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There are a couple of very important
stories to cover in this weekend's edition. There is so much to write about
right now that I am having a hard time keeping up. The individual companies
I cover are delivering wonderful corporate developments, but I'd like to
do some over all market content as well. There is no doubt we are now in
a bull market for microcaps- the issue? How long will it last?
There are two important new BLOGs
for your review: CPNE, and streaking EFSF were covered this
week.
The BLOG is your opportunity
to ask questions and offer comments. I will make an effort to answer every
legitimate question. If I don't know the answer, I will contact the management
and get the answer. Alternatively, if you have questions you don't want
publicly displayed, you can always email me directly at editor@otcjournal.com.
To use the BLOG, simply go
to the home page at www.otcjournal.com
- the BLOG scrolls down from the upper right hand corner. The most
current journal entries appear on the right hand side of you screen. Check
back frequently for updates particularly when stocks are moving to overbought
or oversold levels in volatile markets.
Over the last couple of weeks some
of the major surges we have enjoyed have been derailed by minor corrections.
Two emails I received this week astonished me. One gentlemen wrote me he
was concerned about the pullback in EFSF from $.50 to $.40.
Are you kidding me? I suggested entering the stock less than two months
ago at $.20- and you're worried about a 20% correction from
the high after a 150% move? Buddy- get a grip. Another Bozo writes
about PNWIF- how can I say it is exploding when the stock has been
dropping this week? When I used that headline to cover their recent Q1
result, I was referring to the 300% increase they have enjoyed in photo
processing orders over the past year. Don't you get it? The stock was $1.80
at the end of September when I first featured it. It made $5- that's
a 177% return. The 300% increase was already priced
into the stock. It has corrected down to $4- another 20% correction.
It appears to be stable. No doubt the market will soon start to price in
the next 300% increase in photo processing. Get a grip people. This is
all normal stuff in an ongoing bull market. These companies are growing.
As long as the micros hold up, these corrections are normal.
Now, here's news from two of your
other followings. Both are important, so I decided to include them both
in the weekend edition. Hopefully I'll have a chance to get some market
related content out next week.
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Titan Global
(OTC BB: TTGL): Running on 12 Out of 8 Cylinders |
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Titan Global decided to update
investors on its outlook for fiscal '07 on Friday after the close. If these
guys deliver the goods as promised, it is highly unlikely this stock will
stay in its current range. Unlike CPNE, EFSF, NIHK, and PNWIF,
this one has yet to make a multi digit move- it has only appreciated from
$.85
to $1.30 (53%) since I started covering it in the Fall.
For this one to be a multi digit
(4 or 5 bagger) win, the company has to accomplish two primary things.
1.- They have to pay down their debt, and 2. They have to increase the
hand set subscribers through acquisitions and conversion from their 35
million long distance calling cards. Delivering EPS would help as
well.
TTGL has the lowest sales
to market cap ratio of any company the OTC Journal currently follows,
and it is already and institutional quality idea. After all, it is only
trading at a $71.5 million market valuation. According to Friday's news
release, TTGL now believes it can deliver $145 to $172 million
in revenues in fiscal '07. It now also believes it could deliver up
to $22 million in EBITDA profits. If they don't have to pay too
much interest on their debt, that $22 million could translate to
$.30
per share in earnings. If so, watch out above.
$.30 EPS is at
least where CPNE should end up, and look what happened to that stock
when the institutions finally caught on.
They have ratcheted up their numbers.
They have no toxic financing in place. There is a limit supply of stock.
When institutions discover this one, it could run like CPNE.
Technically, the stock sure looks
like it wants to break the $1.40 resistance barrier. As you can
see from the chart, the stock has bumped up against that $1.40 level
twice, only to pull back into the $1.25 to $1.30 range each time.
Third time could be the charm, and
it could be as early as Monday. After all, the numbers the company released
post close on Friday are very compelling. They just need to prove out and
be put in front of the right fund managers. Take the risk now, and sell
them your stock when they can't get enough.
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Nighthawk
Systems (OTC BB: NIHK): Still Hitting Singles, But Sluggers in the Line
Up |
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NIHK- the company that turns
stuff on and off- remotely- has not been the subject of many editions of
late. I have had concerns- I am mainly concerned this year's resurgence
in the stock forewarns of another comatose second half of the year as in
2006.
2006 OTC Journal penny stock
lovers will recall this one made a magnificent run in the first half of
last year- from $.03 to to $.16 in two months after they announced a joint
marketing deal with Verizon Wireless. Alas, the deal never translated to
any real sales, and the stock retreated back to its $.03 comatose state
through the summer and fall.
I am becoming convinced 2007 will
not be a repeat of 2006. There are several reasons behind my conviction.
When looking at any stock, there are always two major components to consider:
1. Your downside risk, and 2. Your upside potential.
NIHK has come a long way in
the past year, and I believe the downside risk in owning this stock is
considerably lower- Why? Because sales are likely to double from last year
to this. Consider last week's press release: NIHK announced sales
to utilities more than doubled from 2005 to 2006. More companies are finding
more uses for their unique technologies. It's still small- without a home
run they will probably deliver a mere $2 million in revenue in '07- after
all, this is a penny stock. The high growth rate assures the stock will
have a decent bid.
The upside: Here's where it gets
interesting. Entering 2006 the company had two potential walk off homers
in their pipeline- the Verizon relationship and a major deployment for
a huge utility. Neither turned into anything. This year the company has
more like 8 to 10 potential projects of the same magnitude. If just one
of these projects comes to fruition, you could have a $.25 stock.
Here's another aspect to NIHK
I like- the stock has a history of providing low risk entry points. This
stock will come down in price when the company gets quiet and has little
to say. Look at this chart as measured from the stock's rebirth earlier
this year. This past week, prior to the announcement of the utility business
doubling, the stock came back to a perfect 61.8% retracement. It gives
you both trading and accumulation opportunities.
NIHK currently has about 77
million shares I&O, and thanks to convertible debt that number is likely
to end up somewhere in the 90 million to 100 million share range. Therefore,
if the stock is going to eventually find its way to $.25, it will have
to sport a $20 to $20 million market valuation. One big project win could
get them there.
For the time being, my current target
and stop stands as follows: I'll keep the target at $.13, and raise
the SSL to $.05. I missed this week's perfect 61.8% retracement,
but will try to keep a more watchful eye in the future.
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