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Hopefully everyone caught yesterday
morning's BLOG on Nighthawk Systems (OTC BB: NIHK). It was
a Profit Alert. A profit alert means it is time to consider taking
all or partial profits depending on what you want to do. It is your money.
The stock was about $.14 at the time, powered up to $.16 later
in the day, then backed down as expected. When you are looking for intraday
trading guidance, always look for a new BLOG first. It is the only
way to get the message quickly to those who want it.
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.
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Suppose I could find a company who's
-
Assets went up 77% in the last
nine months
-
Sales went up 200% in the last
nine months
-
Offered anywhere from 6 to 10 possibilities
for huge appreciation on any given day
-
Paid a dividend of portfolio company
free trading shares a few times a year.
-
Was trading at or near an all time low
If a company like this would interest
you, read on McDuff:
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The Microcap
of Microcaps; Universal Capital Management (OTC BB: UCMT) |
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I love mornings. I get out of bed
everyday, and it can be like Christmas. Why? because I have a bunch of
different microcap stocks, and you never know what is going to happen.
Sure, there are a lot of discouraging days, but there is generally something
exciting in the portfolio climbing the charts. NIHK was this week's
surprise Christmas present.
Today's new idea is unique. I have
never covered anything like it in the past. I have looked at several of
these companies in the microcap space, but they all had little or no value-
until I looked at Universal Capital Management.
UCMT is a BDC- BDC
stands for Business Development Company. Most public companies function
under the 1993 Act- BDCs operate under the 1940 Act. A BDC is formed
for the specific purpose of helping other companies develop their businesses.
Here's how it works: A company comes
to Universal Capital Management. They want help with structure,
capital raising, management, legal and accounting, etc. If UCMT
likes their potential, they put it all together for a 1 million share fee.
UCMT
might invest its own funds in the company as well. They provide guidance
and help the company grow. They are very hands on.
To date, have done very well. In
fact - they have done so well that their assets have nearly doubled in
the last 9 months- from $3.5 million to $6.2 million since May 1 of
'06 (77% increase). Revenues, which are booked based on fees, have
also risen very dramatically; from $329k in Q3 of '07 to nearly $1 million
in Q3 of '07 (200% increase).
If you own shares of UCMT,
you indirectly own a substantial position in six other microcap companies.
And- here's a another added bonus- from time to time, UCMT spins
out free trading shares to shareholders as companies complete registration
statements and go public.
Like I said: Christmas every morning-
if you own shares of UCMT, you have six chances every morning for
a major event. If just one of their portfolio companies is cranking, their
stock should be as well. The value has just gone up.
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Here's
the current portfolio: |
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Currently, UCMT holds six
different positions in viable companies in its portfolio. This portfolio
represents the $6 million in assets the company carries on its balance
sheet.
Of the six, shares of three could
still be spun out to shareholders once they are free trading via a registration
statement. One has already been paid out. Here's the list of portfolio
companies:
-
AccelaPure Corp: A biotech/pharma
services company with excellent management. Has real revenues already and
some exciting new products in their pipeline. UCMT owns 1 million
shares- it is currently private, doing a large financing at $1, and planning
to go public. This could be a dividend spin out later in the year.
-
Creative Energy Systems: This
company is working with the government to develop technology to allow utilities
to move power from their grids to other locations to prevent supply/demand
imbalances. UCMT owns 2 million shares carried at a $1 million valuation.
This company is planning to go public and shares will be dividended to
shareholders of UCMT.
-
Extreme Visual: 3D Movie technology
without the dumb two colored cardboard glasses. Extreme is working
on a registration statement, and shares will be spun out to shareholders.
UCMT
owns 2 million shares valued at $2 million.
-
SIVOO, Inc (OTC PK: SIVO): Sivoo
is like YouTube- it has video content on the internet with one major difference-
all their content is in Spanish, Chinese, and other languages. They have
licensing deals in place with Verizon and Comcast. Originally, booked at
$.25. UCMT owns 1.3 million shares carried at a value of $800k.
This stock trades around $1.
-
Third Order Nano (OTC PK: TDON):TDON
is working on space age materials for new fiber optics technology. It's
similar to nanotechnology, and known as "advanced embedding materials".
UCMT
owns 787,000 shares, originally booked at $.16 and now valued at $539k,
or about $.80 per share.
-
Theater Xtreme (OTC BB: TXEG):
TXEG
owns a chain of retail stores devoted to creating reasonably priced home
theater environments. The stores are very creative. Circuit City has loaned
the company $2 million. Expanding rapidly. This one debuted at $.35. UCMT
owns 576k shares valued at $454k- stock is about $.80 right now.
So- if you own UCMT- indirectly
you own shares in each one of the companies listed above. Three of the
portfolio companies could be partially spun out in the form of a dividend-
which would be paid to you directly as free trading shares.
In addition, UCMT expects
to add about three more companies to the portfolio before year's end. Every
transaction brings additional value to the company. If any one of these
six rockets up, UCMT should follow in kind. For the price of one,
you have six chances every time you get out of bed.
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Valuation
and Upside |
|
There are only 5 million shares I&O
in UCMT. It's a bit of a different breed of cat. BDCs have an NAV
(net asset value) like a mutual fund. There are two other publicly traded
BDCs- each of which have had their ups and downs in the market. On the
left you see Hughes & Hughes (NASDAQ: TINY). On the right, UTEK
(AMEX: UTK) is pictured.
Both stocks trade at about 2.5 times
NAV- this is because their investments and positions have substantial upside
value. UCMT has an NAV of $.71 as of their last quarterly
filing- suggesting the stock should trade at about $1.80 today.
Here's where your real upside is.
The NAV can rise quite dramatically on any given day, either through appreciation
within the existing portfolio, or adding client companies to their list.
If you look at UTK, you can
see it has appreciated about 8.3% in the last few days. TINY was
$11.50 last month- it's trading in the $13 range today.
Here's a chart of UCMT going
back to last summer. Did you read my BLOG on NIHK yesterday
morning? Remember trading 101 class? We accumulate stocks in companies
we like when they are cheap and no one wants them. We sell when they have
made big, spiky runs, and everyone wants them. On a relative basis to past
levels,
UCMT is cheap. Right now it is cheap and no one wants it.
Even if it stays at 2.5 times NAV-
where are we in nine months? If it is like the last nine months, NAV will
be 77% higher, which would put us 77% above $1.80, or just north of $3.
So- if you want to own a 6 for 1
position- 6 stocks for the price of 1, own UCMT. I love this idea.
Every day, there are six opportunities for major breakthroughs. There are
three opportunities for free trading share dividends. There will be more
companies added to the portfolio. Moreover, the management of UCMT is
actively involved in preventing these guys from screwing up. It's another
level of protection for you.
Here's the problem: I believe this
stock could be tough to buy. It has been relatively quiet for some time,
and increasing volume could take it up quite easily. If the stock gaps
up dramatically tomorrow you might want to use a limit order. I'll do an
early BLOG to help.
My short term target is $2.25-
this is based on some potential appreciation I see in the portfolio companies
along with a couple new additions that look very attractive.
Lots more to come on this one. I'll
probably stick with this one for few years.
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