August 23, 2009

Stocks I'm Watching

I think the next couple days price action will be telling on net-net ADPT on whether or not it can push more. Back in May it double topped right at $3.00 and so far it has already held over that resistance level. Simple market mechanics at work here. Buyers who accumulated in the high 2.90s will be tempted to sell for break even here or new fundamental forces in the eyes of investors will propel the stock higher. People could be selling here and new buyers will come in anyway. There is just a better chance it will run if a couple possible sellers get shaken off and buyers show they can take the stock to higher levels. All this is not entirely significant though because the stock has resistance way higher to.

Electronic Game Card EGMI

With some hesitation because it trades on the OTC this EGMI I will say has very good fundamentals and valuation going for it. They grew sales 76% from 2007 to 2008. They grew earnings 81% in that same period. From reading some of the 10-k their product seems to be a hand-held electronic card that keeps track of winnings at casinos, bingo halls etc. The description was kind of vague to me but I think that is what it is. They have two patents in Europe and Japan and are working on one in the U.S. This card seems similar to me to the type of cards International Game Tech IGT developed to keep track of customers chips electronically in Casinos. It seems pretty interesting, "The shape of a pocket GameCard is flexible to clients’ needs but is currently approximately the size of a credit card, operated electronically by touch and incorporating a microchip and LCD screen showing numbers or icons."

Crunching Some Numbers

2010 EPS is expected to be $.20 going off of 1 analyst according to Yahoo Finance and Zacks.com. This is growth of 42% year over year. Here is what I like. The stock trades for $1.65 so the current years PE is only 12 and the forward is around 8! That is just totally out of whack with their growth rate of 42% for next year. A PEG of around .3. Over the next five years the expected growth rate in earnings is 35% per year.

If I'm conservative here and slap on a 30 PE multiple the stock is worth $4 this year and based on next years earnings growth worth $6 a share. This stock is at $1.65 right now. They've got a ton of cash. $9.6 mil in cash quarter end March with just $1.3 mil in total debt with none of that long-term.

As much as I take faith in SEC filings this is an OTC stock. I am very cautious and skeptical of anything on the OTC or Pink Sheets. My game plan if I even decide to trade this is to just catch a quick trade in it if it breaks out here or maybe buy a move off trend line support or a flag similar to my IFON trade.

CHCI is a homebuilding stock that can be extremely volatile. If it runs again tomorrow it looks good for a quick trade but if it doesn't just a watch if even.

SUF is holding it's trend line nicely.

I think this could potentially turn into a bull flag here and the stock could continue higher. Rounding bottom formation. Price action at $1 might be key.