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OTC Journal Members:
Today's edition contains an update
on two of the OTC Journal's favorites which have succumbed to selling
pressure in this tepid market environment. I have been getting a lot of
emails on both situations recently, and I thought I'd update everyone at
the same time.
I will probably be publishing at
least one new idea during the month of June. Microcap stocks are just irresistibly
cheap, and many companies are delivering outstanding corporate developments
which aren't being in priced in due to market conditions. Look for at least
one exciting idea during the month of June. I believe we can ring the profit
bell in the October/November/December time frame for those willing to act
(OTC BB: NWIS): Funding Announcement Pushes Stock To Favorable Levels
I can no longer call NetWork Installation
"stress free" microcap stock. After six straight months of consistent appreciation,
NWIS finally got damaged in the April and May correction. When the
company announced the acquisition of Del Mar Systems and the associated
entrance into the rapidly expanding VoIP market, the stock traded from
$4 to $5 in about two days. After pulling back a bit, the next surge took
the stock into new all time high territory of $5.50.
April's sell off in conjunction with
rising oil prices and Middle Eastern turmoil caused the stock to give back
all of February's gains, and then some. The stock dropped to the $3.75
level, and then bounced to about $4.25 where it quieted down.
March's quarterly results lead me
to believe this company could be growing at about 150% annually.
Certainly, they are in the sweet spot of the wireless internet infrastructure
build out, and are opening new offices all over the place. Today, NetWork
Installation announced the company has opened a sales office in the
area, virtually completing their presence in all geographic areas of
the highly populated and rapidly growing southwestern US. Click
Here to read the press release.
Last week, NetWork Installation
announced the company had completed a private placement to accredited investors
for just over $2 million. The newly issued restricted shares were
priced at $3. Investors were awarded a warrant with a $5 strike
price as part of the financing. The day after the announcement of the financing,
gave back another $.75.
Obviously, the drop in the stock
was a knee jerk reaction to what I believe is fairly good news. Consider
the following- sophisticated investors just put $2 million into the company
in a illiquid security with no guarantee of an exit strategy other than
corporate success and a higher stock price with volume.
Open market buyers always pay more
than private placement investors. They are taking far less risk. I believe
the current weakness in the stock is a symptom of the sell now ask later
mentality, and creates an outstanding entry level for those so inclined.
the end of 2004 I believe 20/20 hindsight will show $3.50 in June was the
time to accumulate.
Digital (OTC BB: NTDL): Starting to Deliver Some Events
As I have chronicled in past editions,
Digital was bombarded by supply from early shareholders once their
restricted shares were eligible to become free trading via an effective
registration statement with the SEC. The $.40 per share pricing was too
low for the $1 level in a shaky market.
March's quarterly results didn't
do much to help the stock's cause. The company delivered its standard $1
million for the quarter, which represented no top line growth. On the plus
side, gross margins greatly improved, and the company remained cash flow
positive from operations. This company is under no financial stress.
Since last publishing on the NTDL,
I have studied further, and now believe we could enjoy substantial top
line growth in the June quarter if the company can deliver the largest
order in its history to Dollar Tree Stores (NASDAQ: DLTR).
Today, NuTech announced it
released its first new DVD title in its DVD concert series. The "
RZA Live in Germany'' concert DVD is now being distributed.
The announcement is important. Not
because of the potential sales volume, but for the paradigm shift in the
business. For the first time in its history, NTDL has jumped the
gap from a content reseller to a content creator. Companies
that create content generally trade at much higher multiples. If they continue
and sign bigger name artists, this stock offers considerable upside.
It seems as if the sellers might
be exhausted. Positive top line growth in the June quarter, coupled with
a few more DVD concert signings, should get the stock headed back in the
right direction. A bargain basement steal at these levels at only two times
annual sales, positive cash flow from operations, and the largest sale
in the history getting ready for delivery.
here to read today's press release on the release of "The RZA
Live in Germany" DVD concert.
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