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To
OTC Journal Members:
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Market
Comment |
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Yesterday's PPI (Producer Price
Index) numbers came out at 8:30 AM, Eastern time, and they were right
in line with expectations. Since there was no big surprise in either direction
the market traded up nicely early, then eased back down as is typical for
a Friday afternoon in the summer. Any big surprise would have generated
much greater market volatility.
Many active traders and market technicians
were hoping for a stronger PPI, which would have driven the stock
market down. Professionals traders believe that the NASDAQ needs
to go back and fill the gap that occurred back on June 2nd when the
NASDAQ opened up nearly 200 points above its close from the previous
day. In order to achieve this the NASDAQ would have to drop about
295 points, which is a serious possibility. From there these same professionals
believe that the new Bull Market will begin.
More evidence continues to build
that money is poised to flow into the stock market. This past week $17.9
billion flowed into money market accounts at brokerage firms. Hedge Funds
are cash heavy ready to push the market higher.
Everybody is waiting for compelling
evidence that the economy has cooled off, and the FED is done raising interest
rates. Once the PPI numbers were out the discussion immediately turned
to next Friday's release of CPI numbers, which everyone agrees is
a far more important gauge of inflation than PPI.
During the April/May time frame when
the Bear was raging we knew stocks would struggle. We also knew that stocks
were on sale and investors with patience would do well snapping up some
bargains. Now we believe that the next Bull Market is right around
the corner. A lot of attention will be paid to the upcoming FOMC meeting
in two weeks. The FED will either raise interest rates 1/4 point or do
nothing. Either way the market goes higher from there.
This is beginning to feel more like
the Fall of 1998. In July of 1998 the NASDAQ hit a new all
time high of 2100. In early October the NASDAQ was beaten
down as low as 1350 which equates to a 35% drop. By the first
week of December the NASDAQ had regained all its losses, and we
went on to have a sixteen month raging bull market.
Right now we're back in November
of 1998 during the phase when the market is began to recover. A few more
ups and downs should clear the path to a healthy bull.
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Upcoming
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Next Wednesday we will be releasing
our MVP special for June. We know that many of you chose to take
of advantage of our special offers with Forbes, the Wall Street
Journal, and Investor's Business Daily. Next Wednesday's MVP
special is specifically geared towards active traders seeking short term
trading ideas. We have found what we believe to be the best service available,
and as always we will get it for you for free. Stay tuned for that edition.
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Major News on
Envoy Communications (NASDAQ: ECGI; TSE: ECG) |
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There was major breaking news on
Envoy
Communications this morning. The Company told us that they put out
the news release on Saturday morning so that the Canadian newspapers could
pick it up for their Sunday editions.
The timing of this release allows
us to get this news to our members first, thereby giving you a competitive
edge.
We have been providing a lot of coverage
on Envoy recently because we believe that this stock will participate
in the new bull market in a major way. Our hope was that many of our members
would take our coverage seriously and establish a position. Their recent
listing on the NASDAQ will provide a lot more exposure for this
company.
After endless delays they have finally
gotten their NASDAQ listing and are ready to accelerate their expansion
program. The first leg of their expansion program was announced this morning,
and the news is exciting.
Today Envoy Communications
announced that they entered into a Letter of Intent to acquire Sage
Information Consultants, Inc. The acquisition should close in about
30 days.
The Sage acquisition will
add about $15 million in gross profits to Envoy's bottom line based
on its current revenue run rate. The company is a highly regarded Internet
Solutions technology company with numerous high profile customers. Just
a few of their clients include Hewlett Packard (NYSE: HP), State Farm,
Prudential, TD Waterhouse, Fairmont Hotels, CIBC, IMAX and Panasonic.
We view this acquisition to be an
exceptional strategic fit to Envoy's current product offering. Envoy's
Devlin Group subsidiary is an award winning Internet design firm. However,
they have never been skilled in providing the back end Internet functionality
solutions required to provide turnkey Internet Solutions.
Sage will teamed with Devlin
to
provide a complete Internet Solutions package to large corporate customers.
Between the two companies they currently represent such household names
as Hewlett Packard, TD Waterhouse, Fox News, NBC Broadcasting, Panasonic,
BASF, Pizza Hut Canada, and FedEx.
Sage is part of an elite group
of organizations that sit on Microsoft’s Partner Advisory Council
providing guidance on key issues that ultimately shape Microsoft’s channel
strategy for delivering solutions and services.
The terms of the agreement call for
a total purchase price of up to $35 million on an earn out basis.
Envoy
will
make an initial down payment of $8 million in cash an $4 million in Envoy
stock. Sage can earn the remainder of the payment over four
years. Sage must maintain a 50% annual growth rate and a high level
of profitability in order to earn the remaining funds. All future payments
will be 50% stock and 50% cash which is less dilutive to shareholders as
Envoy's
shares rise in price.
If you are a new member of our newsletter
and have not been following the progress of this company we strongly recommend
that you go to our archive section and review some of our coverage. Click
here to be taken directly to that section.
Most importantly, upon completion
of the Sage acquisition, Envoy's real annual earnings run
rate is about $.46 per share EBITDA (US). In our opinion this stock
is worth at least $10 per share US ($15 CDN), and it's only a matter
of time before the market recognizes it. $10 per share would provide
investors with a 66% return on their investment from today's levels.
The stock does not have much US sponsorship yet. It only began trading
on the NASDAQ this past week. Management is in discussion with several
US brokerage firms concerning instituting coverage.
If the stock happens to gap up on
the open on Monday don't forget our recent edition about intelligent trading
strategies for opening gaps. If you missed that information, click
here to read that edition. A gap is not likely due to the release occurring
on a Saturday, but the stock could firm up later in the week.
Here is the complete text of the
news release for your review:
ENVOY BECOMES E-BUSINESS
GIANT WITH STRATEGIC ACQUISITION
$100 Million in Gross Margin
in Sight with Purchase of Digital Consulting Agency
Toronto, Canada. June 10th, 2000
– Geoff Genovese, President and CEO of the Envoy Communications Group (NASDAQ:ECGI
/ TSE:ECG) today announced they have entered into a letter of intent to
purchase Sage Information Consultants Inc., one of North America’s leading
technology solution providers. Sage is being acquired as part of Envoy’s
aggressive growth strategy in a deal worth up to $35 million (CDN).
The purchase pushes the company’s 12-month gross margin forecast to almost
$70 million and makes Envoy one of North America’s largest, full service
e-business companies. The purchase is subject to regulatory approval.
Sage (www.sageconsultants.com)
will operate in conjunction with Devlin Applied Design and complements
the Envoy company’s internationally recognized web development services
with leading edge e-commerce, knowledge management and infrastructure solutions.
Sage is a leading Microsoft Solution Provider Partner in Canada and New
York. Sage is part of an elite group of organizations that
sit on Microsoft’s Partner Advisory Council providing guidance on key issues
that ultimately shape Microsoft’s channel strategy for delivering solutions
and services.
“This year we committed to a growth
strategy that included acquisitions in each of our core areas of business:
technology, marketing and branding,” said Genovese. “The addition of Sage
to Envoy gives us a leadership position in the world of e-business.”
“The Sage acquisition is a strategic
move that adds $15 million to Envoy’s gross margin, brings our 12 month
rolling forecast to almost $70 million and is accretive to our earnings,”
said Joe Leeder, Envoy’s CFO. “The Sage purchase is a significant step
in helping us reach this year’s goal of $100 million in gross margin.”
With 75 consultants and offices
in New York and Toronto, Sage currently provides back-end e-business solutions
to an impressive list of blue-chip clients, including: Hewlett Packard
(USA), State Farm (USA), Prudential (USA), TD Waterhouse (USA), Fairmont
Hotels (USA), CIBC, IMAX and Panasonic.
“We share Envoy’s positive vision
on the convergence of marketing and technology,” said Chetan Mathur, Sage’s
CEO. “Bringing together Envoy and Sage creates the first full-service,
truly integrated and strategically-minded marketing and technology company
in Canada.”
“Sage is a great complement to
Devlin’s existing services,” said Catharine Devlin, President of Devlin
Applied Design. “By merging Sage’s back-end solutions and Microsoft
accreditation with Devlin’s web design skills and IBM and Oracle expertise,
we are platform agnostic and able to provide our clients with complete
and fully integrated digital solutions.”
Award winning Devlin Applied Design
(www.devlin.ca) is renowned for integrating technical, psychological and
usability needs with graphic user interface (GUI) design to create effective,
web-enabled business solutions for its list of leading North American clients,
including: BASF, Pizza Hut Canada, FedEx, CAMCO, CCOHS, SportsRocket.com,
Health Canada, Woodfur.com, IMAX Corporation, MAC Cosmetics.
A new breed company, Envoy (www.envoy.to)
is an integrated e-Marketer, digitally driven and committed to building
global brands both off and on-line. In addition to Sage Information
Consultants and Devlin Applied Design, Envoy owns leading advertising and
e-Marketing agencies, Communique, FUSIONcreative, Hampel/Stefanides of
New York and The Watt Group. Envoy’s roster of clients include: adidas-Salomon
Canada, Aer Lingus, Alliance Atlantis, Benjamin Moore, Bermuda Telephone,
Bridgestone/ Firestone, Canada Life, Castrol, CDNOW, Fisherman’s Friend,
Honda, Hummingbird, Juno Online Services, LCBO, National Discount Brokers,
Oxford Properties, PETsMART, PhoneFree, Safeway, Sprint Canada, Steelcase,
Taylor Made, Toshiba Canada, Toshiba America and Wal-Mart.
Corporate Investor Relations:
Jason Mandel (416) 599-2256, jasonm@envoy.to
Investor Relations Group:
1-800-444-9214 envoy@invrel.com
Media Relations: Darren
Karasiuk (416) 593-7555 ext.505 darrenk@communique.to |
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News
On Pawnbroker.com (OTC BB: PBRR) |
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Beleaguered shareholders of Pawnbroker.com
might have noticed that the stock began to trade better this past week.
Coming off an all time low of $3 the stock rebounded into the mid $4 range
on big volume this past week.
On Thursday they announced a new
strategic relationship with RedTagBiz.com. This is very significant
news. The recent FBI investigation into price manipulation on Ebay
also bodes well for Pawnbroker. We will have additional comments on the
news and the current state of affairs at the company after we speak directly
with management early next week. We will try to get it to you in a Monday
or Tuesday edition.
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