebound.
Look for this one to trade better
in the Fall, particularly if biotech returns to Wall Street's crosshairs.
Sub-Urban Brands (OTC BB: SUUB)
This trendy, pop culture focused
clothing manufacturer should gain some traction in the Fall months. The
White Boy line has been picked up by some very high profile retail chains,
but the company has not disclosed any numbers, which I believe hurts the
stock.
Their lines will begin appearing
in Fred Segal, The Virgin Megastores, and Dr. J's in the Fall. A number
of big trade shows happen in September.
Trailing numbers are hideous, but
the company is just getting started. Watch for sales to new customers to
drive this one in the Fall.
MediStem (OTC BB: MDSM)
I like to call Medistem the "Nike"
of the Stem Cell world, because they are going to "Just Do It". They have
set up a clinic in Costa Rica to begin treating patients with Stem Cell
therapy. They are focused on the non controversial adult stem cell therapies,
and have accumulated a wealth of treatments in this arena.
They received their permit to begin
treatments last month, and are now underway. They intend to open other
clinics on a worldwide basis- I believe Switzerland is their next target.
Look for this one to gain some traction
as the begin announcing clinical results.
Network Installation (OTC BB: NWKI)
I have been covering this company
longer than any other. NWKI has morphed from a Wi-Fi technology and installer
to a "smart building" expert and software developer.
The acquisition of Kelly Technologies
in Las Vegas has changed everything. Last quarter NWKI delivered about
$5 million in revs- their strongest quarter in their history. However,
losses continued.
During the quarter they restructured
their debt on much more favorable terms, and closed down some unprofitable
divisions. The turn around at this company is just getting started.
Teleplus (OTC BB: TLPE)
TLPE was good to OTC Journal
subscribers
in the early going last January, but has since been a bit of a dog. We
started in the low $.20 range, and saw a high of $.43 within thirty days.
It's been pretty much all downhill
since then. The stock is currently camped around $.17. The company is going
after the unbanked cellular market, and having quite a bit of success.
Numbers are not nearly as robust as forecast in 2005, and the company has
taken on a lot of debt to get where it is today. The debt has a convertible
feature, and therefore could represent a fair amount of excess supply in
the future.
There is nothing wrong with the company.
They generate positive cash flow. However, I am going to move them to the
past profiles section of the web site and stop covering their events. In
my view, your capital might be better used elsewhere.
Hyperdynamics (AMEX: HDY)
This company continues to bear the
awesome burden of permanent potential. I don't want to revisit this tired
old story. In short- get the Guinea concession and you've got something.
Don't get it- you have nothing. Perhaps a $.25 to $.50 stock.
As disclosed in the BLOG,
I chose to sell my shares. At this point, I believe there is a better chance
they will never get the concession. The original agreement, which was subbed
out to HDY, expires later this year.
Sooner or later investors will give
up and the stock will crater. Perhaps the best thing they can do is nothing.
As long as the potential remains, investors might hang in there. I figure
I can always get back in if they land the deal. Sure, I'll pay more, but
it should turn into a multi year proposition with a number of stages.
I keep this one on the active list
just in case they get the Guinea government to sign on.
UpSnap (OTC: BB UPSN)
UpSnap was my idea in the
mobile search space. The company has actually been coming along, but the
stock is going nowhere. No one cares, and the company is not giving anyone
any reason to care.
My SSL on this one was $2.20, and
the stock is currently at $1.08, trading by appointment only. I am moving
this stock to the past profiles section of the web site as well. If it
starts to wake up, I can always cover it again. If you own this one, it
could be a good source of funds.
NightHawk (OTC BB: NIHK)
NIHK did well in the early
going, but then fizzled. They have technology which allows power supplies
to be turned off and on remotely using pager technology. A marketing agreement
with Verizon Wireless early in the year put a charge in the stock,
but nothing has come of it in the form of tangible sales.
For the time being, this one will
go into the past archive section. I might revive it if the company starts
to get some traction.
Health Sciences Group (OTC BB: HESG)
What a disappointment. I believed,
as many of you did, that this company had a great product. Remember SHUGR-
the best sugar substitute on the market- not only the best tasting, but
also baked one on one with real sugar. It is over 99% natural.
The only problem was sales. They
were too inept to sell the product. Their losses were horrendous. I chronicled
the whole thing. The stock has improved a little of late on news of the
company's intention to test market Sequestrol. I have tried the product
and didn't care for it. However, I love SHUGR, and look where that got
us. Perhaps I am the perfect reverse barometer.
This one will go to the past archives
as well and could be brought back. The company has new management, which
is required for there to be any hope.
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