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Bottom-Bouncing with BitCoin Shop, Inc. (BTCS)

If you’ve been a student of the stock market for any length of time, then you’ve probably heard the old adage “when there’s blood on the Street, it’s time to buy.” Put simply, that means that when markets and stocks have sold off sharply, putting in new low after new low, it’s often a good time to stake out positions in anticipation of recovery moves higher. 

One promising candidate for a nice post-bloodbath bounce is Bitcoin Shop, Inc., which trades over-the-counter under the ticker symbol BTCS. Bitcoin Shop, Inc. operates an e-commerce website (www.bitcoinshop.us) where consumers can purchase products using virtual currency such as Bitcoin, litecoin and dogecoin, by searching through selection of over 400 categories and over 140,000 items. Bitcoin, litecoin and dogecoin are virtual currencies that use peer-to-peer networks to facilitate instant payments. 

Shares of this intriguing, but highly risky over-the-counter play, Bitcoin Shop, Inc. (BTCS) have been relentlessly pounded over the past two months — not just bleeding, but absolutely hemorrhaging, as you can see from the chart below.

BTCS

You simply won’t see a much uglier chart than this as BTCS shares briefly roller-coastered their way from a $1.50 starting point, all the way to $5, then collapsed to a recent 52-week intraday low of $0.136.  So what happened, and why might BTCS be a good speculative add to your portfolio right now?

Primarily, the rise of the Bitcoin phenomenon was quite sudden, extremely rapid, and fraught with high risk to begin with. Essentially, Bitcoin is a new form of currency, with advantages and disadvantages like any other. But as currencies go, introducing a new and very speculative way to pay for goods and services is a daunting and difficult task, accompanied by extreme volatility.

When the value of Bitcoin began to surge, so too did BTCS’s stock price. The value of the new and difficult to obtain Bitcoin chits ultimately reached critical mass when discount online retailer Overstock.com announced that it was accepting payments in Bitcoin — with several other high profile businesses subsequently following suit. In the wake of several acts of online piracy that ultimately cleaned out the coffers of Mt. Gox, a major Bitcoin exchange, however, the value of Bitcoin plummeted, as you can see from the following chart.

bit

Notice how closely the open market value of Bitcoin mirrors BTCS’s chart.

Although it’s never possible to call a precise bottom, chart-wise at the very least it appears that both Bitcoin and BTCS are leveling off. From a technical perspective the worst of the selling in BTCS looks like it’s over, with $0.16 representing the lowest closing quote this year, after the stock touched an intraday low of under $0.14 last week — representing a more than 95% haircut from the stock’s 52-week high. From there the stock has made a recovery bounce all the way to $0.24 and appears to be consolidating above $0.20 before it can make another run higher. 

Bullishly, trading volume has been on the upswing over the past week, suggesting that an increasing number of market participants are willing to shoulder the risk at current price levels.

Playing the Pullback with Highpower International, Inc. (HPJ)

As we’ve witnessed over the past several weeks, when equity markets begin to reel to the downside, the hype surrounding the sector moves and individual stocks in those sectors tend to give way to reality. Selling in momentum names and high-risk issues generally becomes more pronounced, leaving shareholders scratching their heads as to why a stock they bought at $7.50 per share has rapidly traded down to $4.

That set of events seems to apply to the share price movement of Highpower International, Inc. (HPJ), a company I brought to your attention in October, 2013. At the time of that first mention, HPJ shares were pushing to new 52-week highs above the $1.50 level and appeared primed to breakout to the upside based on both business fundamentals and the stock’s technical chart picture. In fact, that’s precisely what they did, ultimately ripping to a new 52-week top above $7.70 reached earlier this month.

To refresh your memory, HPJ is engaged in the production and sales of rechargeable nickel-metal hydride (Ni-MH) batteries, lithium batteries and battery systems. The company also recycles scrap battery materials through outsourcing and resells the recycled materials to some of its customers. The company’s batteries fall into two main categories — consumer and industrial. The consumer batteries category produces Ni-MH and lithium batteries, while the industrial batteries are designed for electric bikes, power tools and electric toys.

At the time of my original write-up, I was attracted to HPJ’s steadily growing revenue stream, which had surpassed $100 million per annum, with the company slowly punching through to profitability. With a July 2013 industry report projecting the global lithium battery market to swell to the $25 billion mark by 2017, Highpower management announced that it was focusing its efforts on its cleaner, higher capacity lithium batteries, and had just completed expanding its production capacity.  The company also projected its own sales to grow between 12% – 15% in 2014, with the company in the black for the period.

From autumn 2013 until early April, HPJ shares vaulted into previously untested waters, first settling in at the $2.50 – $3.00 channel, then using $3 as a springboard to hit parabolic new highs.  A great many factors have transpired to push HPJ higher — as well as lower — over the past several months. In addition to the release of an extremely solid Q4 earnings report in March, the entire lithium-battery sector, and several select alternative energy stocks, had also made parabolic moves in late 2013 and early 2014, leading momentum traders to pile into the sector.

As you can see from the HPJ stock chart, it’s been a wild ride indeed, and certainly not for the faint of heart. Part of the volatility is attributable to the company’s small public float of under 8 million shares, with recent unpredictable market swings contributing to the seesaw trading pattern. In addition, the stocks of so many “go-go” sectors that had made a series of huge upside moves have been especially hard-hit during the recent market pullback, as easy money dreams gave way to the harsh realities of corrective market action.…

Riding the Alt Energy Wave with Capstone Turbine Corp. (CPST)

With the United States’ energy policy focused on ramping up domestic production to reduce foreign oil dependence, shares of alternative energy companies have been in demand so far in 2014. The prices of many stocks even remotely associated with hydrogen fuel cells, for example, have experienced at least a temporary run-up, as have bio-fuel issues. One promising company in the non-traditional energy space, Capstone Turbine Corp. (CPST) and has been hitting fresh 52-week highs in recent weeks. They could be poised for more gains ahead as the company’s business model begins to hit on all cylinders.

Capstone Turbine Corporation develops, manufactures, markets and services microturbine technology solutions for use in stationary distributed power generation applications. This includes cogeneration (combined heat and power (CHP), integrated combined heat and power (ICHP), and combined cooling, heat and power (CCHP)), renewable energy, natural resources and critical power supply. In addition, its microturbines can be used as battery charging generators for hybrid electric vehicle applications. Microturbines allow customers to produce power on-site in parallel with the electric grid or stand-alone when no utility grid is available.

When shares of Capstone first came to market almost 15 years ago, the stock was very much in favor, quickly surging north of $80 per share. As fate and market conditions would have it, however, the company’s highly regarded, innovative technology failed to find enough buyers to support the lofty share price. With profitability years away, stockholders rapidly bailed on the issue. As a result, over the past five years CPST shares have occasionally traded under $1 each, while remaining firmly locked into a $1 – $2 channel during that period. Right now, however, the tide finally appears to be shifting in Capstone’s favor on several different fronts.

SGLB chart

Primarily, Capstone management has weathered the slide and slowly but surely grown sales—with revenues weighing in at a healthy $100 million for fiscal 2012. Analysts expect that number to accelerate to $175 million in fiscal year 2013. Other key metrics are on the upswing as well, as gross margins have doubled to around 20% over the past 18 months, primarily due to larger deals and installations. In addition, Capstone cut its quarter-over-quarter loss from $8 million to $2 million during its most recent reporting period and currently has $31 million in cash.

The trend in firming margins is directly related to the growth in deal size. The average selling price per micro-turbine rose from $158,000 a year ago to a recent $184,000. “Capstone used to be considered primarily for 1- to 5-megawatt opportunities or installations, so we migrated up in project size, so that Capstone is now being considered frequently as a solution for projects that are in 25-megawatt range,” said CEO Darren Jamison in a recent call with analysts.

As long as the improved margin and pricing trends remain intact, Capstone appears destined to enter the realm of profitability sooner rather than later. For its most recent reporting period the company’s quarterly loss fell to just $2 million, down from quarterly losses that routinely exceeded $8 million in recent years.…

Going Long with Stigma Labs

If you’ve ever bet on sporting events, then you probably know that professional handicappers look for strong trends to help determine winners and losers. In the stock market it’s no different—with the exception that uptrends in stock sectors are generally more reliable for generating profits than their sports counterparts. This year, it’s all about fuel cells and marijuana. Today, however, I want to revisit an under-the-radar play in one of last year’s strongest sectors—the 3D printing space.

 

While the pure momentum run in many large cap issues in the sector has cooled a bit (DDD, SSYS), there are a host of emerging plays related to the field that continue to attract marketplace attention, and appear to be true ground-floor opportunities in a rapidly expanding industry. One of the strongest, in my opinion, is Sigma Labs, Inc., currently trading over-the-counter under the symbol SGLB.

 

Based in Santa Fe, New Mexico, Sigma Labs, Inc. engages in the development and commercialization of manufacturing and materials technologies, and R&D solutions. It also focuses on commercializing technologies and products in various industry sectors, such as in process quality assurance for manufacturing; aerospace and defense manufacturing; additive manufacturing; active protection systems for defending light armored vehicles; advanced materials for munitions; advanced materials for sporting goods; advanced manufacturing technologies; and dental implant and biomedical prosthetics technologies. In addition, the company provides consulting services to the public and private sector, with regard to emerging technologies and alternative applications of established technologies for Federal government and commercial clients.

 

Sigma Lab’s ace-in-the-hole is its focus on developing advanced, real-time quality inspection systems for 3D metal printing and other technologies. Manufacturing integrity is key to the success of the 3D printing process, which presents unique quality-control challenges. Compared to traditional casting, welding, or machining manufacturing methods, additive manufacturing is slower and has its own issues with imperfections due to process variations. Any system that can minimize these quality issues will accelerate production, and that’s precisely what Sigma Labs’ PrintRite3D system is designed to do.

 

Unlike other micro-cap companies in the 3D space which are long on claims but short on real products or potential, Sigma is already doing business with manufacturing giant GE. GE has asked Sigma to develop its PrintRite3D system to the point where it will operate as a “closed loop”— feeding information back to the printer so it can make real time adjustments. GE’s key concern, and what Sigma Labs is best prepared to address, is unmelted metal powder entrapment in the additive manufacturing process.

 

Regarding the partnership, Christine Furstoss, Technical Director for Manufacturing and Materials Technologies at GE, stated “we have a joint technology development agreement with Sigma Labs Inc. to develop in-process inspection technologies of additive components with the goal of reducing production time up to 25 percent.” Currently, Sigma is the only company known to be working on this closed loop inspection technology, and their impressive array of patents protecting the process should make it difficult for other companies to compete any time soon.…

Playing Blowout Earnings (Again) with EnviroStar, Inc.

Sometimes the market provides investors with gifts—great entry points for stocks of up-and-coming companies which are flat-out performing and profitable. Right now, I believe that’s the case with EnviroStar, Inc., a “low-floater” that just reported blowout earnings, and whose share price should be in line for some nice gains ahead if you’re patient enough to stay the course.

EnviroStar, Inc., through its wholly-owned subsidiary, Steiner-Atlantic Corp., distributes commercial and industrial laundry and dry cleaning equipment and steam and hot waters boilers manufactured by others, supplies replacement parts and accessories and provides maintenance services to its customers, and designs and plans laundry, dry cleaning and boiler systems to meet the layout, volume and budget needs of its diversified institutional, retail, industrial and commercial customers. The company, through its DRYCLEAN USA License Corp. wholly-owned indirect subsidiary, owns the global rights to the name DRYCLEAN USA, which the company franchises and licenses to retail drycleaners in the United States, the Caribbean and Latin America.

I first put EnviroStar on my radar screen last September after the company issued a nice fiscal year earnings report, complete with a solid outlook going forward.  Revenues for fiscal 2013 were $36,226,584, an increase of 61.3% over the prior year’s revenues of $22,457,089. Net earnings increased by 214.1% to $1,607,238, or $0.23 per share, compared to $511,689, or $.07 per share in fiscal 2012.

In that release, Venerando J. Indelicato, the company’s Chief Financial Officer, stated: “As previously reported, we received a number of large orders for delivery in fiscal 2013, which we successfully delivered during the year. We are beginning fiscal 2014 with a solid backlog containing a few large orders, and while comparisons will be difficult when comparing fiscal 2014 with our recent banner year, we still expect fiscal 2014 to be a very successful year.”

As it turns out—at least so far—Indelicato’s projection was prophetic.  On February 14, the company reported improved operating results for the six and three month periods ended December 31, 2013. For the first six months of fiscal 2014, revenues increased by 41.4% to $18,328,643 from $12,958,823 for the same period of fiscal 2013. Net earnings increased by 226.0% to $903,077 or $.13 per share compared to net income of $276,994 or $.04 per share for the same period of fiscal 2013.

For the second quarter of fiscal 2014, revenues increased by 52.6% to $9,835,413 from $6,445,709 in the comparable period of fiscal 2013. Net earnings for the period increased by 281.4% to $477,306 or $.07 per share compared to $125,155 or $.02 per share for the second quarter of fiscal 2013.

Once again, Chief Financial Officer Indelicato weighed in with some bullish comments on those results and EnviroStar’s future performance. “We are pleased with the company’s performance for the six and three month periods of fiscal 2014. As already reported, we began the year with a solid backlog and we projected fiscal 2014 to be a successful year. At this point in time these projections are on track, although individual quarters may differ depending on future scheduling.”

As you might expect, market participants responded with enthusiasm to the mid-session release of EVI’s earnings numbers, initially driving the share price up to an intraday high of $4.27 after the stock opened for trading at $3.43 per share.…

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