Newsletter

NetWork Favorable Level; Paradigm Shift at NuTech

June 2, 2004
Volume V, Issue 55
Email : info@otcjournal.com
URL : http://www.otcjournal.com

To 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 today.
 

NetWork Installation (OTC BB: NWIS): Funding Announcement Pushes Stock To Favorable Levels

I can no longer call NetWork Installation my "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 Phoenix 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, NWIS 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. By the end of 2004 I believe 20/20 hindsight will show $3.50 in June was the time to accumulate.
 

NuTech Digital (OTC BB: NTDL): Starting to Deliver Some Events

As I have chronicled in past editions, NuTech 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. 

Click here to read today's press release on the release of "The RZA Live in Germany" DVD concert.



 


Charts Provided Courtesy Of TradePortal.com
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