Titan Capitulates To Tax Selling: What Now?

Titan has simply been atrocious in the past six trading days, absolutely falling off a cliff with seemingly no bottom in site. What the heck is going on here?- like you, I am concerned with the free fall. This thing is really bothering me.

I hope you are reading all of the commentary- not just some of it. Now is a good time to draw your attention to my warning that these kinds of things would happen in this nasty market environment.

I refer back to the November 10th edition, entitled “WOW”. This was a huge down day in the markets:the turning point which kicked off the sub-prime meltdown.

In that edition I talked about the importance of sticking with your SSLs (suggested stop loss) in a down market depending on your personal preference. To me, it is simple. If you hold the stock below either my SSL or your own personal SSL, you have decided to become a Warren Buffet like long term investor.

In conjunction with that edition, I updated all the SSLs at www.otcjournal.com, and set the SSL for TTGL at $1.73. Today, TTGL closed at $1.18- far below the SSL.

If you really are a long term investor, this should not concern you. You should only be concerned with fundamentals. If you are not long term and worried about the drop, you should have been out. If you got out, you should be looking to get back in.

I believe the problem here is simple- TTGL is evolving from a small following of retail investors to an institutional story, and the company has not been effective, or not tried to be effective at getting its message out to an institutional audience.

This down market has led to selling pressure and a vacuum of buying- now I believe the stock is being knocked down by tax selling. The real problem- no buyers.

Here’s a fact- this company made $9 million in positive cash flow last fiscal year- earnings are just an accountant’s opinion; cash flow is a fact.

Here’s another fact- this company should deliver over $700 million in revs this fiscal year, and it is trading at a market value of $64 million- ouch!!!!!!

Let’s look at a longer term chart, and you’ll see my reason for concern:

ttgl11.gif

This chart tracks the stock on a weekly basis since the company embarked on its ambitious growth path. As you can see, it’s hasn’t been straight up the whole way.

After delivering splendid price appreciating in 2006, the stock took a breather in the first half of ’07 before making its next leg up. Throughout that entire time, there was never a sell off as vicious as this one.

On the other side, the left leg up was steeper than the past rise, so there could be an equal but opposite reaction.

I don’t believe we have another CPNE here (if you followed that one) as this company has a much solider business model and adds real value to its customers. This one is not a house of cards.

In light of the new volatility, this could prove to be a great January effect stock as soon as the tax selling abates.

There’s another possibility that is unique to TTGL. Those of you who have really dug into the details know this company’s financial statement continues to be plagued by ghosts of past loan sharks. There are warrants. Some of these funds are under very heavy pressure these days, and there could be a renegade former financier with a need for “cash at any cost”. Just a thought. Their weakness could be our opportunity.

My initial thought- don’t touch this stock now. Wait for the selling to be over. Then, buy this stock towards the end of next week after all the tax sellers have finished doing their damage if it stabilizes. This one could rebound beautifully after we get past next week. Just a guess, but I wouldn’t be surprised to see them announce a restart of their stock buy back program.

Comments and questions are welcome.

21 thoughts on “Titan Capitulates To Tax Selling: What Now?

  1. I though I would post this, for your readers, in case:

    If this stock base wasn’t made up of otcbb investors, it would be at 4 bucks.

    Now, as it approaches the critical double bottom area of .95 (that is a stretch, I know), Investors could be risking the slight downside to garner, what I believe to be, massive upside. .95 also happens to be the spot where the stock went from making successive, lower highs to successive higher lows and higher highs, if you will.

    Then there is this 5 cent gap, right in the middle of this key area with a notable volume differential:

    17-Jul-07 1.02 1.12 1.00 1.02 143,400
    16-Jul-07 0.99 0.99 0.95 0.95 34,000

    .95-1.05 looks perfect.

    Editor: Rather interesting observation. I don’t see the possibility, but always there. With this action, I know believe a 2 for 1 reverse to get the stock to $4 might be in the works, and which point it could get a NASDAQ listing and garner a lot more attention. 

  2. It is already heading back up. I think unlike CPNE, this IS the bottom.

    Editor: My guess- some fund or entity that is getting hit with margin calls somewhere else had to blow a big slug of stock regardless of the consequences. Lots of hedge funds have sub prime exposure. 

  3. Surely the new energy bill signed by George Bush today which outlines the use of Ethanol to be increased by six fold over the next 12 years as a tremendous catalyst too our increased stock value . I presume that was part of our stock price increase today . I also was happy too hear that the reverse split has been abandoned and they seem confident the share price will be close to qualifying for nasdaq standards by the middle of 2008 . I would like too hear any of your thoughts on the recent news .
    Andy

    Editor: Andy, in light of the recent drubbing this stock has taken, I believe a 2 for 1 reverse from $2 could be in the cards – it would be simply a trick to get the stock to $4 so TTGL can attain a NASDAQ listing. If that were the case, I would applaud the idea as it will open the stock up to a much bigger audience. This stock needs institutional support. I believe the recent action in the stock had to have been some fund who need immediate cash, probably related to a margin call elsewhere. Lots of small funds have sub prime exposure. 

  4. I think you latest blog is pretty accurate, but if you read between the lines in the release this am about the board deciding that a reverse split will not happen you can come to an interesing conclusion. In my opinion, they are telegraphing that they will indeed be in the market over the next many months buying stock. I believe they may have started yesterday. I don’t think they wanted to do this at first (they did not want to decrease the float anymore). They have the free cash flow, and they want the NASDAQ listing very bad. I may be way off in my analysis, but I don’t think so. In my opinion, this will be a $4.00 stock next year. Thanks again for the good work

    Editor: Good theory, and highly likely. I also believe it is highly likely the recent free fall in the stock was the result of some fund desperate for cash thanks to some problem they had elsewhere. I personally believe a 2 for 1 reverse would be fine to get the stock to $4 if it resulted in a NASDAQ listing immediately. However- here’s the downside- if the company did a 2 for 1, there would be so few shares in the pub float, it would be hard for institutions to buy the stock. You are right- they are totally committed to be viewed as a big boy stock, and they know they can’t get there on the BB. This is simple- they need to get those damn derivatives off their balance sheet, and they need to commit some serious attention to getting in front of institutions who participate in this end of the market. They are still haunted by the ghosts of past poor performance and loan shark financings. They must have been getting the message from somewhere that the possibility of a reverse split was a bit of a black cloud.

  5. So now what should we make of this!…
    Now our ‘conglomerate’ has bought into the highly risky apparel market?….how does that mesh with anything else going on here?
    8-K
    On December 14, 2007, Titan Apparel, Inc. (“Titan Apparel”), a wholly owned subsidiary of Titan Global Holdings, Inc. (the “Company”), acquired substantially all of the assets of Global Brand Marketing Inc.,

    Editor: Actually, I had heard about this one some time ago. Apparently, there was some distress and some real value here, and they were able to buy it for a song. Greystone just loves these guys for some reason. Greystone must think they are very skilled at identifying value. Looks like we might be annualizing at over $1 billion in sales. Someday, this thing is going to be looked at in a whole different light. 

  6. Another purchase this morning, of a private company in a fairly new area for them. While I would rather see $4 sooner than later, it seems pretty simple to me. One year from now, they either will have or will have not met their earnings goals for the year. If they can truly produce $.25 per share profit, the stock price should certainly move to reflect that reality. Until they report actual earnings, there may simply be too much gray area, with all these new previously private acquistions, which keep the institutions on the sidelines. I’m believe and I’m ready to wait for my reward.

    Editor: These guys are busy. They are such a moving target, and in so many industries now- they have said they want to be a mini Berhshire, and clearly have the leverage to do it. It’s going to be a huge company- I’ll bet they are north of $1 billion annualized now, with a lot of moving parts. It will be interesting to see if they can get institutions to bite with such a diversified portfolio of companies that have no operating history as part of the pub co. 

  7. I think the news about aquiring the apperal company this moring is great. It looks to me that greystone credit is holding much paper on many companies, and if they faulter, their relationship with Titan ends up to be a win for both companies. It looks to me they were basically given this company for free.They were also of course given the financing, with no future dilution from what I can see. I think if you look deep enough here at this relationship (Greystone, Farwell, David Marks, Titan) there are a lot o people who are going toget rich off of it. I have been investing for many years, and am not sure I have ever seen a company evolve like this. In the future they may be teaching this business model at major Universities and places like Wharton.

    Sorry to ramble on, but one more thought: Titan’s communication and Card services that are targeting 1st and 2nd generations americans is brilliant. I went to Bank of America (one of the largest banks in the country) last week, and almost one half of the officers there and some of the tellers had “habla espanol” on their name tags, and 100% of their brouchers and were written in spanish and english. I of course live in the south (Texas), near Houston and see the writing on the wall. They will forever now be a force in our economy. They are hardworking people, love there family back home (phone cards and card services). I plan a trip to Richardson Tx soon to see this company for myself. I have added to my position at these levels the last week or so. Santa came early this year. Thanks again for the great newsletter.

    Editor: You’ve pointed out a number of strengths, so I will point out a few weaknesses. They have to get rid of the derivatives on the balance sheet which keep killing their earnings and make them look like they are losing money hand over fist. Those are legacy derivatives from past indiscreet financings, and they are just killing the financials. Secondly, they need to improve their ability to get their story in front of institutional investors. This stock just has to trade more volume, and it is their responsibility to get it done. Perhaps these shortcomings are the reason this is still a $1.50 stock, and it’s a good thing if you don’t own enough yet. 

  8. well I’m back in hoping this is on the up side now couldn’t go much lower thanks for listing to the good the bad and the ugly thoughout the year Happy Hoildays

    Editor: I believe the big sell off in the stock was some sort of year end aberration from someone who had desperate need for “cash at any cost”. 

  9. Hi Larry
    Have you any info on Oblio owing huge amounts to their providers? That they have disabled prepaid phone cards on their customers? TTGL is quick to acknowledge any positive moves the company makes . I think they are obligated to do the same on any negative developments.

    Editor: Clearly they are required to disclose all substantive events, good or bad. The only place I have heard any rumors concerning Oblio is on this BLOG. If you have any evidence to support this rumor, I’d appreciate knowing what it is. Will see if I can reach someone from the company. 

  10. Looks like they were listening to you Larry. “Titan will work to eliminate or reduce the impact of these instruments in the 2nd quater of 08.” Good start today with the termination of warrant or warrants to purchase 10mil shares at $1.30. All aboard.This train will be leaving the station real soon.

    Editor: They figured they had fantastic numbers for the year end with $9 million in positive cash flow, but a huge paper loss- look what the market did to the stock. I believe they are getting the message. I am telling you, these guys want to be on NASDAQ in the worst way. I’ll bet they pull out all the stops in 2008 on the stock side, but we’ll see. 

  11. http://finance.yahoo.com/q/is?s=ttgl.ob

    On Yahoo they show this as being posted “Tuesday”. Doesn’t say which Tuesday but that usually means the most recent Tuesday, which is today. New Years Day. What the hell? Pretty grim numbers, imho.

    BD

    Editor: The year end results have been covered exhaustively in blogs, conference calls. and other content already. This is stuff that was all disclosed a long time ago. As previously noted, for the year, TTLG had about $9 million in real positive cash flow for the year- with $24 million in non cash charges mostly related to warrants. There is also a new “deferred revenues” issue related to phone card sales that skews there top line down. It’s all in the past BLOGS and additions, and on their year end conference call. Also, next quarter will include two months of numbers from the acquisitions.

  12. Just a followup on my comment of 12-23. Did you get a chance to talk to anyone about these rumors? Thanks and Happy New Year to you and all.

    Editor: I have emails out to the management, but have not gotten a response. I expect things will begin to pick up next year. 

  13. The only thing I know about this company is what I read in the blogs,but it looks like they can”t get out of there own way or maybe its a bad company and everyone else see it

    Editor: The next quarterly earnings release is due out in Mid January. Let’s see what comes out. This will be the first 10Q with Appalachian Oil. 

  14. well I guess I was wrong about the bottom of this stock They must have given up getting on the NASDAQ

    Editor: There doesn’t seem to be a bottom, and there doesn’t seem to be any volume. Let’s see where we are when the earnings come out by mid January. 

  15. I hope I am wrong but with this negative stock movement , it seems likely that our First Quarter must be looking bleek and not up to expectations . I can,t believe we will post a loss especially with the lawsuit settlement with AT&T for about 7 million adding too our bottom line . Its making me concerned that there is no discussion or news releases on projected 1st q numbers . I have now E-Mailed the company 3 times with a few general questions over the last 30 days and not one single reply . One more note : It is nice too hear about all these buyouts but what is the point of Grossing 1 Billion if it costs you 1.2 Billion to do it !!!!
    Have you talked or had any communication with management lately Larry ?

    Editor: We’ll be seeing a new 10Q in mid January. Then we’ll have a handle on the condition of the company. Until then, the stock is certainly trading like crap, but on pretty light volume. With the right news, it could change in a day. 

  16. Unless I am reading it wrong, The estimated earnings they threw out last year for this 2008FY means that to reach the Nasdaq $4 they will need to trade at better than 15x next years earnings. Thats a pretty high demand in this market, especially with no history of profit. That said, if the added perception by the micro traders is that the hurdle to Nasdaq has been raised (due to the poor market) and the potential for needing a reverse split increases (because it is clear to me that management and early investors want the Nasdaq) , then the micro traders will continue to punish this on any volume low or high, until they get rolled over, and/or have a change of sentiment because TTGL finally gets 1) a real profit track record, 2) earning announcements coming in above estimates and are early and often, and/or 3) the management sticks its neck out and commits to higher earnings guidance estimates. No doubt there is news due out and silence signals managements caution at being accused of manipulation. I have averaged down on TTGL in this market, but I do question my own choice. S.

    Editor: Here are the thoughts I published yesterday in a subsequent BLOG. I don’t know if you are making the right call, but I like your assessment of the situation. Thank you for your contribution.

    http://www.otcjournal.com/otcb/titan-absolutely-destroyed/595/ 

  17. I use a very popular and very effective stock screening program called VectorVest that performs very sound fundamental stock value analysis and makes Buy/Sell/Hold recommendations. Yes, it is more practical with non-micro companies but hell, I thought TTGL actually does have some “real” numbers. Well, I gave TTGL a spin and the “value” TTGL has on present revenue, revenue growth,sales growth and a slew of other factors is a very depressing 15 cents (fifteen) and a very clear SELL signal. I am not bashing this stock, just reporting the result. I am also one of those post SSL “investors” and have high hopes for good results on Jan 15

    Editor: I am very familiar with their service, while I appreciate your input, I will tell you in my view Vectorvest is absolutely worthless for evaluating a microcap stock. It is simply a computer program that looks at balance sheet and earnings. It doesn’t have the capability of figuring out that after non cash charges, the company made $9 million last fiscal year, and it doesn’t have the capability of factoring in growth of a company from $130 million to $750 million. Useful tool for large caps if you don’t know how to evaluate income statements and cash flow. However, based on the way the stock is trading Vectorvest is more right than wrong for the time being.  

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