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By the time you read this, there
will be some new BLOG offerings on Titan Global (OTC BB: TTGL),
and Apple Computer (NASDAQ: AAPL). Those of you who are following
AAPL
know
I have had a target price of $200 on the stock in 2008, and it sure
looks like we are headed that way. In fact, I believe it might go higher.
Some comments on where I see AAPL. I also have some thoughts on
the action in TTGL, which is probably my #1 microcap idea right
now.
The BLOG is your opportunity
to ask questions and offer comments. I will make an effort to answer every
legitimate question. If I don't know the answer, I will contact the management
and get the answer. Alternatively, if you have questions you don't want
publicly displayed, you can always email me directly at editor@otcjournal.com.
To use the BLOG, simply go
to the home page at www.otcjournal.com
- the BLOG scrolls down from the upper right hand corner. The most
current journal entries appear on the right hand side of you screen. Check
back frequently for updates particularly when stocks are moving to overbought
or oversold levels in volatile markets.
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In
the Dog House- Universal Capital Management (OTC BB: UCMT) |
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They don't all work out. It's a part
of microcap investing. It's risky by nature, and we often put our hard
earned speculative dollars in companies that disappoint. Many of these
are small and unproven, and good microcap investors have learned to accept
this reality.
I believe bad stocks are like cancer
to our portfolios. They irritate us, and become emotional bad pennies.
Sometimes it's simply best to take your loss, move on, and put it behind
you, rather than stubbornly hang on hoping for a turn around. Just like
cutting out the cancer, it gives the patient the opportunity to get healthy.
Sometimes things improve, and if they do, you can always go back in.
There are a couple of companies I
am considering dropping. New Century (OTC BB: NCNC) has been a huge
disappointment. The company simply has not delivered as promised, but I'm
going to hang in there a little longer as things might improve.
One I am officially dropping as of
today is Universal Capital Management (OTC BB: UCMT). This is really
a fund of microcaps, and fundamentally the company is fine. However, there
are two reasons I am dropping it- 1. The company has not delivered on expected
dividend opportunities, and 2. investors never really embraced the idea.
Your response was tepid at best.
Therefore, I am dropping UCMT
from here forward. You can hold the stock as you choose, but don't look
to the OTC Journal for updates. NCNC's head is on the proverbial
chopping block as well if the company does not start to deliver soon.
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NightHawk (OTC
BB: NIHK): A More In Depth Look |
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A lot of you asked for it, so I got
the facts about the latest developments at NIHK. It's not surprising
investors are interested- after all, this was one of our best penny stock
movers in 2007. I know a lot of you would like to experience deja vu all
over again with the big run from $.08 to $.24 over a two
week period. It could be on the horizon.
Let's start by talking about the
NIHK
legacy business- the remote power disconnect and reboot. Here's how I see
it. This business has been growing. The customers have been primarily utilities
who are consistently hooking up their technology to customers, but other
applications have materialized and could grow into something special. I
fully expect NIHK to deliver its best quarter ever in Q3. By public
company standards it's still small, but growing and has a lot of upside.
It should generate well in excess of $1 million in revs this year,
possibly $1.5 million, which is a big improvement over 2006. Slow
but steady growth with the potential for major breakthroughs. This steady
growth limits the downside for shareholders in this trading range.
Now- let's look at this week's big
news- the new hospitality industry hi def set top box division. Here's
the product. It's really one of the only and the best Hi-Def TV box designed
specifically for hotel rooms.
NIHK paid $4.2 million for
this business. To buy the business, NIHK obtained
$6 million
in
financing from its financier, and kept $1.8 million for working capital.
More on structure below.
Products like this are sold to the
hospitality industry through specialist solutions provider companies. NIHK
only has one customer for this product right now, and that customer (unnamed
so far) provides hi speed internet access for 500,000 hotel rooms world
wide. The TV signal that comes through this box is delivered over the internet-
this is known as IPTV.
Despite delivering to 500,000 hotel
rooms, this provider is a mid level company. There are much larger solutions
providers, and NIHK is pursuing other and more robust relationships.
So far, this provider has ordered
$900k worth of these boxes in two orders since NIHK has owned the
company. The boxes run about $220 each, and NIHK's cost currently
runs about $180. Margins aren't huge at this time, but NIHK feels
it can cut the costs into the $140 to $150 range- a pretty decent margin.
NIHK
hopes to fill the orders in Q4.
The customer anticipates steady order
flow of about 2,000 boxes per month, yielding about $80k per month in gross
profits. Again, it's not huge, but it's great cash flow and will change
the whole complexion of the company. 2,000 set top boxes per month equates
to $5.4 million in annual revenues for NIHK, and $960,000
in gross profits.
On to capital structure. There are
currently about 120 million shares of NIHK I&O, yielding
a market cap of $12 million. The $6 million financing finally provides
NIHK
with positive shareholders equity of about $2 million- a
big improvement.
The $6 million came in the form of
a convertible preferred with a toxic conversion feature. However, none
of the preferred can convert for at least one year, and there are no registration
rights for the financier. Therefore in a worst case scenario, the financier
could file to sell under Rule 144, but the number of shares that could
be registered will be very restricted and take many, many years to find
their way into the market. In short- no dilution to the public float for
at least one year, and then a very slow and very long term burn from there.
Here's what's really cool- this $6
million preferred is redeemable by NIHK- in short they can buy them
out with a more favorable financing to shareholders, and have a full year's
running time. Great for shareholders.
In summary- this hi def set top box
business could be a huge windfall for NIHK shareholders. The numbers
pencil out to a much higher stock value, and the company has a year to
develop this business before it can dilute the public float in any way,
and then it will be a very slow process over many years if it happens at
all.
You've been asking for a price forecast-
here it is- this stock should have another run at $.25, and
it could come in pretty short order. Things have changed for the better,
and I'm looking for deja vu all over again of deja vu all over again.
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