Every once in a while a company closes a deal that actually has the potential to transform its stock into a market winner. Combine that with an issue that has already experienced dizzying share price jumps in the past, but is hovering about 80% off of those lofty levels, then you may have a recipe for potential trading success.
Right now, the shares of xG Technology, Inc., trading on the Nasdaq under the symbol XGTI, may be preparing to parlay that one-two punch into some nice trading gains in the weeks ahead.
Founded in 2002, xG Technology, Inc. develops communications technologies for wireless networks worldwide. It primarily offers a portfolio of intellectual property to enhance wireless communications, embedded in proprietary software algorithms designed to offer cognitive interference mitigation and spectrum access solutions to organizations in a various industries, including national defense and rural broadband. The company sells its intellectual property and the equipment directly, as well as through an indirect channel network.
On Tuesday, XGTI announced it had been awarded a subcontractor position from the U.S. Army. The multiple-award contract, valued at $497 million, calls for xG to provide communications and network services over a five-year period. xG is teamed with primary contractor Science Applications International Corporation (SAIC) to carry out the project. Promisingly, SAIC has used xG Tech as a subcontractor in the past, suggesting that the company will continue to expand its partnership with xG on future projects.
Under the terms of the latest subcontract, xG Technology will provide research, development and evaluation in support of communications and networks systems under the five S&TCD Division technology areas including antennas, system engineering, satellite communication, cyber-security, and communications networks.
As always with deals of this nature, it’s impossible to immediately determine how much revenue will be coming xG Tech’s way. That’s because the contract amount is the ceiling the government contract authorizes, and also because xG will be working under the aegis of Science Applications Intl., a much larger player in the space.
That inherent uncertainty didn’t stop market participants from piling into XGTI shares in the wake of the news. The stock jumped out of the gate at the market open Tuesday, quickly ripping to an intraday top of $3.01 per share. Profit taking, however, along with news of a Syrian aerial attack in Iraq, caused both the market indexes and XGTI’s share price to contract considerably.
By the closing bell, the stock had slipped down to a final print of $2.31 per share—still good for an impressive 25% rally on the day. With the entire XGTI public float listed at about 15 million shares, trading volume on the day weighed in at 13 million shares, about 13x the issue’s daily churn rate over the past year.
As you can see from the chart above, XGTI shares have a track record of making quick runs north. In late May shares got an immediate boost after the company announced that it had been awarded a new patent for interference mitigation techniques.…
Comments Off on Taking Stock As the Second Half of the Trading Year Approaches
It’s once again time to look back at several of our recent picks, evaluate their performance, and speculate on their prospects going forward with the second half of the trading year right around the corner. In general, it’s been tough sledding for true penny plays, while several small cap issues we’ve highlighted have been charging ahead from our entry points — propelled in part by record bullishness in the Dow and S&P 500 indexes.
Selected as a potential breakout candidate less than a month ago, when the issue was trading at $2.54, this fracking-related infrastructure support company has performed beautifully — taking out our $3.25 target in less than four weeks, ultimately touching a new 52-week high of $3.29. Catalysts for this issue have included good earnings and higher open market oil prices.
Currently, ENSV shares are sitting at about $3.05 each, and I wouldn’t be surprised to see the stock sit in a $2.90 – $3.30 channel prior to the company’s next earnings release. There’s no reason to believe that more good times won’t keep rolling for Enservco’s earnings trend, however, which leads me to believe that this issue remains a solid buy and hold candidate. Company management will be ringing the closing bell of the New York Stock Exchange on June 20, which may be a symbol of even better things to come. I’m raising my price target to $3.50.
Telecommunication Systems (TSYS)
Recommended as a buy a little over one month ago at $3.07, after breaking through technical resistance at $3 on rising volume, this has proven to be a modestly successful trade. TSYS shares are currently sitting at about $3.25, after breaking up to a new 52-week top of $3.47 two weeks after our story appeared. At the time of that call, trading volume in TSYS was very much on the upswing, and the stock was grinding through price levels it hadn’t seen in about two years.
With trading volume waning recently, the issue appears stuck in consolidation mode, in anticipation of either an upside or downside catalyst. That will no doubt come when the company releases its next earnings statement and outlook. Until then, given the declining trading interest, I’d suggest taking the profit and closing this position.
Jammin Java (JAMN)
After flashing signs of a technical price surge higher in the wake of a company roadshow and several bullish deal-related announcements, the reality of earnings put a kibosh on the rally. Prior to the downbeat earnings news, headlined by a multi-million dollar loss on the year, JAMN shares had managed to quickly rip up to a break of $0.40, well above the trading price of $0.33 when our story first appeared.
In hindsight, the price jump appears to have been fueled by both the bullish news releases and anticipation of an improved bottom line. When those earnings disappointed, there was a great deal of speculative froth that turned the tide against the stock. Now battling to hold the line at $0.30, I would need to see some vast improvement in sales numbers to bet on this one again.…
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.…
Comments Off on 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.…
Comments Off on Taking Stock – Following Up On Some OTC Winners
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.…