June 2006 Really
Cheap Stocks and Mid Year Market Timing Analysis
How in the heck did a
Red Hot Poker Plant get in the wild
flower bed? They are tuberous, aren't they?
"The secret to living a long life is don't do things that tend to
shorten it."
-Terrence Hill from "My Name is Nobody"
Globetel
Communications (GTE) @ $1.13
Apr
27 10:00
AM (Strong Buy Ratings from DonHarrold.net)
Apr
28 04:10
PM Sarraf Gentile LLP Files Securities Class Action Against
GlobeTel Communications Corp.
May
1 09:42 AM
GlobeTel Declares Formal Default by Internafta
May
4 10:52 AM
GlobeTel Communications Corp. Responds to Sarraf Gentile Lawsuit
May
9 07:27 PM
Shalov Stone & Bonner LLP Provides Additional Information on
GlobeTel Class Action
May
9 04:56 PM
Scott+Scott, LLC Files Class Action Lawsuit Against GlobeTel
Communications Corp. on Behalf of Investors
May
10 06:02
PM Schatz & Nobel, P.C. Announces Class Action
Lawsuit Against GlobeTel Communications Corp.
May
10 04:17
PM Milberg Weiss Announces the Filing of a Class Action Suit
against GlobeTel Communications Corporation
Why
all these class
action lawsuits?
One day some months ago Globetel came out with a PR stating it had
signed a 600 million dollar deal to install wireless in Russia with a
Russian consortium called Internafta.
The only thing apparently left was getting the money in the bank.
Globetel announce they had a high $$ international law firm looking out
after their interests and Globetels' stock jumped
over 60% that day.
I sold some short holdings and made out pretty well.
Well, the key date for receiving finance from the russkies came, went
and guess what? No money.
The stock cratered so I did some buying at two dollars and change.
What Happened? Well according to Globetel and the russkies, a
transaction of 600 million dollars was very difficult to
accomplish
through the international banking system.
It would be much smoother to transact using smaller installment
payments of 150 million.
The first payment date was extended and guess what - the russkies
couldn't make that either. Globetel ended up
declaring the agreement in
default and walked away.
Hence the class action lawsuits.
What more can I say about Globetel except that I sold two thirds of
it. So far they seem to have missed nearly every key
date.
There was some blather the other week about the rigid airship (not a
blimp, mind you) Sanswire 2 doing a test
flight at the end of
the
month. I'll believe that when I see it.
I really thought this stock had a chance of doing something
positive. They have had a number of announcements
regarding
positive earnings but it seems not enough to really enhance the bottom
line.
I'm holding on to a third of my original position just in case.
My recommendation on this particular stock is speculate only.
Swing trade the sucker and take as much profit as you
can.
What
did I do with my other two thirds?
Mobilepro
(Mobl.ob) @ .18
Mobilpro is into wireless, broadband and other data com services. They
have a customer base of approaching one
quarter million. They
have 200 -300 employees and seem to be moving in the right direction.
The company has a
market capitalization of @ 100 million. Quarterly
growth has been around fifty percent. At the same time, the stock has
lost about fifty percent of its value. It has a beta less
that
-5, which means it moves five times more up and down than
its tracking
index.
And of course shares outstanding are approaching 500 million.
For some years they had a rather unique financing agreement with a
venture capital group which caused considerable
consternation among
share holders. Several months ago they got rid of that albatross and
now they apparently have a
much cleaner slate to work with.
My bottom line on this one is that it can't do any worse than
globetel. Their PR department is better than Globetel. I think
their
marketing is better than Globetel. Who knows, they may be better than
Globetel.
The
latest positive
news:
BETHESDA,
Md., June 23 -
MobilePro
Corp. announced today that it has signed a definitive contract with the
City
of Yuma, Ariz. to design, deploy and operate a mesh wireless
network in the community. Yuma is one of the
fastest-growing cities in
the nation.
Jerry
Sullivan, CEO of
MobilePro's
wireless division, said, "We believe that high-speed Internet access is
an essential service for rapidly growing communities like Yuma. We
expect to begin deployment of the network this fall."
The
wireless network
planned for Yuma
will initially cover a portion of the city's total 106 square miles.
The network
will provide state-of-the-art technology to the City of
Yuma, its residents, businesses and more than 80,000
estimated annual
visitors.
Subscribers
will be able
to access
the wireless network from anywhere, at any time, within the coverage
area. All
Wi-Fi-enabled devices will have free access to the network
landing page, which will contain information about the
service and
instructions on how to connect, and the city's website,
The
Latest Negative
News:
BETHESDA,
Md., June
9 --
MobilePro Corp., a leading broadband wireless services company,
announced today it
has elected to no longer pursue a project to
establish a wireless broadband network for the City of Sacramento. Last
year MobilePro won a competitive bid and later conducted a successful
pilot project in the city's downtown area that
provided outdoor public
Wi-Fi Internet access and real-time video applications in Sacramento's
Cesar Chavez
Plaza Park.
MobilePro
said that
after being
declared the RFP winner and going through a lengthy permitting process,
the city
forwarded MobilePro a counter proposal requiring that the
company establish a free high-speed wireless network
supported almost
exclusively by advertising revenue without the benefit of the city
serving as an anchor
tenant...............
Not too bad, huh.
And
my Homeland
Security Pick -
Homeland
Integrated
Security Systems (Hisc.pk) @ .03
I had a question several months ago about what was going to happen when
HISC spun off some of their assets into
their new shell
company.
Apparently a few other people did too and someone decided to issue a PR:
Homeland Integrated Security Systems to Retain Entire Product Line
Including Rights to the Cyber Tracker (Thu, Jun
15)
If that is the case then what is this shell company going to consist
of? I am not really sure about that. I do know that
I will
get one share of this new company for every fifty shares I currently
own (big yawn).
The spin-off date has been moved back again:
Also
announced at
yesterday's
teleconference was that Homeland Integrated Security Systems, Inc.
shareholder
dividend of EVSI shares, which was to be issued to
shareholders of record as of June 29th, 2006, was extended to a
record
date of July 27, 2006. All Homeland Integrated Security shareholders of
record as of July 27, 2006 will
receive 1 share of Evans System Inc.
for every 50 shares of HISC they own as of the record date. The
dividend in
Evans System is expected to be valued at $.50 per share.
Exactly what is EVSI? No one seems to know.
Fifty cents a share, huh? Another big yawn. You
see, what
typically happens is those spun off shares usually get
locked up for
several months where you cannot sell them. During those
several
months the price of your new
shares drops
precipitously, and
sometimes to sub-penny level. You might be able to buy a roll
of
toilet paper when
lockup expires.
Frank Moody, the president and CEO of the company was doing a pretty
good job, I thought. Their PR department was
much better than GTE and
the company was moving in the right direction.
And then this Friday:
ASHEVILLE,
NC--(MARKET
WIRE)--Jun 23,
2006 -- Homeland Integrated Security Systems, Inc. announced at
yesterday's shareholder teleconference that Fred Wicks has been elected
by the Board of Directors to serve as
President and CEO of Homeland
Integrated Security Systems, Inc......
What is going on here? Not a clue in the PR.
Methinks
there are company shells and then there are shell games.
Which is this? Couldn't really say for
sure.
The stock reacted accordingly ending up around .02 with a bounce back
to .03.
My
outlook? Jaundiced.
Market
Outlook Going Forward
One thing about financial forecasting is that it is a lot like weather
forecasting. Most of the time you are wrong and
nobody
expects
you to actually be right. Leaves lots of latitude.
In case you missed it, we have been going through a correction for the
last several months which has erased practically
all the gains for the
year. No big surprise there. It has been three
years or so
since the market has corrected ten
percent or more.
If you have cash laying around, I think now is an attractive
entry point. If you are in the position to take advantage of
investing in a Roth IRA , I would be doing that right now.
Roth IRA's use after tax money but monies coming out of these
accounts during retirement are tax free.
My allocations are pretty much the same as they were at the beginning
of the year. I am thinking about selling off the
rest of
Muhlenkamp because of performance issues. I have only a small position
left.
I have shifted a bit out of small and mid cap value and am
more emphasizing small and madcap growth.
A few of these funds are MSSMX, STSVX, FCGPX
I think the market still has legs and I think a healthy amount of
international exposure is a good thing. I would stay away
from
country specific sector funds and narrowly focused
emerging
markets funds.
Some of the international funds I like are NBISX, NBITX,
FISMX,
TAVFX, ARTIX, and ADRE for a
small
percentage.
And speaking of that:
Fund
Closing - NBITX, NBISX - End of July, 2006
I
am highlighting this for anyone who needs a
good
international fund. I am heavily weighted in this fund in
international
side of the portfolio and I really like this
fund.
If you are in need of a good international fund, look real hard at this
one before it closes at the end of July. Existing
shareholders
can continue to make purchases.
If you like the fund but don't have much to put in it, put in the
minimum. Minimum in an IRA is $250.00. Think about
starting
that Roth.
Financial shows are still yammering about large caps it being due for
them to have a nice run. I still haven't seen
anything to
convince me that this is an area worth exploiting. I did buy some FAIRX
( a Large Cap Blend), and have
some FDVLX ( Large Cap Value) more for
diversification than anything else.
GE, MAS, CBSS in DRIP plans is pretty much my large cap exposure.
Sector Specific:
I still like Communications (5%), Healthcare (5%) and Technology (2%)
In Communications I have FWRLX and PRMTX
Healthcare consists of ICHCX and FSHCX. I am still
watching
FSHCX and would be leery about taking a position in
that at this time.
Technology consists of one fund - BUFTX. The reason I like
this
fund is because it invests in all sorts of technology. It
has
the
option of investing in medical, research, communication - any areas
where there are developing technologies.
Investing for Income
You
don't really want to be buying bonds in an
environment
where interest rates are rising. As interest rates rise,
principle decreases and sometimes it decreases more than
interest
rate increases. So while you are getting paid
more interest,
the
value of your bond decreases.
The reason I bring this up is because the fed appears to be nearing its
fiscal tightening policy. Vangard GNMA's would
be very
attractive
for purchase at that time if you are looking at investing for
income or for some plain old
diversification. For
diversification
I would be using a tax sheltered account. Something to
consider
anyways. This
would also be more appropriate for
mature ( I
mean older) investors.
And
the
Professional Perspective
My Guru, Bob Brinker has been content to remain 100% invested in the
market. The only negative comments I heard
from him was just
the
other week where he thinks the Fed may screw it up again and
raise rates one too many times.
This would not be good.
He also belabors the point that high energy prices in an of themselves
are not inflationary and wonders why some
members of the Fed don't get
that.
The example he uses is this:
If someone has a 100% propensity to spend which is to say they live
from paycheck to paycheck, more money at the
pump means less
purchasing power at Walmart. Energy prices at these levels will act as
a brake on the economy.
Higher interest rates
piled on top
of higher energy prices put on more of a brake.
I will be watching this a bit closer.
A
Final Note about
those Really Cheap Stocks
Stocks like the ones I talk about at the beginning of the letter are
more for my amusement than anything else. It is
entertainment
- gives me something to write about as well.
These types of stocks are some of the riskiest out there and should
never be considered as a major holding. Heck, not
even a minor holding.
Usually this word of caution is reserved for men only because they are
more naturally the risk takers.
There are some women idiots out there too.
Case in Point:
A woman
shows up on a GTE bulletin board I follow and
proclaims
GTE is the best thing she has ever found. She is
pulling her
kids
college money (about 20k saved up so far) out of those stodgy growth
and income funds and investing
it all in GTE in the high three
dollar range. She just knows when that Stratellite
flies
(rigid air ship, not blimp), the stock
will go stratospheric.
I very rarely post on bulletin boards but I did this time and as nicely
as I could suggested she not do that. College
money is not
something you gamble with and especially not on a penny stock.
I
said growth and income is a great
place to be and if she didn't like
the fund she had, I would suggest a couple others. I did
anyway.
Well, I was promptly placed on her 'Ignore' list.
Here we are six months later and I've seen a few posts from her.
She is still holding, even though she has lost over two
thirds of
her kids college money.
An
Analysis:
I kept a spreadsheet of all my really cheap stock buys and sells.
I made for me what was a lot of money.
BUT....
If
I took that same amount of money and invested
it in one
really good small cap CGA (capital gains aggressive) fund,
I
figured I would have ended up making about four or five
percent
less than playing with really cheap, risky penny
stocks.
Was it really worth the risk to get that extra five percent?
No, but it sure was
fun!
