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A Few Of My Favorite Things

I have a number of favorite things as we all do. A few of my favorite things are skiing, golf, and fly fishing. Playing nine holes late on a summer's evening with my 10 year old, and getting home in time to watch the last few innings of a baseball game are just a couple more of my favorite things. A great bottle of Cab with a good steak and close friends is near the top of the list.

In the microcap stock world, mid July to mid August is my favorite thing. With the exception of 2008, the mid July to mid August time frame has proven year in and year out to be the time when microcap investors make the most money over the next five months.

Seasonality in the markets has been measured many times over the years, and it's tried and true. Not every time frame is exactly the same, but in general the most money is made in microcaps from the dog days of August into the January to March time frame. 

Stock market historian Yale Hirsch who publishes the Stock Traders' Almanac every year did the definitive study in this area. He studied the S&P 500, which clearly isn't as crazy or risky as the microcap world. However, some parallels can be drawn.

Here's a great statistic: if you had bought the S&P 500 on April 1st, and sold in September 30 every year from 1976 to 2000, your average gain would have been 1.1% Not of much interest to anyone looking for superior returns.

Now here's the eye opener. Over that same time from '76 to '00- if you had bought the S&P 500 on October 1st, and sold it March 30, you would have enjoyed an average return of 9.05% on your money. 

That's eight times the return just by being in the correct six months of the year. A real eye opener. On the microcap side it's a bit different. I believe the lows come a bit earlier, simply due to microcap stocks tending to get the majority of their volume from individual investors, and the mid July to mid August time frame is when individual investors lose interest in favor of more recreational pursuits.

Hence, these smaller stocks tend to drift down on lighter volume when everyone's on vacation and losing interest, and there's other reasons. Read on......
 

Options Media Group (OTC BB: OPMG): A Second Half Story in '09

I haven't written about this one in a while, and I like to keep everyone in the loop and provide some regular updates as they are provided to me. It's a little early for football metaphors, but nevertheless early indications are OPMG is going to have a blockbuster second half of this year's game.

I'll digress to seasonality for a moment. It's not just the summer vacation issue that puts stocks into their low volume summer swoons. I believe it also relates to the anticipation associated with Q3 corporate results- for many companies the least robust quarter of the year. Q4 is oftimes the best, and the market trades down in quiet of Q3 results in the summer, only to rocket in anticipation of Q4 results in the fall.

OPMG has repositioned itself to be a real player in digital marketing over the past six months, riding the Mega Trend digital marketing revolution. Every year the OTC Journal has at least one idea that just rockets in the latter part of the year (with the exception of '08 for obvious reasons). 

'06 it was CPMG - $.18 to a high of $3.75. In '07 it was SPKL- $.50 to $2. '08- along with the rest of the world, we had nothing. '09 will be different. Something is going to get absolutely smoking hot. I'm just not sure which idea it will be. 

OPMG has as good a chance as any in light of what the company is doing. The company is deeply embroiled in the digital advertising world, and that's the only area of the marketing/advertising world that's expanding today.

Advertising consumers are simply finding that there's a better Return on Investment with digital strategies. Lower costs and the super targeted nature of digital advertising has money flowing out of more traditional mediums in the new direction of ESP (email service providers), Permission Based Emailing, and SMS text message marketing.

OPMG is right in the middle of this revolution with all of the above, and their fortunes are making a major turn for the positive. Q2 numbers will be out in about one month. You're not going to see top line growth. That will come in Q3. Here's what you are going to see: Substantially reduced overhead along with a transition to much higher gross profits on the roughly $800k to $1 million in revs they are delivering monthly. The gross profits will be way up.

OPMG is very close to being cash flow positive month to month, and the top line growth I expect to see in Q3 of '09 should put the company in the black (operational cash flow wise). 

In addition to the business update, OPMG announced a new service- it has launched a new lead generation web portal, and the company has the marketing muscle to drive lots of traffic to this portal and sell the results to happy-to-have-the lead retailers. It's going to be a cash cow.

They are now landing all kinds of new business, as disclosed in their weekend general update press release. They are now doing business with the likes of Wynn Hotels, Palms Casino, Best Western Hotels, Jamba Juice, Army National Guard, Toyota Dealerships, and Gerber. Wynn Hotels is a classic example- it's the kind of company that might use print and TV advertising. Instead, in these difficult times, they are opting for the more targeted and less expensive digital marketing. 

There's plenty of positives going on at the company, but the stock is currently in a state of typical summer malaise. The little bobble you see circled on the chart is the opportunity. That's a typical, low volume, summer type pullback. These are the kinds of opportunities the few, but the smartest microcap investors like to take advantage of. 

The Digital Marketing Revolution is here to stay. It's the growth arena in the marketing world. OPMG is just getting it's ship on course, and should have a really good Q3 followed by a great Q4. A second half super star? Quite possibly. Certainly headed in the right direction. 

This weekend's update FYI:
 

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