HyperDynamics Hears Its Death Knell

“For Whom the Bell Tolls- It Tolls For Thee“- the immortal words of Earnest Hemmingway, referencing a death knell. The bell ringing means someone has died.

I bring up this reference because I believe it references the recent financing our old pals at HDY have entered into. The company filed an 8K last Friday after the market closed, clearly hoping no one would catch it. Of note- there was no press release.

The bozos at HDY have entered into a $6 million debt deal with the devil- Cornell Capital. You want to be an investor in the Cornell Capital, but you don’t want to be an investor in the stocks they finance. They make huge returns for their investors- guess who pays.

HDY is borrowing $6 million from Cornell- $2 million now, $2 million when the file a registration statement, and $2 million when the registration statement goes effective.

Cornell has a conversion price of $2. Believe me, once the registration statement goes effective, this stock has no upside above $2. Anyone who wants to buy will be matched with a sell.

As long as HDY makes the payments, the conversion price remains at $2. Where are they going to get the money to make the payments? They don’t generate any revenues. Hence, unless something changes dramatically at the company, HDY will have a hard time making the payments unless the money simply comes out of the $6 million they borrowed. How does that make any sense?

As soon as they can’t make payments- guess what happens- you got it- Death Spiral.

The management at HDY has failed to deliver the Guinea deal after six months of trying to restructure it with the Guinea government. They are in a law suit with the joint financiers of their Lousianna natural gas properties. This house of cards is falling apart.

Had they gotten the Guinea deal done, I believe the stock would have traded well enough to get a standard “Pipe Transaction” done, where the investors took risk. This debt deal is only risky to the financier if the stock stops trading.

Of course, there is always the possibility the Guinea deal could come through, and the market response could be strong enough to overcome the toxic supply of stock and send this issue much higher.

However, as I have observed many times in the past- the longer it takes to make the arrangement, the less likely it will happen. That’s just my opinion. Yours could differ.

At  any rate- I sold my remaining 5K shares between $2 and $2.10. I would rather be out wishing I was in, than in wishing I was out. Ideas are plentiful. Capital is scarce.

I don’t blame the guys at HDY. They put their best foot forward, and it wasn’t enough- so far. They are just doing what they have to do to survive. It’s not criminal or fraudulent to fail.

The sad part- someone is going to make a fortune in that concession. At this point, it would appear it is not the shareholders of HDY.

Comments and questions are welcome.




Sub-Urban Blasts Off In Early Going

Sub-Urban has really taken off in the early going- much to my surprise. The audience for this recent RTO is growing surprisingly rapidly.

I figured market conditions would moderate people’s appetite for this stock. However, investors are grasping the theme quite quickly, and realize the viral nature of trendy clothing worn by the stars. In today’s press release, movie star Britney Murphy gushes about her capri pants:  “I love them, I never want to take them off. I want them in every color.”  I would make them in twenty so colors so Brittany has to wear them every day.

The initial presentation went out after the close on Tuesday. The stock closed at $.35 that day. As I write today’s BLOG, the stock is trading at $.60- nearly a double in an awfully brief period of time. Amazing considering the current market.

Perhaps the J Crew IPO had something to do with investor appetite for this stock. J Crew came public yesterday. J Crew (NYSE: JCG) was priced at $20, and is already trading at $25. Events like this will put a charge into an entire sector.

There is a correction in the initial presentation. I stated “ Sub-Urban announced it has executed a milestone order with prominent national fashion retailer Fred Segal to carry the Company’s flagship WHITEBOY® clothing line”. This statement is incorrect. In fact, it was not a distribution agreement. It was a purchase order. A minor correction, but nevertheless we want to have the facts straight.

Here’s the chart- short term as it is:


As you can see, this stock has blasted off in the early going. It is capturing the attention of investors who know the potential of viral marketing to the “MASH” generation.

So far so good. If you don’t own it and want to, perhaps a little patience might be in order.

Comments and questions are welcome.

US Energy Drifting Up

I believe in the future of US Energy. I like what the company has delivered on the corporate achievement side in the mere 2 months I have been writing about it. I believe it is the right idea at the right time.

Let’s review:

  • They are marketing a very exciting fuel saving technology for diesel engines. It takes a diesel, and converts it to a hybrid that burns diesel and natural gas together. There is no sacrifice of power with a great deal of fuel cost saving.
  • The company is focusing its energy on the Far East, where diesel is $7 plus per gallon, and is hard to find at times.
  • The company has sold numerous systems in the US.
  • The company sold its first major order to a retrofit specialist in Thailand who order 1500 units as a starter.
  • The company’s technology will be included in newly manufactured pick up trucks made by General Motors beginning in Q4 of ’06.
  • The company just picked up a distributor in Europe.
  • The technology works- the order flow proves it.

sp;                                So, with all the news, especially the GM deal, why can’t this stock get any traction and surge to a new high? Clearly the market is wrestling with some supply. Probably from a financing.

However, the post GM drubbing the stock took was very short lived. It is actually drifting up on light volume, which suggests that anyone who wanted to sell the stock has done so.

Here’s the chart:

As I see it, the area I have circled is one big consolidation. The market is grinding through the supply, and one of these days it will break out. A nice volume surge would help.

The timing of the GM announcement was horrific. It came during the teeth of the market melt down. Unfortunately, the stock didn’t trade enough volume to surge dramatically. It would have in a different market.

Another one to accumlate on dips. Eventually, persistance should break down resistance, and the stock should finally break out.

Comments and questions are welcome. 

Commerce Planet Reaching For the Stars

Commerce Planet, the company formally known as NeWave, is indeed behaving quite remarkably. In essence, all the bad juju is pretty much cleaned out of this one- its reincarnation is complete both on the fundamental and technical side.

I say this because the stock is behaving like a champ against the backdrop of a brutally tough market. Were it not for all the FED speak about inflation, this stock might be in the $.75 range right now.

All the old money from the 2005 poor year that wanted to sell has done so. Alot of the financier money has been absorbed by the market. And yet, the stock made a multi month high this past Friday.

Here’s the current chart:

As you can see, the stock is making a series of higher lows and higher highs. This chart is one of a stock that is clearly in an uptrend, and defying the gravity of the current market.

This chart suggests to me that the June quarter is going to be a real blockbuster, and the market knows it. Amazing what a little corporate performance can do for a stock.

Barring any cataclysmic market calamaties, I believe this is one to own and hold on to. I have sold very little of our corporate holdings. In fact, we still own nearly 66% of our shares after nearly 2 1/2 years and a lot of pain in late ’05. Oh, that I would have had the courage to buy more at $.19. Such is life.

Accumulate on dips and put in the forget about account. Looking for $1 on this on. If Q2 is another 250% year over year sales growth with significant profits, look for $1 sooner rather than later. We’ll see the numbers in early to mid August.

Comments and questions are welcome. 

Dexcom- Will It Ever Bounce?

Dexcom- wow- when the mo players come out of a stock, they come out of a stock. They have just decimated this issue in the last two weeks. In my view, time to reload.

This is the same company that completed a 4.7 million share offering at $24 per share at the end of April. This is the same company Jim Cramer described as a major player in the burgeoning diabetes market.

By way of a refresher course- DXCM came public in the spring of ’05 at $12 per share. The company has developed a wireless blood glucose monitoring system- a little sensor implanted in your abdomen sends a signal to a hand held device- it delivers real time blood glucose monitoring to the patient. The device was approved for market by the FDA at the end of March- about 1 year after coming public. The device has many benefits for diabetics.

We have a great history with this stock, and I have fond memories of a huge trading win earlier this year. Here’s the chart:

I believe short sellers have been behind some fairly vicious rumors about the company. Last week there was a rumor going around that the company was recalling a bunch of devices- not true.

This week the rumor relates to insurance reimbursement. No one was expecting this device to be reimbursable from the insurance companies so soon. There have also been rumors about problems in the sales department- also not true. They have a total of 22 sales people nationwide who are just starting to market the product.

I thought $13.50 was about the bottom, and I picked up 2k shares around that level. Much to my surprise, the stock gave up another $1.50 early this week.

At some point someone is going to have something positive to say about this company. In the meantime- who knows- the stock could go to $9.

I have seen this pattern repeated time and time again. A few months after the storm clouds pass, you wonder why you didn’t accumulate some shares and hang on to them.

I’m not going to miss this opportunity- I am accumulating with an eye towards going up into the 7500 to 10,000 share range, with an $18 price target towards year end.

Comments and questions are welcome. 

US Energy- Little Ado About Everything

What a disppointment yesterday was. US Energy, a company that has developed a revolutionary fuel saving hybrid technology for diesel engines, hit the motherlode, and the stock fizzled on mediocre volume.

In life, they say timing is everything. Back in May, US Energy announced a lousy $50,000 order from the State of NY, and the stock traded nearly 4 million shares and made a new multi month high.

Yesterday, the company announced its technology would be included on trucks manufactured in the Far East by GM, and the stock basically did nothing. If this had come out in early May I am quite sure we would be at much higher levels.

I guess in a perverse sort of way, the fact that it didn’t go down was a victory of sorts. The current mentality is “cash at any cost”, and that is just plain stupid.

Today, just prior to the open, USEI announced the acquisition of Automated Engineering Corp. This is the company that supplies the “brains” of their technology. It would appear Automated will be getting big order flow from USEI- so why not buy them?

Here’s the chart:

As you can see, there was a little volume blip yesterday, and a lame attempt to move higher.

Little Ado About Everything. USEI got a 1500 retrofit order from the Far East. GM will be using their technology in new vehicles. They just bought their biggest supplier- could it get any better?

My SSL (suggested stop loss) is $.29. If you are only in this stock for a trade, you should probably sell it if it gets down there. It is really the only stock I cover that hasn’t hit its traders stop loss.

If you are a longer term investor, this one looks really good for a move higher in an improved market environment.

Comments and Questions are welcome.

NeWave Surgin to New ’06 Highs

There’s not a lot to say about NeWave  (NWWV) other than to congratulate both shareholders who hung in there and either established a position or bought more when it was cheap, and the management for executing one of the best turnarounds I have seen in twenty years.

During the nearly 2.5 years I have covered the stock, I have seen over $2 on the high end and $.19 on the low end. Ups and downs aside, the company has never been healthier.

The recent $4 million Q1 with the first announced profit was an eyeopener for the market, and the stock has been gaining ground ever since. Here’s the current chart:

The huge surge in price and volume I have circled occured when the company announced Q1 earnings. Since that time the stock retraced and has now gone on to make a new high- very bullish.

The market has now decided it wants this stock. I can’t say where it will end up, but $1 seems to me to be a reasonable longer term target if the company stays on course. Assuming it gets to $.60, that still only represents a $24 million market valuation.  I can see this company trading at a $50 million market valuation quite reasonably.

Certainly, there will be some pullbacks and surges. I don’t know if it’s a short term sell right now. I would suggest hanging in there for at least Q2 numbers in early August, which could be outstanding. The stock is behaving as if someone believes they will be.

Comments and questions are welcome- I’d love to hear some success stories on this one.

US Energy- Symbol Change

I know there has been some confusion since I was not informed prior to the event. However, it is really a non event in the whole scheme of things.

This past Monday, US Energy, which changed names from Hybrid Fuel Systems several months ago, finally go around to changing its symbol from HYFS to USEI.

The net effect to investors- zero- it means nothing. However, since the market was not informed in advance, there could have been a little “confused” selling in conjunction with the change.

In the meantime, the stock cannot seem to break out to new highs. It continues grinding in a range, despite the recent news of the largest contract in the company’s history.

Here’s the most current chart:

What strikes me is the series of higher lows without making higher highs. Clearly, there is some resistance at the roughly $.40 level. Persistance breaks down resistance. Perhaps it will require one, two, or three more tries to get through that $.40 and stay there. A big volume surge would help.

A good stop loss as we move towards the summer doldrums would be $.30.  A few more big contracts like last week’s might just overcome the summer quiet period and keep the stock moving.

Comments and questions are welcome.



Golden Peaks Crashes- Gold Not Too Shiny Anymore

I should have known better. Gold- every few years gold gets hot and everyone piles in. I have never warmed up to gold- it’s too intangible to me. It doesn’t create much commerce other than in teeth and jewelry.

Gold pundits have been pointing out massive demand out of China as the spark fueling the recent gold rally. I believe these claims are greatly exaggerated. I believe it was one of those situations where gold was going up because it was going up.

Could it be a hedge against inflation and a falling dollar? Not likely- in the last several trading days Bernake has pontificated on keeping inflation under control and the dollar weakened further. Yet, gold has fallen another $20.

It is the market’s job to make the most number of people look as foolish as possible. About a month ago, several of my intrepid gold buddies in Canada called and claimed if gold broke through $700, $1000 would be the next stop.It broke through $700 and collapsed.  Perhaps that will be true down the road. I don’t think so.

I believe the gold speculative bubble has burst. It’s over. I’m sure many of you will completely disagree, and I will be happy to post your comments. In my view, it’s over.

With regard to Golden Peaks- this company is on the verge of a major development in Argentina. Every test hole they drill all through their claim brings positive results.

However, I am going to slowly liquidate my position at a loss. Check out the chart:

Note the huge surge in volume when we got into this idea on a breakout. Down from hundreds of thousands of shares everyday, now it barely trades. As I write today’s BLOG, the stock has traded all of 1600 shares. That’s a positive and a negative. The stock is very illiquid now which is a negative, but on the plus side it would appear that everyone who wants to sell has done so.

I intend to slowly start liquidating my position of 20,000 shares, which is currently at about a 20% loss. I believe gold fever has broken, and the meteoric rise in these types of companies is over.

On the other hand, the company is doing very well in the exploration process. If you believe this is an ongoing correction in a bull market for gold, and you are a long term investor, simply hold the stock and wait for better times.

Remember- in the US you trade the stock through symbol GDPEF.

Comments and questions are welcome. I would appreciate some varying viewpoints on the future of gold prices.