SPKL filed its Q1 10Q yesterday afternoon, and the filing really contained no surprises. The market is responding in kind my delivering another quiet day of trading with the stock still trying to get through the $.90 and stick higher than that level.
The top line number was $625k in revs- up from $221k in the same quarter in 2007. That nearly a triple in top line performance- 182% revenue growth to be exact.

The quarter was reflective of exactly what the company has been saying it was doing- investing the $6 million raised at $.85 per share last December into expanding it’s company owned store portfolio.

If you are wondering about the current state of restaurant openings and future openings, here’s a quote directly out of the 10Q:

As of May 3, 2008, we have sold 127 franchises. Of the franchises sold, 31 franchise restaurants are opened and operating, 1 company-built and owned restaurant is open, 5 franchise restaurants have been repurchased by the Company, 6 franchise restaurants are under construction, 2 company restaurants are under construction, 6 franchise sites are under lease negotiation (we have either received an actual lease that is being reviewed or a letter of intent), 1 franchise restaurant closed and 75 franchise sites are subject to area development agreements. An area development agreement is entered into when a franchisee has purchased the rights to a geographic area with a set number of restaurants in that area.

As you can see from this statement, it is very reasonable to expect continued growth from SPKL long out into the future.

At the end of the quarter, SPKL still had about $3.6 million and cash, and no long term debt.

The only real liability on the balance sheet is about $1 million in deferred franchise fees. This debt is really the fuel for growth. This liability is, in fact, the franchisee fess already paid into the company for expansion. It is shown as a liability on the balance sheet until the restaurants represented by the franchisee fees open for business. Then, the liability is converted to revenues as SPKL has fulfilled its obligation to get the store open. As that number goes down, the number of stores goes up. I would like to see the number go up, as that means more franchises have been sold.

As far as losses go, the company lost about $1.5 million, or $.03 per share. I would expect the losses to continue throughout 2008, and improve to a profit or at least cash flow positive in 2009.

New store openings are now picking up, with several on the horizon.

Here’s the current chart:

This is a slightly ascending wedge. The market is just grinding away at that $.90 resistance point. Sooner or later, it is going to break out, and bust north. When it does, it needs to work its way higher than $1, to set up a pattern of higher lows and higher highs.

It’s tough to say where this stock might be in the next two weeks, but the company is proving its worth everyday with new franchise sales and new store openings. If you can see out a year or two, this company should be far more valuable than the current $42 million market value it commands.

There aren’t many fast casual chains growing at this clip. If you’re not a believer yet, go try the food.

SPKL continues its pattern of trading very poorly on increased volume, and I’m getting a lot of emails with basically two questions- 1. Is there something wrong with the company?, and 2. Is it time to buy yet?

Those of you who have really been following this story know that I am uniquely intimate with this company. In fact, I was instrumental in helping them in the process of choosing to go public, and a lot of the pre public shareholders are personal acquaintances of mine.

Therefore, I can state with a great deal of certainty there has been no fundamental derailment at the company. In fact, just the opposite is true, the company is accelerating on every front- franchise sales, company owned store growth, and real estate acquisition. The only weakness of late has been the vacuum of new store openings in the last three months- This was simple a cycle issue, and new store openings will start to pick up again later this month.

However, the stock has been under pressure of late, and I am choosing to step back and see how low it wants to go. In my view, SPKL has become a victim of the new SEC regs related to shortening up the time frame for 144 filings. It used to be that investors had to hold shares for a year under Rule 144 before they were eligible to become free trading. As of February 15th, the time frame has been shortened to 6 months.

There have been a rash of filings of late, and I believe the recent weakness in the stock is related. I am monitoring the volume as it related to the filings, and will notify everyone when I believe the selling is about done.

In the interim, here’s a look at the current chart:

As you can see, the gap I have been looking for filled on Friday. As such the stock is close to being in position to turn back up. Almost there, but not quite. I would suggest giving it a few more days to a week.

Comments, questions, and in this case, complaints are welcome.

About a week ago SPKL filed its year end audited financial statement, and this is the first time I’ve had an opportunity to comment on the results.

For those of you who would like to learn more about this rapidly growing fast casual restaurant chain, please go to our information center on the company- you will find every edition and BLOG I’ve ever published on SPKL. You’ll find it at http://www.otcjournal.com/Spicy-Pickle-Franchising-Inc/SPKL/af/profile/

There were no surprises at all in the 10K- it was just as I predicted it would read, which is probably why it was not a market moving event.

The revenue number is pretty small- that’s a reflection of the annual revenues last year being comprised mainly of the royalties of about 8% they collect on each store. In the 10k annual report there were no company owned stores included- which means there were no big top line numbers. Since the end of the year, one company owned store has opened which they built, and 3 have been acquired from franchisees. Two more are under construction right now. The total will be five before too long, which will equate to about $3.5 to $3.8 million in annual sales. Since they delivered $1.2 million in sales for the year, next year is virtually guaranteed to be at least triple that number, but that’s based on where the company is today just from the company owned stores. It’s early in the year. There are many more growth opportunities for the remainder of the year.

The far greater news out of the 2007 numbers is the balance sheet improvements. SPKL finished the year with $5.4 million in cash vs $1.2 million the previous year, and $6.4 million in assets. Thanks to the $5.9 million financing in mid December at $.85 per share, the company finished the year in great shape. The cash will go down in 2008, but the revenues and gross profits will go up as SPKL invests the money in expansion.

Therefore, over the course of 2008, you will see quite dramatic top line percentage improvements, a deterioration of cash on the balance sheet as it is invested, and reduced losses- perhaps even profits by the back half of the year. The company will certainly turn cash flow positive later in the year.

The only negatives I can even come up with on SPKL are the slipping stock price and the temporary vacuum of new store openings.

The company has not opened a new store since the middle of December, but it’s not due to lack of opportunity. As is the case with construction, a few of the properties we thought would be open by now have been hit with delays- construction, permitting, etc. The delays have just about run their course, and 6 or 7 new ones will open over the next couple of months, and there should be a much larger number in the back half of the year.

Current commitments from franchisees have the total number of eventual stores at about 130 now. Just to clarify for those who are confused by the numbers- there are 36 opened and operating today- about 7 or 8 under construction- about the same number with signed leases awaiting the commencement of construction, and another 10 or so leases in various stages of negotiation. That leaves about 75 more stores committed to and paid for to open over the coming years.

On to the technical picture.

This stock began trading publicly in August of ‘07. It was a self underwritten IPO at $.40 per share. After catching fire in the short run, it succumbed to Bear Market selling pressure. Pretty much all technical levels of resistance have given way. My SSL on the stock was $.90, so if you are still in, you should be long term. This is a good choice to be long term in my view.

I believe before the Bear Market is over, the stock could be vulnerable to go back and fill the gap from its very early trading days. That gap is like a vacuum, and nature wants to go back and fill the void.

I know it’s tough to see on the chart, but in order to fill that gap, the stock would have to trade back down to $.71.

If the stock can grind it’s way down there, I believe the trip would be very short lived, as there are a lot of investors following the company and looking for the bottom to get really engaged.

About 2 years ago right now, CEO Marc Geman called me to discuss raising capital. At the time, SPKL had a total of 12 stores open and about 20 franchises sold in all. Today, the number of open stores has gone up 200%- 12 to 36- and the number of franchises sold has gone up 550%- 20 to 130. The growth rate is accelerating because the management is excellent, the concept is strong, the franchisees are making money, and the food is simply great.

I believe SPKL will be a repeat of Commerce Planet (OTC BB: CPNE) with a more positive ending. Long term subscribers will recall I first featured CPNE in 2005 at $1, and it found its way to $2. Then, we had a tough market and the company stumbled- it was $.30 in the Fall of 2006. By the spring of ‘07 the stock was at a high of $3.50- a ten bagger off the bottom of the pullback. They since have sabotaged their own success.

For SPKL it will be deja vu all over again with one main difference- the SPKL business model has far stronger legs. Each of those restaurants is an annuity that can contribute pretty much forever.

I believe this stock is going to $3 or $4 in the next Bull Market. I can’t say when it’s going to be, but I believe it will happen. You have a once in a lifetime opportunity to accumulate this one during the economic slow down. Today, you can pick up the stock at the same level the $6 million December financing was priced at ($.85)- two board members put in $1.4 million of the $6 of their family money. I personally invested $102k out of my Defined Benefit money. Worth noting.

Comments and questions are welcome.

This will be the first in a new series of daily blogs with some observations about today’s market action, especially as it applies to the current ideas I have in front of subscribers.

Open LEH Puts:

Well, the trade is working well so far. Earlier today I was up $2k on an $8k investment from last Friday, and tempted to lock in. Gave back $500 so far. However, since LEH was down yesterday on a huge up day in the markets, I have no reason to believe the stock is ready to head back up. Some downgrades today from brokerage firms, and they are rumored to be awash in bad mortgage paper. Let’s hang in another day.

VTOK: New Idea

The response to new idea VTOK was pretty anemic. I believe the story is reasonably compelling, but I don’t think the market really gets how big the Amerivon relationship will be. More will come out in the future.

SPKL:

Stock continues to languish on light volume. The company is doing great, but the stock needs a catalyst to get it moving again. They came out with their 10K, so I will do an in depth BLOG on it. Big winner in the next bull market.

EFSF:

Stock firming a little in a pretty brutal micro environment. I like the second test of the lows, and some volume starting to show up. Might get some legs in this one.

PNWIF:

Showing some signs of life today as it is oversold in a news vacuum. Costco services should start soon. Big winner in the next Bull market.

AAPL:

I missed it waiting for the all time bargain basement steal. I don’t believe the volatile madness is over, so might get another chance.

CREE:

In no man’s land. Sticking with my plan. I have my 2k shares in the mid 28’s- will buy more if I see it back in the $25 to $26 range- will sell calls against it in the $30s. Today, nothing to do at $29+.

Overall Market:

After a huge week and a big Monday, the market should be giving some ground, but it’s not. Bullish, but still half the day to go. The environment is finally improving a little, and perhaps the micro will start to show some signs of life before too long.

The Pickle had held up quite nicely in the face of the current nasty Bear that’s been gnashing its teeth at every non energy non commodity company out there.

Today, the stock finally succumbed to the buyer’s strike, and broke below the ascending triangle which has been forming for the last several months, suggesting the stock wants to go through a corrective phase for the time being.
Here’s a look at today’s chart:

As you can see, the stock has broken down below the support level defined by the descending triangle.

I have been warning the stock was vulnerable for a downside push as it would appear the December financing has brought some sellers with a little market related impatience out of the proverbial woodwork.

I am not concerned about this turn of events as it is my expectation you are going to get some corrective action in most stocks in a Bear Market even if the company is delivering on all fronts.

This break below the support level also coincides quite closely with the 61.8% retracement of the stock’s entire big move from the fall- another technical negative.

In light of the great performance the company is delivering, here are my thoughts. I believe the stock at a very good level for accumulation if you are a long term investor- meaning you are looking for long term capital gains (more than one year).

If you are looking for an oversold trade for a quick move to the upside, I would avoid the stock at this time. There could be more downside work to be done before a bottom is put in.

From here, it will be interesting to find out what level investors find this stock irresistible. I’m guessing somewhere in the $.90 to $1 range.

This move might in fact be healthy for the stock longer term. It will no doubt clean out anyone with short term thinking on SPKL, and leave the stronger, longer term investors as the shareholder pool. We’ll end up in stronger hands when the rebounds start happening.

It’s worth remembering that SPKL is on an expansion tear. It’s also worth remembering that of the $6 million that was raised in December at $.85, $1.4 million came directly from board members.

The current meltdown in the financial markets does not seem to be infecting individual investors as harshly as the Wall Street Money Manager Professionals.

Yesterday might very well have been the big “woosh” of panic selling bargain hunters have been waiting for. SPKL was not immune, but it held up nicely in the face of panic selling.

I believe the stock is pretty much in the hands of loyal, individual shareholders who have tried the food, followed the company’s progress, and believe in its future.

Let’s recap where we are today. When I first featured SPKL in September, the stock was $.70, and the company had about 20 stores open with about another 20 franchises sold. There were no company owned stores. The one they owned in Denver had been shut down in favor of moving to a new location.

Today, the stock is about $1.20 after having made a trip to $2, and the company now has 36 stores open, 4 under construction, and 73 more to find locations for over the next 2 to 3 years.

The current crop of franchise stores that are open (35), should generate over $20 million in annual sales, which translates to about $1.7 million in royalties to SPKL: pretty much forever. The number goes up as the number of stores goes up. The one company owned store, which includes a franchise training center, a bakery to serve a number of the stores in the Denver area, and commissary, should generate about another $1 million in top line dollars.- The current top line- about $2.7 million annually as we turn the corner into ‘08.

SPKL’s real estate department is looking for properties in many markets right now- by far the most in its history. In a way, a US recession is favorable for SPKL’s expansion plans, as commercial real estate at a reasonable price might be easier to find.

Furthermore, SPKL completed a $6 million financing at $.85 per share in December, which now needs to be invested. It is earmarked primarily for building out company owned stores, which will have a disproportionately large impact on the company’s top and bottom lines. And, did I mention- two of the independent board members invested $1.4 million on their family money in the $.85 financing- is there a better endorsement?
2008 should bring far more rapid expansion than we saw in 2007. The company completed the process of going public, raised a significant amount of capital, and growth is accelerating. There were a rash of new store openings in the second half of 2007- there will be a repeat on a larger scale in 2008.

You won’t see much in the way of big top line growth in the year end numbers, but Q1 numbers should demonstrate a huge gain over Q1 ‘07 and Q4 ‘07.

Here’s yesterday’s action in the stock:

Here’s what I like. On the day the market absolutely fell apart, the stock traded its highest volume since mid December. Despite an effort to make a new multi month low, it rebounded and delivered a green bar for the day. It held up quite nicely. In fact, over the last two months, the lows have been getting higher, albeit in very small increments. A very good sign in a Bear Market.

Individual investors seem to be able to ignore the noise about recession and the market meltdown. They aren’t under margin pressure, and can step back and look at the big picture. While I certainly can’t predict what the next several months might bring in the overall markets, I can surely predict SPKL will be a much bigger company in 1 to 2 years. Franchise sales are accelerating now, and store openings will be next. The model simply works in the fast casual space.

When we get to 100 stores open, if there are 400 more to open, look for this company to be an acquisition target.

As always, I remind you to go try the food. Decide for yourself if this chain will continue to take off. As far as the stock is concerned, I wouldn’t even consider an SSL unless we get somewhere near the $1 level.

Comments and questions are welcome.

I wasn’t aware it was happening at the same time SPKL issued yesterday’s press release, but September quarterly numbers were announced, and the market didn’t seem to care that their top line is a small number and their bottom line showed losses as predicted. The stock is up 11.5% today as I write this, continuing the rebound phase that started at the end of last week.

Here’s the short look at the top and bottom line. SPKL delivered $261k in revs in the quarter, and lost $1.3 million or $.03 per share. Sounds like an awfully small company. You have to drill a little deeper to understand the value.

Three new stores opened during the quarter, and the company booked $60k in revs from franchise fees. The remaining $200k is the 7% royalty stream the company derives from franchise stores.

Here’ what this means- the stores underlying the $200k in royalties delivered about $3 million in revenues- That’s about $12 million in annual revs. Three new stores opened during the quarter, so the company didn’t experience a full 3 months of revenue stream for those.

One other issue to understand: In Q3 of 2006 SPKL had one small company owned store in Denver. That store has since closed and is being relocated. The new version has a fantastic location, will act as a nationwide training store, and contain the bakery and commisary. That new store is slated to open in mid December. All the revenues from that store will go to the top line, and the company is currently looking at other sites for company owned stores.

In short, if all 40 stores manage to get opened by year’s end, the revenues being delivered by those stores will be between $26 million and $30 million annually. At 8%, the company books about $2 million in annual revs- not including franchise fees and the top line from their company owned store. Then, you can start looking out to ‘08 when SPKL moves past the 40 store threshold, and starts moving towards 100 stores.

You will see some top line increase in Q4 of ‘07, and a huge top line increase in Q1 ‘08. This is very predictable due to the nature of the business. In the interim, with the stock up nicely today, I would say the market gets the value in this case.

Comments and questions are welcome.

Thanks to the big two week sell off in the market and the extraordinary run up in the stock, SPKL is behaving pretty much as predicted. Here’s what’s happening. Those same investors who bought the stock because it was going up without really looking at the company, are the same investors who are now selling it because it is going down.

If you took my advice and made either a complete or partial sale when the stock was up in the stratosphere, you should be getting excited about buying once we hit a bottom, which is rapidly approaching.

Here’s a look at the chart:

As you can see, the 61.8% retracement for this stock is $1.13. That should prove to be a fairly low risk entry level. That’s not to say the stay might not go a bit lower, but your downside should be pretty minimal at that level. Today, we are trying to get down through $1.20, so we are very close.

Here’s what I find very noteworthy- as the stock continues lower everyday, the volume is also dropping quite significantly. This low volume sell off is just the kind of pattern that leads to a quick turn back up when conditions right themselves.

I wouldn’t mind seeing the stock trade sideways for a couple of days, but in here it could simply turn back around in a hurry.

It’s time to start looking to be a buyer. Personally, I couldn’t be more excited. I would like every OTC Journal subscriber to own lots of this stock. The last time I suggested it was a buy, the stock was $.90. We are very close now, if not there already. Sometimes, a little patience pays off.

Anyone who has been reading my commentary on SPKL knows I have been suggesting avoiding the stock for a couple of weeks. I felt as if the stock had gotten a bit ahead of the company, and it would be prudent to wait for a pullback.

So- here’s the big question- what’s a good entry level to continue to accumulate this stock? I had the opportunity to watch some of the action in the stock today, and was very impressed with a technical reverse when it pulled back to the $1.43 level.

Looking at the chart, it is no surprise. Here’s why:

Here’s a chart measuring the entire monster move from $.56 to $2. So, as you can see from the chart, the $1.43 level was a nearly perfect 38.2% fibonacci retracement. If you jumped on the stock at that level, you made a great move as it appears so far.

If this level holds, it seems as if that was the opportunity. If the $1.40 or so level gives way, the $1.12 range would be heaven sent for those looking to jump in.

In the current market environment, these pullbacks are tending to be a bit shallower and short lived, so $1.43 might turn out to be our best opportunity.

Maybe, maybe not. I know that’s not a definitive as some of you might want, but short term calls are tough.

Perhaps a partial position is the answer, keeping in mind there could be lower opportunities in the future.

Comments and questions are welcome.

We’ve been lucky. For those of you who didn’t catch it, the Pickle got a little national recognition on Monday morning via the Today Show.

A segment entitled “Investing 101 For Women” featured a young woman’s adventures in the investing world. After taking some money out of a 410k, buying a house, selling a house for a profit, and investing in the stock market, here last move is to invest in a restaurant chain- and- they flash a picture of a Spicy Pickle restaurant. Awesome. Here’s a link to the video clip:

http://video.msn.com/?mkt=en-us&brand=msnbc&fg=rss&vid=148d5e1e-5b80-4e7f-86f8-212a04f4bb3f&from=05

At this point I believe the stock is going up because it is going up, and I also believe it is overvalued at this level. I have been a seller, and will continue to be at this lofty valuation.

I believe this company will have a breakout year in 2008, and the stock could go higher than where it is today. I’ll have a look at the chart when it cools off. For now, I believe you should be taking some or all of your money off the table, and waiting for the stock to cool off.

Here’s the chart:

Simply streaking. And I thought it was more of a sell at $1.30. People call me all day long and tell me they are not worried about the price- they like the growth potential and love the food.

The momentum is fun, but it will head the other way when the investors who are buying the stock because it is going up decide to sell it because it is going down. Don’t get caught holding the burning match when it burns down to your fingers.

Comments and questions are welcome.

Well, SPKL is powering higher today on pretty big volume. And, just like the last BLOG I posted on this stock, I would advise you not to be a buyer. I felt the stock was fairly valued at around $1, but the concept has clearly hit a hot button with investors, and the price performance of the stock has outstripped my expectations.

If anything, on today’s high volume, I would suggest taking some partial profits if you were in when I first featured the company at $.80 last month.

You can use SPKL as a great opportunity to “trade around a position”. This means you have a core position you hold for the long term, but take a certain amount of your position to sell on surges, and buy back on pullbacks.:

Here’s the chart, with an idea of where I would buy it on a pullback.

It’s pretty clear that at this point in time, we are not going to get a 61.8% retracement in this stock. It is more likely we will see a 38.2% retracement, just as it did last week. I was pretty short lived.

The 38.2% retracement would take us to about the $1.10 level, which is where I believe the stock could pull back, and probably should pull back to.

In summary- not a buy- a sell, partial sell, or hold. Look for a technical pullback to $1.10 to jump back in.

Comments and questions are welcome.

I’ve had lots of emails and questions about SPKL- mostly, where to buy the stock. For those of you who read my last BLOG, you know I was negative on buying in the $1.20 range, and more inclined to sell or hold.

I spent some time with the charts today, and came up with the following:

I measured back to when the stock had its first big volume day and started climbing. As you can see, the .382 retracement puts us at about $.98, and the .618% retracement puts us at $.82.

In this case, the fundamental case and the technical case are pretty much in sync. As I stated in my original presentation, I felt the the company, frozen in time, was worth $1 per share today. With more growth would come a higher number.

The .382 retracement would put us just under $1, which I believe would be a very favorable entry level. It could drop down to the .618 level of $.82, but that doesn’t seem likely in the near term the way this issue is behaving.

Here’s a strategy suggestion- If you see it under $1, commit part of your resources and keep some capital handy if you see it below $.90. There’s your entry levels that gives you a high probability of success. Also, the longer term the chart, the better predictor. This is a pretty short term look, so you never know. for sure.

Comments and questions are welcome.

SPKL has far outstipped my early expectations with Friday’s breathtaking breakout to the $1.21 level, with a high trade on the day of $1.24.

Are you wondering buy, sell, or hold? If you been reading the OTC Journal for any length of time, you probably already know what I am going to say.

Trading 101- Class- what do we do when stocks we are following make big, spiky, high volume runs? Heres the chart of SPKL:

As you can see, Friday was a huge spike. The answer to buy, sell, or hold? Let’s start with what you don’t do. While this stock may power higher for a day or two more, you don’t buy now. It is going to cool off. The announcement of the addition in one store in Florida is not a game changer- there will be many such announcements in the future.

Hold or Sell? That depends on you and your goals. If you are looking to make some real money off this idea over a longer term, you should probably just hold on, be happy with what you have, and wait for a pullback and some quieter trading to accumulate. I am looking for much higher than $1.20 over the course of time. If you have a traders mentality, or want to try to play the trading game and sell now, hoping you can buy it back cheaper, there’s nothing wrong with that. I might sell a few shares as well next week.

If you are wondering why the stock is so hot- here’s a guess. SPKL starting trading some volume this past Monday. When market makers see volume materialize on a relatively thinly traded stock, they assume investors will get tired and they start shorting. Then they cover at a lower price and make a few cents when seller materialize.

As more investors learned the SPKL story, the buying just kept flowing in. I believe there was a mini short squeeze on Friday. Stocks trade like that when someone has to buy, not wants to buy.

In summary, if you want to establish or add to a position, wait. If you want to make a partial sale, not a bad idea. If you want to stick with this one for the long term, be prepared for the fact that it might pull back a little.

Comments and questions are welcome.

It’s about 15 minutes into the trading day, and SPKL has traded a huge amount of volume for 15 minutes, but hasn’t appreciated that much on the price. That’s a very good thing if you are looking to take a position.

Here’s the chart in the early going:

As you can see, the gap wasn’t too big, and that’s favorable for taking a position. If the stock were to trade back down and fill that gap, that would be absolutely ideal for getting on board.

Therefore, if the stock happens to trade back down to the $.70 level or so, I’ll bet it will turn right around and head back up. That’s known as “filling the gap”. Traders love to buy when stocks “fill the gap”.

If you are interested in participating in SPKL, I believe this is a reasonably low risk entry point. Your SSL should be somewhere in the $.65 range. More on that later- it’s a little premature to worry about it now.

Comments and questions are welcome.

Well, the cat is out of the bag. The Spicy Pickle idea is out there, and there are probably thousands of potential investors who will see the video and read about it this weekend.

For the most part, investors who got an early look at the video seem to have been interested in investing in the stock, so I have to make the assumption there will be many more interested investors looking to take a position.

For the first thirty days, SPKL had traded very nicely, with the stock easing up slightly, and the volume increasing slowly but surely.

On Friday the stock got a bit more heated up than I would have like to have seen. It was up 23% on 1.15 million shares of volume - a new record.

It would have been better if the stock had been a bit quieter, but the word is getting around on just how well this company is doing, and a groundswell of enthusiasm is coming directly from people who know the company and have eaten the food.

That having been said, I believe some caution is warranted on the trading side here. Many of the early shareholders are big believers in the company, and they don’t really have much interest in selling. Those that do have already had a fair amount of liquidity in the first 30 days of trading.

Therefore, when the stock opens for trading on Monday, it could get a little out of control. If there is a big spike, some early shareholders might find their profits irresistible, and supply could hit the market. Based on the way it traded on Friday, I suspect there is very little supply at these levels.

So, let’s take another look at this very short term chart:

The stock closed at around $.70 on Friday. I believe the company is worth $1 today, with lots of upside as they continue to expand.

If you invested the 1/2 hour as I suggested, you should have a pretty good understanding of the company.

If you want to own the stock, it is important to own it right. If the stock trades up like crazy on Monday morning, I would stay on the sidelines and wait for things to quiet down.

If it ramps up to $1 very quickly in the early going, you might want to wait for it to cool off. At this point, I would suggest a limit order in the $.80 to $.85 range. You might even want to wait a few days if the stock is trading much higher.

Alternatively, another good strategy might be to take a partial position in the early going, and leave some money on the sidelines for a pullback. If it doesn’t pull back, at least you will own some. If it does, you’ll be in a position to add at a lower level.

If you’re concerned about the 1.8 million IPO shares priced at $.40, consider Chipoltle Mexican Grill (NYSE: CMG). It was priced at $22 in January of 2006, but traded to $45 on the day it opened for trading. On Friday it closed at $113.90

There’s one more issue I would like to get out of the way right now. If you have looked at the disclaimer section for this idea, you know I have sold a few of my own shares already. I did this for two reasons- 1. because I needed some money, and 2. I was hoping it wouldn’t trade up too much before I had the chance to present the idea to OTC Journal members.

I will probably sell a few more shares because I could use the money, but I plan to keep the vast majority for 1 to 3 years.

I am interested in feedback from any OTC Journal readers who happen to have eaten at any of the restaurants. Please share your experiences with everyone else.

I will probably post another BLOG within the first hour of trading on Monday with some thoughts on how we are progressing, and what a sensible strategy might be. Thanks for taking an interest in this idea.

Comments and questions are welcome.