The Titan Mess; Fully Priced In?

Well, the delinquent numbers have finally come out, and there are a couple of nasty surprises in the disclosure. I will need some time to digest the whole thing, but here’s my initial reaction.

The company delivered $122 million in revs and reported a loss of $24.4 million. However, they took non cash write downs totalling $25.5 million in their Communications and Global Brands Divisions- meaning, their cash flow really wasn’t too bad.

Here’s the big negatives in my mind. First of all, TTGL clearly has problems in the Oblio Telecom division, which was the acquisition and turn around story that got the company headed in the right direction in the first place. In today’s press release, they admit their internal switching facility, which was supposed to decrease costs and increase margins, has been a complete failure. Hence, the reports of card failures in December and contentious relationships with distributors. They claim they will evolve back to a straight marketing company without the hardware or network, which doesn’t give investor a warm and fuzzy feeling about the management team.

Secondly- USA Detergents seems to be problematic as well. Apparently, the bought a very distressed company, and have decided the proper direction to go would be to shut down the operations and outsource the manufacturing. Therefore, all they bought was the label itself, and this division is contributing nothing but losses.

The Energy division is chugging along adequately, albeit no barn burner in the profit department- perhaps there is some substantial upside here.

I’m not surprised the stock is not selling off today. They will probably lose the dreaded “E” on the symbol tomorrow, and move back to the normal listing.

I’m also not surprised they needed the extension to get these financials filed- I’m sure there was major debate on how to book the writedowns for the various divisions. It looks to me like the accountants chose the most aggressive direction on writing down the value of the assets.

So- where to from here? I’m pretty sure all this bad news is already priced into the stock. A couple things need to happen- first and foremost- the management needs to hold an open ended conference call with a complete question and answer period open to anybody and talk about all the issues facing the company.

Simply looking at the hard numbers, the company is trading today at about a $45 million market value on $122 million in revs (nearly $1/2 billion annually), and they didn’t lose much hard cash. The energy division is probably worth more than where the stock is trading on a stand alone basis.

However, they recently bought another division- the shoe manufacturer. If the integration of this division go as smoothly as the past ones have gone, one can expect the roller coaster ride to continue.

I suspect there is some upside in the stock from here. Something good is bound to start to come out and turn the tide. However, this is no Berkshire Hathaway mini clone. Right now, its a stumbling, bumbling, de “worsified” company that needs to get back on track. Their turn around initiatives don’t seem to suggest the management is very skilled.

Bottom line- I wouldn’t be a seller right now- it’s all priced in already. On a rebound we can start looking at options and consider the future. By then, we will have more information.

Southland Health Officially Dead

If you are one of those few who have been waiting for your Southland Health Care stock certificate while the company and the brokerage firms fight it out, no need to worry any longer.

The two year saga of Larry Lunan’s efforts to refinance Southland and turn it into a healthy public company has officially come to an end with Friday’s disturbing news out of the company. As far as I am concerned, this one is now dead and buried. If you are holding a Southland certificate, it is little more than wallpaper, toilet paper, or kindling- your choice.

Apparently, the company was unable to make its insurance payments in January, and has subsequently shut down.

Hard to believe Lunan could not manage his way out of the mess with a company delivering over $40 million in revs, and profits, but that is indeed the way the cards have been turned over.

I doubt any sort of Phoenix can rise out of these ashes- To Lunan- a lot of people bet on you, and you failed miserably- myself included.

That’s the harsh reality. Forget about Bad Toys/Southland/Paladin- it’s over. If you haven’t taken some sort of tax loss on the investment, please talk to your accountant and find out if one is available.

Titan Gets Dreaded “E” On Symbol

In case you haven’t figured it out, Titan Global no longer trades under the symbol “TTGL”- it now trades under the symbol “TTGLE”, which signifies the company has filed to file its quarterly financial results in a timely manner, and has had to file for a formal extension.

TTGL, despite boasting it will deliver $735 million and $15 million in net profits in fiscal ’08, is behaving as if there is nothing but problems at the Berskshire Hathaway wanna be.

The OTC Journal family has delivered information suggesting their Oblio Telecom division has had problems delivering it’s prepaid minutes to card holders, and there are serious undisclosed problems therein.

In addition, others have suggested the USA Detergent division is closed down for some sort of restructuring- details of which have also not been disclosed.

Here’s my message to management: Disclosure, Disclosure, Disclosure, and for good measure- Disclosure. Perhaps there are some short term challenges- perhaps not.

Either way, the “Not Knowing What’s Going On” is far more damaging to the stock price than disclosing exactly what is going on and how the company is choosing to deal with it.

As if this is not bad enough, now the company is unable to file its Q1 financial statement on time, and has received the dreaded “E” on its symbol- not such a bad thing, but clearly not a good thing.

Next week the company will have to get its quarterly numbers filed and get some disclosure out. I’m pretty sure the market has priced in a worst case scenario, so there’s probably a lot of upside here, but I want to wait for the numbers and associated conference call before forming any opinion. They had better do an open forum conference call- time to start telling investors what the hell is going on.

Hopefully, not another CPNE, but a hiccup on the road to success. We’ll see. It had better be next week.

Apple Turns To Applesauce

Absolutely astounding. AAPL is getting beaten into oblivion, and I for one couldn’t be happier as I still love this company, and am currently out of the stock.

In short- yesterday’s earnings report was awesome- They beat the highest estimate by $.14 per share. $9.6 billion in revs and $1.6 billion in profits- AAPL ended the quarter with $18.4 billion in cash- up $2.7 billion from the previous quarter. Yes, they can pay the bills.

MAC sales were way ahead of estimates, but iPod sales poked analysts in the eye and came in a bit light. (some are guessing the iPhone is eating into iPod sales- you don’t need an iPod if you have an iPhone)

Here’s the rub- Apple forecasted a little downturn in Q2 (calender Q1)- they are looking for $6.8 billion in sales and $850 million in earnings. Pathetic. Why bother even opening the doors- just kidding.

Wall Street is freaking out over the stock right now, and AAPL is getting absolutely hammered. The traders are no longer in charge, but the margin clerks are, with both fund managers and individual investors being blown out of AAPL left and right.

You might think of AAPL as a technology company. I think of it as a consumer electronics/digital revolution company. And, I still believe there is a lot more growth ahead.

Where are we headed? You are not going to believe this, but here’s what the chart is telling me:

Yes folks- here’s where I believe the stock has a chance to go. Believe it or not, $108.50 is my number for an absolutely screaming, irresistible buy. There are no assurances it will get there, but there’s a chance.

Here’s a monthly look at the stock, going back to late 2006 when the stock was $50, and Wall Street just started to understand the power of the digital entertainment revolution- AAPL is the poster child for that transformational change.

I believe, in this irrational market environment, there is a chance the stock will give back a whole 61.8% retracement of that entire move. Once the .382 level gave way, the .618 level moved into the crosshairs.

There will be many more years of growth ahead for AAPL- the new notebooks are unbelievable, and iTV will start to grow.

Since we are looking at a monthly chart, you have to think in monthly terms. Another words, if you take the plunge at that level, think about where the stock will be in months, not days or hours. Put on the mute button and cancel out the ambient noise about the sky falling.

We might not get there, but if we do, I will be ready to take advantage of the situation. If both the stock and the market stabilize, I will revisit the chart.

This might seem a little far fetched, but that’s the market we are in right now.

Comments and questions are welcome.

Pickle Holds In Turmoil- Lots of Support

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.

Jobs Delivers Big News: Market Hates It

Steven Jobs came out with fantastic news on iPhone sales, and the new Mac Airbook. The stock was close to $180 today, and is now getting absolutely killed.

I liquidated all postions at about $172- looking to get back in when the bloodbath is over. More when the smoke clears.

Titan Absolutely Destroyed

If TTGL were the DOW, it would be trading at about the 7500 level, and the financial world as we know it would have come to an end. It would be 1929 all over again.

I have seen many stocks trade down to horrifically low levels in tough markets. Sometimes it’s a great buying opportunity. Sometimes it’s a precursor to a problem at the company.

I don’t know which it is in this case, and it’s too early to call. Drawing back on experience- there were some great buying opportunities in market driven pullbacks last August as micros and many large caps provided great entry levels.

Then, there’s the experience on the other side. CPNE comes to mind. That stock was $3 in 2007 when it started to free fall in February. It wasn’t until June when the company really disclosed the dramatic nature of the downturn in their business. The stock is now at $.30, but I didn’t suggest getting out until the stock was at $.70. I was late, and made the mistake of waiting for the disclosure rather than taking my cue from the market.

This bloodbath in TTGL is particularly distressing due to the robust nature of their financial results. After all, in fiscal ’07, they did deliver $9 million in positive cash flow.

Here are my thoughts for today. Q1 numbers are due out by Jan 15. That’s only a week away. No doubt, there will be a follow up conference call.

This will be the first quarter that includes results from Appalachian Oil and US Detergent, which should add quite dramatically to the top line. I don’t know about the bottom line or the cash flow.

If the fundamentals are still strong, it’s time to batten down the hatches and just hang on through these rough waters.

If there is a crack of some sort which suggests there is trouble ahead, let’s let it be someone else’s problem, get out of this idea, and move on on some sort of bounce back. There will be better ideas ahead.

I hate to walk away from a beautiful buying opportunity, but sometimes you just have to cut out the cancer and move on. In this case and in this market, I would rather give up a $.30 move to the upside rather than put good money after bad.

If you are underwater on this one, remember my published SSL was $1.73, so by definition you have decided to become a long term investor. If the numbers are good, you should be looking to add to your position and waiting out the market.

Here’s the chart, and as you can see, this stock has eclipsed all levels of support, and basically delivered a round trip to my original entry level of $.85 back in October of ’06.


The company has offered up no explanation for this butchering. It would help if we knew some fund exercised a bunch of warrants and was hammering the stock. Then, I could get behind it.

Bottom line: Hold your nose, hang on for now, and wait for the next earnings release. Perhaps we will be passing up a huge opportunity to jump on a really cheap stock, but I don’t want to put good money after bad until all the facts come out. I don’t want us to go through another CPNE type event.

Comments and questions are welcome.

CREE: Apparently, Green Is Good

I haven’t written about CREE in a while. In the year end tax selling binge, the stock briefly dropped below my SSL of $23, but I chose not to sell my 2,000 shares. Based based on where it is today, I hope you chose to hold on as well.

Just after the year ended, CREE made a very surprising and fairly robust rebound, heading from just under $22 to over $28 in six trading days. This, against of backdrop of every tech stock being taken out to the woodshed and beaten to death. What the heck is going on here?

The answer: sector rotation, and CREE is now perceived to be in the right sector.

As many of you know who have read my content on this company, I believe CREE has truly disruptive technology. They are the technology behind the new wave of LED light bulbs- destined to replace the incandescent light bulb we have all been using for over 100 years.

LED lightbulbs last 4 to 6 times longer than incandescents, and use less than 1/2 the power. The problem: cost- a regular LED lightbulb runs about $25 today. Despite being worth it, consumers have not shown a willingness to invest this much up front.

Nevertheless, LED lighting is coming. The transition away from incandescent is being mandated over the next five years by several European countries, and many feel the US is not far behind.

In fact, I was listening to Barrack Obama speak the other night, and he referenced sacrifices we would have to make to get energy consumption under control- he specifically stated we would all have to invest to “change our lightbulbs”. BTW- this is not a political commentary, so don’t bother commenting that you luv or hate him. Like it or not, it was on national TV in primetime.

CREE has patented technology for the chips that power LED bulbs. The price is expected to come down over the next two years quite rapidly, and CREE will get fees and royalties for every chip in every LED bulb.

Here’s the rub. For most of the second half of ’07, CREE was viewed as a “chip” stock, and semi conductor issues have been getting pounded.

In fact, the SOX index (semi conductor) is now trading down to levels unseen since September of 2004- that’s nearly 4 years of appreciation down the toilet.

Here’s what’s happened: the view of CREE has changed since the first of the year. As we turned the corner into 2008, the media began interviewing analysts and fund managers about their view of the right sectors for 2008. A common theme: GREEN- anything that saves both the environment and energy is considered green, and nearly all of them were touting CREE as a company embroiled in the green movement. With the democrats looking strong for late in ’08, green is even more “in vogue”.

To sum it up, the perception of CREE has changed from a chip stock to a green stock since the first of the year, and the proof is in the chart. Check it out:


Here’s a chart overlaying CREE and the SOX Index. I put CREE in green (yes, it’s symbolic). Note they traded pretty much in tandem in December, and look how radically they have diverged in January.

CREE- now widely accepted as a GREEN stock, is a great one to be in for 2008. It has been immune to the recent big blow off in the market because it is now a GREEN stock, and as such will trade with a much fuller market valuation.

I don’t know if it’s a buy for a trade right now, but it should definitely be accumulated on dips for a trade, and anytime it’s below $30 for long term investors.

Comments and questions are welcome.

TraceGuard Change At the Top Starts Rebound

TCGD announced a change at the top on Thursday after them market closed, and despite the huge drubbing the overall market took on Friday, the stock managed a nice, low volume rebound off its oversold, post Holiday condition.

I don’t think the market has totally caught on how strong this new CEO really is. This guy was in charge of all the security for the Israeli border and airports. That would make him one of the most knowledgeable and well connected terrorist experts in the free world.

Here’s what we do know: His role as CEO will open a lot of doors for the company. Also, we know a guy like this would not take the job unless the technology was very commercially viable.

We don’t know if he’s a good salesman yet. I hope he is, and can get the company rolling down the path to commercial success.

Here’s the chart showing Friday’s rebound:


The stock made a nice move on Friday, but has not broken back above the downtrend line yet. This suggests there could be some backing and filling before the stock is really ready to regain some serious ground.

This is not the kind of company that is going to be able to deliver a commercially relevant press release every week. It’s a zero revenue development company, and will take some time to get there.

Therefore, the stock could go through long periods of quiet trading, which lends its “personality” to long term investors. In this kind of company, the breakthroughs can be quite robust, which can lead to very abrupt, short term moves. Tough to trade, but good for the long term.

If you have any comments or questions, please feel free to post them. It might take a little time to get answers, as the company is located in Israel, but I will try.

The Apple Rots: I’m A Buyer

This is the third time it has happened since I’ve been recommending this stock. It was victimized by a severe sell off relative to the market- not the company. Two out of the three times (August and November), I stepped up and jumped into the stock by investing in some very high priced calls.

In August I took a long term position, which even if I sold on Monday after a 20 point drop, has worked out fantastic. In November, when the stock swooned from $190 to $155 in three trading days. On that trade, I turned $16,500 into $24,500 in one day.

I hope to do it again. I love these irrational, emotionally driven sell offs. I hope I’m right again.

I bought 10 $185 Feb Calls today at $14.25 ($14,250 investment). Let’s hope it’s deja vu all over again.

In the interest of time I’m not going to put up a chart. Next week I’m hoping for some post holiday stats or some FED intervention next week to send the market higher. The stock could easily rebound 10 points.

Also, next week is the Consumer Electronics Show in Las Vegas, followed by the MacWorld report one week from Monday. Lots of reasons for the stock to rebound without the FED intervening.
If it drops again on Monday, I’m pretty sure I will add to the position.