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.…
It’s been a rough and highly volatile start to 2014 for market players. That makes now an opportune time to look at the performance of some recent recommendations and close out some older OTC positions, as the “easy money” bull market days of 2013 appear to be coming to at least a temporary halt.
Fusion Pharm (FSPM)
This issue was one of two plays that appeared primed to benefit from the capital rush into marijuana stocks that accompanied Colorado’s legalization of the substance in January, and plans afoot in many other states to pass similar legislation. As hoped, FSPM shares raced all the way to and through the $8 mark after we wrote about the stock in early January when it was trading at $2.90 per share. Currently sitting at about $6 per share, I would reduce my position here by half, take the 100% return, and hold on to the rest in anticipation of ongoing sector strength.
The second of two “pot stocks” we profiled in January, this company’s shares have also seen a nice jump from about $0.14 each, to a recent trading print of $0.21. I like the nice steady rise in EDXC’s price, along with the fact that the company is well-positioned geographically to benefit from the Colorado law change. Until the sector shows signs of buyer’s exhaustion, I expect these shares to continue to grind their way higher. If you took a position in this one, I recommend leaving it open.
DLH Holdings, Inc. (DLHC)
This Christmas Eve pick from December truly was a gift if you chose to play it. Shares quickly ripped from the $1.60 – $1.70 channel they occupied when we issued an alert on this company as a potential breakout candidate, and that’s exactly what happened. Within two weeks DLHC had established a series of new 52-week highs, quickly pushing up and through 100% gains to a $3.50 top. Market conditions and profit-taking have since conspired to push this issue back down to about $2.50, but I would keep my position open pending the market’s reaction to the company’s earnings report set for the end of the week. If those results are good, I expect DLHC to eventually take out new 52s.
Emmis Communications (EMMS)
This bread and butter play in the radio broadcasting industry remained stuck in neutral for several weeks, hovering around our entry point of $2.30 per share in September, rarely budging more than a few pennies a day either up or down. Finally, buying interest increased dramatically at the end of 2013, pushing shares back through the $3 level. Although I still like this company as a long-term hold, market conditions are such that it’s a good time to cash out, with the stock still holding at about $2.80 per share—good for a nice gain of over 20%.
Information Services Group (III)
Also recommended in the summer of 2013 when shares were trading at $2.50, the stock has simply headed north, recently touching a new 52-week top of $5.50 per share.…
I can’t think of any historical precedent for what’s happening with marijuana in the United States—when a formerly illegal substance with a massive built-in market becomes legal. Alcohol prohibition almost fits the bill, but alcohol was legal before prohibition. That being the case, it’s time to take a look at two pure play over-the-counter stocks that appear well-positioned to benefit from Colorado’s burgeoning marijuana industry: Fusion Pharm, Inc. (FSPM) and Endexx, Inc. (EDXC).
Fusion Pharm, Inc.
Based in Denver, Colorado, Fusion Pharm, Inc. manufactures and sells a patent pending commercial hydroponic cultivation system capable of growing almost any herb, vegetable, flower, fruit or terrestrial plant better and faster than traditional farming methods. The system is called the PharmPods hydroponic cultivation container system. The company sells and licenses its PharmPods containers to agricultural equipment distributers, urban farming companies and other specialty growers. In February 2013, the company completed the sale of 8 PharmPod High Intensity containers under its licensing agreement with Meadpoint Venture Partners.
Unlike almost all other issues in the “pot sector,” Fusion Pharm features a razor-thin float of 5.7 million shares. With the current mania for marijuana stocks in full swing last week and this week, traders managed to push FSPM up to an intraday top of $2.95 in Wednesday’s trading at the time of this writing—an extraordinary move considering that shares were available two weeks ago for about $0.25 – $0.30.
Of course, a significant part of the surge in FSPM’s share price can be attributed to momentum players circling their wagons around what has turned out to be a perfect storm of buying conditions in the sector. Reports out of Colorado of long lines to buy cannabis, and that the state’s marijuana dispensaries are already having difficulty keeping up with demand after only one week, have served to fuel buyers’ ongoing appetite for pot stocks.
Despite Fusion Pharm’s friendly float size, there are several other factors that should bode well for a longer-term run in FSPM’s share price. The company is already based in Colorado and doing business with local growers. As a result, it’s not “betting-on-the-come” that someday business will pick up: business is already at its doorstep. Moreover, sales had already been kicking in prior to the Colorado legalization law taking effect. In July, for example, Fusion announced that it had achieved $200,000 in sales, including its first pod sale to a California concern. And speaking of California, the state is likely to legalize pot in April, opening up an even more massive marketplace and providing another nice catalyst to the sector.
Given FSPM’s recent parabolic move higher, it’s difficult to recommend a precise entry point. Extreme volatility continues to rule the day with these pot stocks, so any entry point is a bit of a crapshoot. That said, those with a longer view and high tolerance for risk may find that FSPM’s shares are a relative bargain even at current levels.
ENDEXX Corp. (EDXC)
Shares of ENDEXX Corp.…
I’m rarely attracted to publically traded small-cap biotech and pharmaceutical firms. Most are struggling to get their products approved by the FDA, and looking to enter a marketplace already populated with “800-pound gorillas”—giant big pharma multinationals with deep pockets and heavy-duty institutional support. Very occasionally, however, I’ll stumble upon an up-and-comer in the sector that appears well worth a long look as a nice long-term investment. Right now, Navidea Pharmaceuticals (NAVB) is just such a company.
Now in its 30th year of operation, Navidea Pharmaceuticals is a biopharmaceutical concern focused on the development and commercialization of precision diagnostics and radiopharmaceutical agents. The company’s radiopharmaceutical development programs include Lymphoseek (Lymphoseek, Kit for the Preparation of Technetium Tc99m for Injection), a radiopharmaceutical agent for lymph node mapping; AZD4694, an imaging agent, and RIGScan, a tumor antigen-specific targeting agent. In January 2012, Navidea executed an option agreement with Alseres Pharmaceuticals, Inc. to license [123I]-E-IACFT Injection, also called Altropane, an Iodine-123 radiolabeled imaging agent, being developed as an aid in the diagnosis of Parkinson’s disease, movement disorders and dementia.
NAVB shares got a significant boost earlier this week after the company announced that that the F.D.A. granted Fast Track designation to Lymphoseek (technetium 99m tilmanocept) Injection for sentinel lymph node detection in patients with head and neck cancer. Under the FDA Modernization Act of 1997, the Fast Track program was designed to facilitate the development and expedite the review of drug candidates intended to treat serious or life-threatening conditions, and that demonstrate the potential to address unmet medical needs. Navidea intends to file the supplemental New Drug Application (sNDA) for Lymphoseek before year-end.
The Fast Track designation Navidea has received for Lymphoseek recognizes the significant unmet need that exists in the treatment of head and neck cancers and the important role that Lymphoseek can play in reducing or eliminating the need for debilitating elective neck dissection surgery,” said William J Regan, Navidea Senior Vice President for Global Regulatory Strategy. “After filing the sNDA, we look forward to working closely with the FDA to bring to market as quickly as possible an expanded label for Lymphoseek and what will be the first agent indicated in sentinel lymph node detection.”
Lymphatic mapping is a procedure in which lymph nodes that may contain tumor metastases are identified and biopsied to determine if cancer has spread beyond the primary tumor. Accurate staging of lymph nodes is critical, as it guides therapy decisions and determines patient prognosis and risk of recurrence. According to the American Cancer Society, approximately 232,000 new cases of breast cancer and 77,000 new cases of melanoma will be diagnosed in the United States in 2013.
Digging a little deeper, I discovered that Lymphoseek was already approved by the FDA in March 2013 for use in lymphatic mapping procedures to help in the diagnostic evaluation of potential cancer spread breast cancer and melanoma patients. In fact, the company is banking revenues on the product, adding to the cumulative sales of $400,000 during its last three-month reporting period.…
It’s been an amazing, record-shattering ride for U.S. equity markets in 2013. With Thanksgiving right around the corner, and Christmas less than one month later, it’s a good time to look back at several of our picks, evaluate how they did, and weigh in on how these plays may perform during the rest of the year and beyond.
Sharps Compliance (SMED)
Sharps Compliance Corp. (SMED), which I brought to your attention in late October, is in the business of collecting and disposing of medical waste, and a range of other dangerous potential contaminants. Based on the company’s latest earnings report, indicating that business was booming, along with several other factors, I felt that there was some solid potential for an imminent short-term breakout in SMED’s share price. At the time, SMED was trading at about $3.80 per share.
In fact, that’s exactly what happened, with SMED shares running up to a new 52-week top of $5.24 per share at the beginning of this week. Profit taking finally kicked in earnest Wednesday, despite the continuing bull market run. As a result, it appears that it’s time to close out this position, which yielded optimal gains of about 40%. Congratulations if you saddled up early with some SMED and rode this one to some nice breakout profits.
Quint Media (QUNI)
Quint Media, Inc., operates as a digital and social media company in the United States. It focuses on connecting people with content relating to their passions, interests, and each other. The company’s Quint Media network is engineered with a digital ecosystem, matching content that is customized to user-interests. It primarily focuses on brands relating to lifestyle, entertainment, and fashion.
I first wrote about QUNI approximately two weeks ago, when shares were ping-ponging in a narrow trading range of $0.30 – $0.36. The following week they broke out to a new all-time top of $0.45 before recently pulling back into the low $0.30 range once again. Relative to many other penny plays, this issue appears to have a solid chance at success, with a good management team, a well-designed web-site, and membership in a sector—social media—that should remain hot for years to come. I still rate this issue a “Speculative Buy” at current levels, and would regularly monitor the company for any significant business developments that may act as a share-price catalyst.
Highpower International (HPJ)
In early October I highlighted the shares of Highpower International, Inc. (HPJ), a Hong-Kong based company engaged in the production and sale 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. At the time I profiled HPJ shares, at $1.70 per share, statistics indicating sharp growth in the worldwide demand for lithium batteries had helped propel the stock to new 52-week highs.
Given that factor, and both from an earnings standpoint, and given the share’s technical trading history of establishing a lengthy base from which to springboard north, I felt that HPJ was a Strong Buy—both as a breakout candidate, and a long-term hold.…