I have been promising everyone I would reserve judgement on what to do about severe problem child Health Science Group until the end of March.
The end of March has come, and I am prepared to share some thoughts but no real conclusions. Thought 1- the company’s performance, relative to what was forecast, has been abominable. There are a number of forecasts you can find in SEC filings and press releases. The one that sticks in my mind was annualizing at $10 million by the end of 2005. Not even close- an absolute pipe dream. I don’t know where they got the number, but clearly it had no basis in anything close to reality.
Thought 2- if the current management team remains in place, I would simply sell the stock and get out. Take your loss and move on. Despite having a very exciting product in SHUGR, and now beginning the roll out of Sequestrol (I finally have some to try), the current management team has no credibility in my mind. They have now had over a year to deliver on promised results and little or nothing is happening. Just continued losses and broken promises.
I have a direct relationship with the company. I know they are attempting to put together a major transformation. I don’t have any details so don’t ask. If they pull it off, it could get the company back on track. If not, lower levels are imminent.
Here’s your chart. The stock is trading in a pattern reflective of corporate performance. I am going to give it a little more time and rate it a hold for now. I definately wouldn’t buy it. You can always sell it later in the year for the tax loss.
I was very excited about the SHUGR product when I first looked at this company. I thought they could sell the daylights out of it. It is by far the best sugar substitute on the market today.
I don’t know whether the problem is product or management, but there is clearly a problem.
On the other side of the coin, Sir John Templeton said he always made the most money when buying at the point of maximum pessimism. Perhaps this will end up being a buying opportunity. However, a major metamorphosis must take place, and take place soon. The company is now delinquent in filing its year end financial statement. I’m sure it will be horrific when it finally hits.
Sometimes, in the microcap world you are going to have losers. Fortunately, we have the DXCMs, HDYs, and KALs of the world to make up for them.
Final thought- I am suggesting hanging in there a little longer to see if something positive can happen.
Comments and questions are welcome.
I sold my position at the begining of the year, taking it on the chin after I read about the problems they were having with their auditors. There is clearly a management problem here.
Editor: I’m pretty sure that’s what I just said. Agreed. Wise choice.
i sent you a comment and you did not reply??? do you only respond to the comments you like?????????
Editor: No, I reply to all reasonable questions, but sometimes I get a couple of days behind. If you don’t see a response, resubmit. It might have been a technology problem.
sequesterol news release,is this the rabbit coming out of the hat?dnp has had an 42%increase in sales in Q1 and 65% increasein sales in march,could this be shugr????how is the japan deal coming?and europe? and middle east,and others they have eluded to? cheers bryan
Editor: don’t know, don’t know, don’t know.
hello editor still looking for you to respond to my last questions??? if you can”t or do not .at least send me a note as to why not. cheers bryan p/s i am a share holder!!!
Editor: Call the company directly, have them send you a non-disclosure letter drawn up by their attorney, and ask them what they plan to do to right the ship. Year end numbers are atrocious as predicted last week. On the plus side, the stock is not tanking, and therefore today’s news is already priced into the stock.
How do companies like HESG and AMW get away with just lining their pockets with money, while the stock just falls apart. I wish they would issue me stock for a .01 that I could sell on the open market for 1.00. These little companies are driving me up the wall.
Editor: You were warned year end numbers would be atrocious. Forget the numbers- $7 million in expenses to generate $60k in sales? How’s that for incompetent. For what it’s worth, no one has enriched themselves off this deal. The founders have been funding the company out of their own pockets, and losing quite a bit. On the plus side, the fact that the stock is not tanking suggests this disgusting performance is already priced into the stock.
Well, the disaster continues. They had 39k of sales in qtr 4, 2005. 60k all year. What ever might have happened to the 20-40 MILLION? They have less than 500k of money and 5 million in liabilities. They’re dead, dead, dead. Tomorrow will be ugly, imho. Watch for a reverse 1:30 split so they can jack the price up and sell shares in desperation. BD
Editor: I told everyone year end numbers would be atrocious. That was two weeks ago. The fact that the stock is not tanking is telling me the bad news is all priced in.