Penny Pick Elite
During the recession, while most investors were panicking as almost every stock was tanking…I was calmly sitting at my desk with a smile on my face.
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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.…
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.…
Getting High (returns) With Colorado’s Legalization
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.…
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