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Summer
Ending Early |
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Is microcap performance seasonal?
You better believe it. Probably more so than ever. It's amazing how experienced
investors pick up on these patterns and use them to their advantage.
Here's what has developed over the
past five years. In general, micros start doing very well in the late August
to mid October time frame. They usually trade up through March. This is
followed by the traditional April to June sell off, when microcap investors
sell positions in anticipation of the quiet summer months. In general,
micros do not have institutional followings. Most participants are individual
investors like you and me. Therefore, market makers take advantage of the
quiet summer months to bring the stocks down on pretty anemic volume.
Here's what happens- by August, everyone
who was going to sell has done so. The stocks are oversold, and supplies
are no where to be found. As buyers return and bids firm, there is a wave
of momentum to the upside, and stocks rebound very easily in the initial
wave. Then, there's always a few folks who freaked out as the values dropped,
but didn't sell. As soon as their stocks start to rebound, they mop their
sweaty brows, thank the powers at be for the chance to get out, and sell.
This, of course, is the cardinal sin. After that first plateau, many of
the good ones go on to make new all time highs.
These patterns don't always follow
the calendar perfectly, but in general it's the way it happens. Investors
seem to have this figured out, just like they figured out the January
Effect.
Does any remember a phenomenon known
as the January Effect? Up until the last five years, the January
Effect was predictable. The January Effect refers to the sell
off experienced in small stocks during December as investors sold stocks
for year end tax purposes. The selling in December led to bargain shopping
in January, which led to pretty predictable rebounds.
In the last five years the January
Effect has evolved. Investors, catching on to this pattern, now sell
for tax purposes in October and November, and bargain hunters materialize
in December.
It seems to me something similar
is happening this summer. I believe the summer sell off is ending early,
and stocks are already starting to come back. Last year, it happened in
mid August. This year, it seems to be happening right now.
Here's a few examples directly from
our world. Has anyone been watching PhotoChannel (OTC BB: PNWIF)
of late? A year ago (split adjusted), the stock was $1. In February it
was $5. Last month it was $2.75. Friday, it closed at $3.38. Will it have
another 5 fold move between now and the end of January? Not likely. However,
a double or a triple from current levels could easily be in the cards.
eFoodSafety
(OTC BB: EFSF) made its low two weeks ago at about $.25- $.35 Friday,
and looking just great for another three fold move over the next seven
months. Commerce Planet (OTC BB: CPNE) is another one that looks
ripe for a rebound. It has been trading around its low for about 6 weeks.
Did you notice it traded 325,000 shares on Friday? Someone is buying. Should
you be doing the same?
OTC Journal fan favorite Nighthawk
(OTC BB: NIHK) appears ready for a rebound phase as well. Friday's
news suggests NIHK won't hang around this levels much longer. Don't
be left behind. Let's have a look:
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Nighthawk Systems
(OTC BB: NIHK): No '06 Repeat Here |
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Talk about patterns that repeat themselves-
have you considered NIHK? Guess what the low in '05 was for NIHK?
About $.035. You know what the '06 high was? You guessed it- $.15-
about 5 times your money.
How about the '06 summer low? Guess
what that was. You got it- about $.035. Guess what the '07 high
was. You got it again: $.24- wow- this time it was nearly 7
times your money from the low to the high.
Here's the problem- I don't think
the stock is going to $.035 this summer for a very good reason.
Their sales flow is becoming much too consistent for the same kind of pull
back. It's a much better company than it was the last two years, and the
evidence was presented by the company in yesterday's post close news release.
On Friday, just after the market
closes, NIHK let investors know Q2 would be the best top line number
in four years. Just as I suspected and have been writing about all along,
NIHK
is experiencing consistent and robust growth. Utilities are starting to
catch on to the value proposition in their technology, and repeat orders
along with new business have yielded the best order and delivery flow in
four years.
You might think to yourself there
is substantial upside in NIHK. I believe there is as well. I believe
the stock will make another new all time high sometime in the next six
months.
However, consider the following.
Friday's news is as much about the downside in NIHK, and for an
inherently risky $.10 stock, this consistent order flow and revenue
growth is going to prevent this one from heading into the cellar as it
has in past years. Kaching.
Talk about a pattern that is likely
to repeat. Every year for the last two NIHK has made a meteoric
run in pretty short order. However, it doesn't happen in a day. This
is a weekly chart going back to late '05. You're thinking to yourself Big
Deal- so the stock went from $.035 to $.24 in one year. It was still only
a quarter.
Consider if it had been a $3.50 stock
running up to $24. It would have made headlines everywhere for performance
like that.
So, read the press release below.
The company is going to deliver its best quarter in many years. The top
line number will be great, but it won't be huge. This is still a small
company delivering about $2 million in annual sales.
However, consider what is huge. What's
huge is the number of households and businesses that their utility customers
could eventually fit with the NightHawk device. They order, they
install, and they order more. They are a long ways away from running out
of customers.
Micros are rebounding early this
year in concert with the strong broader market. If you want to take maximum
advantage on NIHK's next big run, you need to accumulate it now.
This stock is not nearly as risky as past years, so you are probably looking
at the summer lows.
Here is the complete text of Friday's
news for your review:
| Press Release Source:
Nighthawk Systems, Inc.
Nighthawk Systems Provides Guidance
on Second Quarter 2007 Results
Friday July 13, 4:01
pm ET
-- Largest Revenue
Quarter in Four Years --
SAN ANTONIO--(BUSINESS
WIRE)--Nighthawk Systems, Inc. (OTCBB:NIHK - News), a leading provider
of intelligent wireless power management and emergency notification solutions,
today discussed financial results expected to be included in the filing
next month of its Form 10-QSB for the quarter ended June 30, 2007. Boosted
by strong sales to electric utility customers, the Company expects to report
its highest quarterly revenue results in four years, with revenues increasing
more than 50% over the first quarter of 2007 and approximately 35% over
the same quarter in 2006.
These improved results
were largely driven by increased sales and shipments of Nighthawk's CEO700
whole house disconnect units to electric utility customers, which reached
an all-time high for a fiscal quarter. More than 75% of revenues for the
quarter were generated by sales to electric utility customers. The Company's
CEO700 allows electric utilities to connect and disconnect power to a customer
by sending a wireless message to the meter-based unit, thereby avoiding
the time and expense historically associated with dispatching a truck and
personnel to the site to manually perform the task.
H. Douglas Saathoff,
Nighthawk's CEO commented, "I'm very, very pleased with the revenue results
from the second quarter of this year, and very encouraged by the size and
frequency of the orders that we are receiving from the electric utility
market. The high costs associated with manual connect and disconnect methods
is not going away, and cannot be ignored as utilities seek ways to cut
costs without sacrificing levels of service to their customers. I'm optimistic
about the near term opportunities that we can generate with the introduction
of our hosted software solution that will make it even easier for our customers
to manage and utilize their Nighthawk devices. We have built a solid track
record with the CEO700, and I believe that planned enhancements to the
product, combined with the hosted software interface, will even more firmly
establish Nighthawk Systems as the wireless solutions provider of choice
for utility automation needs."
About Nighthawk Systems,
Inc.
Nighthawk is a leading
provider of intelligent wireless power control products that enable simultaneous
activation or de-activation of multiple assets or systems on demand. Nighthawk's
installed customer base includes major electric utilities, internet service
providers and fire departments in over 40 states. Nighthawk's products
also enable custom message display, making them ideal for use in traffic
control and emergency notification situations.
Individuals interested
in Nighthawk Systems can sign up to receive email alerts by visiting the
Company's website at www.nighthawksystems.com.
Forward-Looking Statements
Statements contained
in this release, which are not historical facts, including statements about
plans and expectations regarding business areas and opportunities, acceptance
of new or existing businesses, capital resources and future business or
financial results are "forward-looking" statements. You should not place
undue reliance on these forward-looking statements. Such forward-looking
statements are subject to risks and uncertainties, including, but not limited
to, customer acceptance of our products, our ability to raise capital to
fund our operations, our ability to develop and protect proprietary technology,
government regulation, competition in our industry, general economic conditions
and other risk factors which could cause actual results to differ materially
from those projected or implied in the forward-looking statements. Although
we believe the expectations reflected in the forward-looking statements
are reasonable, they relate only to events as of the date on which the
statements are made, and our future results, levels of activity, performance
or achievements may not meet these expectations. We do not intend to update
any of the forward-looking statements after the date of this press release
to conform these statements to actual results or to changes in our expectations,
except as required by law.
Contact:
Nighthawk Systems, Inc.
Doug Saathoff, 877-7-NIGHTHAWK,
ext. 701
dsaathoff@nighthawksystems.com
Source: Nighthawk Systems,
Inc. |
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