Home Page : www.otcjournal.com
Email Questions or Comments To:
editor@otcjournal.com
To
OTC Journal Members:
 |
What
Do These Stocks Have in Common? |
 |
Yes, these are the three stocks I
showed you on Thursday evening. One guy got them. These are not household
names like Apple Computer (NASDAQ: AAPL). You probably never heard
of any of them. Here's an overview:
1. Blue Coat Systems (NASDAQ:
BCSI): Blue Coat provides hardware appliances and software for
controlling and securing Web-based communications in the secure Internet
gateway and WAN application delivery markets worldwide. These guys do a
lot of corporate internet security. They keep bad guys out of corporate
networks.
2. VM Ware (NYSE: VMW): I
made a mistake on the symbol on the chart, but VMW is the right
one. It's the right chart, just the wrong symbol. VMware's suite
of virtualization solutions addresses a range of complex IT problems, including
infrastructure optimization, business continuity, software lifecycle management,
and desktop management.
3. Vasco Data Security (NASDAQ:
VDSI): VASCO Data, through its subsidiaries, engages in the
design, development, marketing, and support of hardware and software security
systems that manage and secure access to information assets worldwide.
These guys are all about securing financial transactions online.
Here's the bottom line. These companies
are all involved in computer and network security, and the stocks are just
rocketing. Doubles, triples, and quadruples in the last six months. It's
all about the huge volume of transactions and information that flows over
the internet in today's world, and the need for protection from the bad
guys. Here's a company devoted to helping you.
 |
Enigma Software
(OTC BB: ENGM): Getting the Bad Guys Out of Your Computer |
|
This company is all about protecting
computer users from spyware, viruses, trojans, and identity theft. Every
time you visit a web site, spyware can sit on your computer and provide
stats and information to the bad guys against your wishes.
Here are some eye opening stats:
-
8 out of 10 PC's are infected with some
sort of Spyware, with an average of 24.4 spies per PC scanned.
-
Microsoft estimates that 50% of all
PC crashes are due to spyware.
-
Dell reports that 20% of all technical
support calls involve spyware.
-
In the first half of 2007, spyware infections
prompted 850,000 U.S. households to replace their computers.
-
1 out of every 11 surveyed had a major,
often costly problem due to spyware.
-
The economic fallout per incident was
$100 on average, with damage totaling $1.7 billion.
-
Although as many as 90% of U.S. home
computers have been infected with spyware at some time, a majority of PC
owners don't know how to solve the problem.
-
For the seventh consecutive year, identity
theft topped the U.S. Federal Trade Commission's annual report on consumer
fraud complaints, accounting for 36% of the 674,354 complaints received
between January 1 and December 31, 2006.
-
Americans lost about $49.3 billion US
in 2006 to criminals who stole their identities.
|
Enter
the Enigma- Simply a Better Product |
|
ENGM has developed a product
known as SpyHunter- it's a very simple program that hunts out all
the crap in your computer and eradicates it with one simple key stoke.
I have used both Symantec's
and Mcafee's virus protection software. You must have it on your
computer to keep it safe, but I find it cumbersome and difficult to use.
It is simply not user friendly. When I run a virus scan, it always comes
up with all sorts of stuff. I wants me to decide if I want to "quarantine",
or delete offending files. It's a one by one process, with all kinds of
inconclusive results. Usually, you don't know if you're doing the right
thing, and most of the time it tells you that it can't do what you want
any ways.
SpyHunter doesn't hit you
with any of the techno jargon. If just scans your whole computer in about
one hour, then provides you with a list of stuff that needs to be killed.
Then, in one key stroke, it kills them all in about 10 seconds. No muss,
no fuss, no choices, no confusion.
Then, ENGM takes it one step
further. If you have some bad stuff in your computer that SpyHunter
won't get rid of, you simply send a log via email to their customer service
department, and boom- they send you back a customized solution for your
needs.
Then, if you still have a problem,
a technician from ENGM will literally take over your computer remotely,
and get all the bad stuff out of it. Try to get that kind of service out
of Symantec or Mcafee- it's not happening.
|
Growth,
Growth, and More Growth |
|
Over the past year, ENGM has
evolved its model from a one time purchase to subscription based. They
have a recurring revenue theme in place now that is working.
Let's cut to the chase on the numbers.
Here's the top line:
-
Q2 Revs in 2007 were $769,000
vs $275,000 in '06- an increase of 180%
-
6 month revs in 2007 were $1.25 million
vs $550,000 in '06- an increase of 127%
-
They've had five consecutive
quarters of top line growth.
By any standards, that's outstanding
growth, especially in the high margin software business. Let's look at
their weekly subscriber base growth:
I had to condense the size of this
chart, but you can see a much better version on the Enigma Web Site.
Click
Here to see a better image. This chart shows the subscriber growth
in three ways- New weekly subscriptions (red line), Renewals (blue line),
and Third Party Subscriptions (yellow line).
As you can see, new weekly subscriptions
have grown steadily over the year. However- here's what I really like-
look at the big swing up in renewals of late. That's the big upturn on
the middle line in the month of September. Last month, close to 3,000 customers
chose to renew their subscriptions- in my view, that's an endorsement of
the product. They wouldn't renew if they weren't having a positive experience.
This company is delivering higher
revenues, but here's what Wall Street really likes. The quality of those
revenues is improving thanks to subscription renewals-their sales could
gather momentum in a big way from here.
|
Conclusion:
The Supply Demand Dynamic is Exciting |
|
If you drill down into the financial
statements of ENGM, you will only get confused. This is another
situation where a weird and draconian accounting treatment skews the books
dramatically. If you look at their cash flow, you will see a company that
has only burned about $200k this year and paid down a substantial
amount of debt.
Increasing revs from here should
put them in the black, and continuing increases in subscription renewals
should keep them there.
Now- here's probably the most interesting
and exciting technical aspect of this idea- the number of shares I&O.
The vast majority of this company is held in various preferred issues which
have never been converted to common stock. In fact- fully, fully diluted
many years down the road, there could be 150 million shares I&O. That
will take at least five years.
Today the are only 4.6 million share
I&O. Hence, something we all love- volatility- look at the chart:
Look what happened to the price of
ENGM
when there was a volume surge in June. The stock traded a mere 216,000
shares, and tripled from $.20 to $.60 in a matter of two
days.
This is both of concern and exciting
at the same time. There are a very small number of shares available in
the public market for investors to fight over. Hence, this could be a very
volatile issue- moving up and down quite dramatically with volume surges
on news.
Therefore, I would suggest trying
to acquire this one below the $.20 mark- a great level to own it.
There will be many future events to get investors excited- they are due
to release a new version of SpyHunter any day now- one that doesn't
just find the spyware in your computer- it prevents it from getting there
in the first place. They are starting to expand to other countries in different
languages.
As with Spicy Pickle- here's
a company with a product everyone needs, and will continue to need for
many years to come. Go to www.enigmasoftware.com
and try the product. I have run it on 4 machines, including my 24 year
old daughter's which was absolutely loaded with Spyware- it has done a
great job cleaning it out, and it's very easy to use.
These guys market their product directly
to consumers over the internet- no middle man, no distribution fees, no
margin reduction. Symantec and Macafee hate them because they are eating
into their market share without spending a fortune. They are Guerilla Marketers
at their best.
What's the difference between BCSI,
VDM, and VDSI? growth rates are about the same, but ENGM
hasn't
moved because investors don't know about it. You have a competitive advantage
now with your knowledge. For you penny stock lovers, this is a very strong
idea.
|
