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Comments in the BLOG

This past week there were three BLOG entries you should check out if you have an interest in any of the stocks covered. GEPT announced it had reached an impasse with its acquisition of Astrophysics, confirming my belief the stock is more of a sell than a buy for now. There's still a double in the stock from the June entry level. Just as predicted, HDY rebounded nicely early in the week, providing the exit opportunity for those who wanted out, including myself. There are also some early thoughts on new idea HESG.

To use the BLOG, simply go to the home page at www.otcjournal.com - the BLOG will scroll down automatically on the right side of your screen. The most current journal entries appear in the middle of your screen. Check back frequently for updates particularly when stocks are moving to overbought or oversold levels or in volatile markets. Your questions and postings do not automatically appear, so don't bother posting the same question multiple times. I personally go through to moderate and respond to every question.
 

NeWave (OTC BB: NWWV): Problem or Opportunity?

I was looking at several different issues for the weekend edition. I was considering looking at oil prices and working on a forecast for the next year. Recent signals from the economy are bullish and worth reviewing. There are a number of pressing issues on investors minds that could have made for good and interesting reading.

Instead, I decided to publish an edition on NeWave, one of my favorite companies and least favorite stocks right now. There is no news to report, and the stock has been relentlessly trading down on below average volume since June.

Shareholders of NWWV have been treated to a rough ride this summer for no apparent reason. So, where do we go from here?

A great strategy for making money in the microcap market is to accumulate positions in stocks when they are quiet and no one wants them. Then, when the stock becomes a fan favorite once again and is riding the wave of a positive corporate event, you can be a seller. This strategy requires discipline, courage, and faith.

For those who need a reminder, NWWV is in the business of putting people in business on the internet. It's a subscription based service. A mere $9.95 gives you a trial membership, and $29.95 per month keeps you going. NWWV provides a huge variety of products you can resell through you own virtual store. It is estimated there are approximately 800,000 people making a living on eBay alone, and many more want to join the party. 

Subsidiary Auctionliquidator.com is a kind of eBay drop off service for those with items to sell. Both the retail division and the charity division are growing rapidly.

Here's what I know about NWWV:

• NWWV had a record month in April, delivering $1 million in revenues for the first time in company history.
• The company has now opened accounts and serviced over 225,000 paying individuals in their short 2 year history.
• The company is launching an ambitious new marketing campaign in September. They are rolling out a nationwide infomercial starring Bob Eubanks.
• Since they are a service business, they have no cost of goods and therefore gross margins are extremely high.

• Their phones are still ringing about 7,000 times everyday, and new subscribers are being added constantly.
• The company will deliver another record quarter in June showing substantial increases on the top line from both the March quarter and the same quarter in '04.
• The company is on track to achieve cash flow break even this year, and might possibly begin to turn its first substantial profit before year's end.
• The nationwide infomercial roll out, currently scheduled for September, should accelerate revenue growth above the already blistering pace.

Some one or some persons holding large positions is selling to cover problems elsewhere in their portfolios.

I am fairly close to the company, and don't have an inkling of any changes. Therefore, I am choosing to believe there are a few large sellers offloading for reasons unrelated to NWWV.

I also know history tends to repeat itself. Patterns re-occur in nature.

Let's look at NWWV at this time last year. Note the sharp sell off in the June to August time frame. The stock dropped from about $1.50 in April of '04 to $.93 on August 9, 2004. The day NWWV made it's low it traded all of 2100 shares. 

By October of 2004 the stock hit a high of $1.50 (net return of 61%) before pulling back. This chart does not extend out until February, when the stock made of high of $1.90 (104% return from August low) before entering its current decline. 

There was no reason to publish an edition on NWWV today other than to share my views on the current oversold state of the stock and suggest now is the time for the smart money to accumulate while it's cheap. 

It's August, no one is paying attention, the stock is oversold, the company is on track to deliver record numbers, and history suggests there is a lot of money for those who take advantage of seasonal weakness. I'm looking for a significant rebound between here and October.

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