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Group (OTC BB: HESG); Two Bockbuster Products
Obesity is an epidemic in the United
States today. The US Government considers anyone with a BMI (body mass
index) of 30 or more to be obese. That includes 61.3 million Americans.
The weight control industry has evolved
into a behemoth; $40 billion is spent annually in the US alone on weight
control products and programs.
Public Enemy #1 in the fight against
fat is one of our favorite foods: SUGAR. Sugar is used to
enhance the flavor of more things than you can imagine. Aside from the
obvious like pastries, candy, and soft drinks, vast amounts of refined
sugar are found in products like ketchup and bread.
Refined Sugar, the ultimate "Bad
Carb", has a number of nasty side effects. It is poison to diabetics. It
causes your metabolism to spike briefly (a glycemic effect) and then crash.
Kids run around the house destroying everything in their paths. You feel
energized, then tired. You want more to feel energized again. Net result:
Here's an overview of current substitutes:
Aspertame (Sweet n Low, Equal)
the most widely accepted sugar substitute. Aspertame is 100% chemical,
has an unpleasant after taste, and has lost ground to Sucralose (Splenda)
in recent years.
Sucralose (Splenda), was
approved for use as a sugar substitute by the FDA in 1998. It tastes like
sugar but is 600 times as sweet. It has no calories. It is derived from
the sugar molecule and combined with Chlorine. It doesn't blend well with
other substances, and cannot be used by itself in baking. It has been associated
with numerous negative side effects including swelling of the liver and
kidneys and shrinkage of the thymus: a gland that is the very foundation
of our immune system.
Stevia: Zero calories and all
natural, but has rough taste. It does not have a GRAS (Generally Recognized
as Safe) rating from the FDA.
Health Sciences Group has
the answer. Shugr™. Shugr™ is the ultimate sugar substitute.
Zero calories, zero carbs, tastes exactly like sugar, bakes and mixes exactly
like sugar, and is made from 99.5% natural ingredients.
Shugr™ is derived from a blend
of erythritol and tagatose which occurs naturally in many fruits and vegetables.
has a patent pending and its ingredients have a GRAS (Generally Recognized
as Safe) designation for food safety as determined by the U.S. FDA.
The product is currently being sold
through several national chains including the Vitamin Shoppe and
At present, it is only available in 1.3 lb jars, but packaging is expanding
as you see here. The larger quantities will come in bags for baking just
like regular sugar, and packets will be offered as well for individual
The health stores represent a vibrant
market for the product, but much higher volume potential exists as an additive
to an end product. Recently, HESG signed a distribution arrangement
with DNP International, one of the largest suppliers of ingredients
to food manufacturers. DNP sold 8 million lbs of vitamin C in 2004.
DNP will be moving Shugr™
a far larger market- as an ingredient for baked goods and beverages. This
market is huge, and the sales cycle is long. Food producers do extensive
testing with new ingredients before substituting in existing formulas.
HESG has another blockbuster
product roll out scheduled for later this year. They have obtained the
world wide rights to market Sequestrol™. Sequestrol™ is a
nutritional supplement that has been clinically proven to lower cholesterol.
was developed in Korea, and is extracted from seaweed.
In a study conducted on 57 subjects,
reduced serum cholesterol levels by 22.7% after 30 days of oral administration
with no change in diet.
In an similar animal trial, Sequestrol™
was found to reduce LDLs (the bad cholesterol) by 59% and 75%, while increasing
levels of HDL (the good cholesterol).
Sequestrol™ is a white powder
that is odorless and tasteless. It has a huge advantage over the avastatin
drugs (Lipitor, et. al.) in that it is 100% natural, and can be combined
with food products. It is also about 1/4th the price of the statin drugs.
Sequestrol™ can be combined
with foods, and HESG anticipates manufacturers will be able to claim
their product lowers cholesterol.
More immediately, HESG is
slated to go into production on an infomercial to directly market the product.
will be sold by informercial in a nationwide roll out later this fall.
HESG management is focusing
nearly all of it's sales efforts over the next 6 months on Shugr™ and
Sequestrol™. These are two clinically proven products that have enormous
market potential. A natural sugar substitute that tastes and bakes exactly
like sugar. Just follow the recipe, and substitute Shugr™. Combine
the sugar substitute with a natural cholesterol reducer that can be added
to foods and beverages - two very high profile products. Once these are
successfully launched, there are others in the pipeline.
Here a six reasons to own HESG
Peter Lynch, considered by many
to be the greatest mutual fund manager of all time, believed in investing
in companies with products and services that he used and understood.
Technically, the stock looks outstanding.
After making a new all time high back in February, the stock pulled back
to a low of just under $.70 last June, and has been making a series of
higher lows and higher highs since then. HESG has been slowly working
its way up through this trading range since mid May, and appears ready
to break out. The consolidation pattern is circled in blue.
The stock is trading 40% below
the high set last February.
August is the best time of the
year to accumulate positions for a three to six month investment. Last
year, the OTC Journal had several doubles and triples between mid
August and year's end.
The company is launching two new products
with blockbuster potential, and sales should ramp up as these products
become more widely known.
There is a big pipeline of new products
coming as soon as the initial two are launched.
The market capitalization is only in
the $20 million range, leaving lots of upside potential. As sales ramp
up, I could easily see this stock trading in the $50 million market cap
For Sequestrol™ it's pretty
easy to see the benefits of a clinically proven cholesterol reducing powder
that can be blended with anything. Pfizer's Liptor is the highest selling
drug on planet earth.
I have two 1.3lb jars of Shugr™
on my counter, and have it every morning on my cereal. It is an outstanding
product. No sugar substitute comes close. But, don't take my word for it.
Do what Peter Lynch would do. Try it yourself.
I convinced the management at HESG
to offer a free sample to OTC Journal members. All you have to do
is go to a web page, help HESG out by clicking a few buttons in
a survey, and give them your address. They will send you a free sample.
Here, or copy and paste the following URL into your
While you are there, check out the company's web site.
I like this stock to go back to it's
previous high of $1.50 before year's end, which would result in
a 67% return on invested capital. Much, much higher levels
could be attained down the road if Shugr™ and Sequestrol™ find their
way into the recipes of household name foods and beverages.
Splenda did it, and hands
down Shugr™ is simply a better product.
More details on sales projections
and margins in future editions. I will have a BLOG posting up on Monday
morning on HESG, so you can post any questions you have there.
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