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April 5, 2003
Volume VI, Issue 32
Email : [email protected]

To OTC Journal Members:

Trading Alert- LendingTree Inc. (NASDAQ: TREE)

The editors of the OTC Journal get ideas from many different sources. We have contacts from years of experience in the markets. One of these many contacts provided us with an idea this past December. In our December 2, 2002 edition we published a Trading Alert on eResearch Technologies (NASDAQ: ERES), which we rated as a buy up to $16. EResearch Technology closed at $27 Friday, for a 70% return on invested capital over four months. These kinds of returns are few and far between in today's market.

Today's idea, LendingTree, comes from the same source. This does not guarantee the same results, but we like our chances. For those that don't recognize the name from their nationwide advertising campaign, LendingTree is the premier Internet-based loan marketplace for consumers and lenders. The company collects consumer credit requests and compares those requests with the underwriting criteria from 190 participating lenders in the LendingTree exchange. Consumers can receive up to four offers in response to a single loan request within hours and then compare, review and select the loan offer that best suits their needs. Lenders can generate new business that meets their specific underwriting criteria at reduced acquisition costs.

LendingTree generates revenues several different ways. Each lead forwarded to a lending institution generates a fee of $1 to $10. When a loan actually closes LendingTree receives fees ranging from $36 to $750

The company is expanding its product line to include telephone sales and other financial products such as credit cards. 

In 2002 LendingTree generated $111 million in revenues, up 74% from the previous year. The company also had its first profitable year. In the December quarter alone, LendingTree earned $6.1 million on $34.7 million in revenues ($.19 EPS).

LendingTree has publicly stated it expects to achieve $139 million in revenues and $.50 in EPS in 2003. Since coming public in 2000, the company has grown every quarter, and exceeded earnings expectations every quarter. On March 11th, the company raised guidance for the first quarter, following a pattern eResearch established on its way to $27.

Basics For this Idea

As was the case with eResearch, there is an enormous short position in LendingTree. There are 32.2 million shares issued and outstanding. About 14 million are publicly traded. At last report, there was short interest of approximately 5 million shares.

Short sellers argue the real estate bubble will burst, and home refinancing will dry up, leading to a slowing of LendingTree's growth. Supporters argue lending institutions will need sources of new business if the market declines, but the mortgage market isn't likely to decline.

We believe companies with new and exciting business models can grow in nearly any environment, as was demonstrated by the success of Expedia (NASDAQ: EXPE), which has prospered in the online travel business despite the worst travel environment imaginable. Short sellers were murdered in Expedia when USA Interactive announced it was tendering an offer to buy out the company earlier this month.

As you can see from the chart, LendingTree has been in a strong uptrend since the first week of March. The stock pierced its 50 day moving average (blue line) with ease, and is now flirting with the 200 day moving average (yellow line). Consistent trading above the 200 day moving average would confirm a long term uptrend.

An ideal entry point for the stock would be established if it were to pull back to the support line, depicted in red. Somewhere in the $11.75 to $12 range would be a great entry level if the stock retreats a little from Friday's $12.35 closing price.

A drop under $11.30 would suggest the market is convinced the short sellers are right and the company's business is suffering.

Here are the parameters of this Trading Alert

  • Buy TREE up to $12.50, while monitoring for a pullback into the $11.75 range as the ideal entry level.
  • Target Price- $15 to $16 expected to be achieved as 1st quarter earnings are released (third or fourth week of April)
  • Stop Loss- $11.30.
This recommendation is based on the stock trading up ahead of the March quarterly earnings release, which we believe will come in stronger than expectations. A number of internet stocks have traded well recently (EXPE, AMZN, YHOO, ASKJ, etc), and short sellers are taking notice.

For those wishing to invest more aggressively, there are options trading on this stock. The May 10 calls are offered at $2.85, and the May 12.50 calls are offered at $1.20. Option trades should only be considered by those who can afford the entire loss of their investment.

In the interest of full disclosure, we inform you one of our editors has purchased 10 May 10 calls at $2.85 for his personal account. Our editor intends to add to this position if the stock pulls back as described above. This should be viewed as a potential conflict of interest.

Members' Forum

Lots of emails on SHEP Technologies (OTC BB: STLOF), which was featured in the last Member's Forum. Here are some comments, including one on Calypte Biomedical (OTC BB: CALY):

On SHEP Technologies

The Toyota Prius is currently for sale to anyone who wants one, regardless of foot mass of driver.  There are no plans for discontinuing the model. The car is gasoline/electric hybrid, the only way to run out of power is to forget to put gas in it before the tank runs dry.  The approximate range of the Prius is 560 miles per tankful.

Mason H

On SHEP Technologies

You should have included some information on the Honda Insight in your April 2nd discussion of energy recovery technology and problems the Prius has had.

The Insight functions in nearly the reverse of the Prius in that the gasoline engine is the primary motivating force with the electric motor acting more like a turbo-charger.  No Insight owner can be stranded due to the batteries being drained.  In fact, I have driven in the Rockies with a completely drained battery in my Insight.  Also, Honda has experimented with an ultra-high capacity capacitor to replace the batteries for quicker re-charging and discharging capability (see Internet articles on the Dualnote).  My personal opinion is that a combination of SHEP and a Honda-like version of hybrid power would produce cars / trucks the American public would like while significantly reducing gasoline consumption.

C. Burt C

On Calypte Biomedical
What is up with Calypte? Are they going to split shares?


OTC Journal: Marty- As we stated in our review newsletter last weekend, we are not optimistic about the future of the Calypte's stock price, which is a different issue from the future of the company. Management continues issuing enormous numbers of free trading shares below the prevailing market. Recently, the company issued another 44 million options, exercisable at $.025, and convertible into free trading shares. The suggests the shares will now trade down to $.025 to find support.

Unless the company manages to consummate a relationship with a major pharmaceutical company, we believe the stock price will continue grinding lower under the severe pressure of excess supply.

Calypte announced they will be seeking shareholder approval for a 1:30 reverse stock split, which must be viewed as a negative for share value in the short run. This was announced after the market closed on Friday.

Post reverse split, the company's market value will be less than $10 million. We believe the technology alone is worth considerably more. 

If they can raise capital with some entity who is interested in owning a piece of the technology, instead of stock they can immediately sell into the market at a discount, this one would have a chance to be a superstar.

Please email your questions or comments for the Members' Forum to [email protected]. You can send in questions or comments on any company or subject. 

Charts Provided Courtesy Of
The Newsletter is an independent electronic publication committed to providing our readers with factual information on selected  publicly traded companies. All companies are chosen on the basis of certain financial analysis and other pertinent criteria with a view toward  maximizing the upside potential for investors while minimizing the downside risk, whenever possible.  Moreover, as detailed below, this publication accepts compensation from certain of the companies which it features.  Likewise, this newsletter is owned by MarketByte, LLC.  To the degrees enumerated herein,  this newsletter should not be regarded as an independent publication.

Click Here to view our compensation on every company we have ever covered, or visit the following web address: for our full profiles and for Trading Alerts.

All statements and expressions are the sole  opinions of the editors and are subject to change without notice. A profile, description, or other mention of a company in the newsletter is neither an offer nor solicitation to buy or sell any securities  mentioned. While we believe all sources of information to be factual and reliable, in no way do we represent or guarantee the accuracy thereof, nor the statements made herein.

The editor, members of the editor's family, and/or entities with which they are affiliated, are forbidden by company policy to own, buy, sell or otherwise trade stock for their own benefit in the companies who appear in the publication unless specifically disclosed in the newsletter.

The profiles, critiques, and other editorial content of the may contain forward-looking statements relating to the expected capabilities of the companies mentioned herein.


We encourage our readers to invest carefully and read the investor information available at the web sites of  the Securities and Exchange Commission ("SEC") at http://www.sec.govand/or the National Association of Securities Dealers ("NASD") at We also strongly recommend that you read the SEC advisory to investors concerning Internet Stock Fraud, which can be found at Disclaimer ID:$subst('Recip.userid') Readers can review all public filings by companies at the SEC's EDGAR page. The NASD has published information on how to invest carefully at its web site.

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